After a pandemic-induced slowdown, ad tech mergers and acquisitions (M&A) are on the rise, with many companies seeking efficiencies and expanded footprints, including connected TV (CTV) offerings. During the pandemic, consumers’ CTV consumption increased dramatically, reflecting its unique ability to connect with highly-targeted audiences across the content they crave, and audiences show no signs of slowing down. According to eMarketer, by the end of 2021, nearly 83% of households will have at least one connected TV used by at least one person every month. Advertisers are responding accordingly, by increasing investment in CTV. In Q4 2020, ad-supported streaming soared, with ad impressions increasing by 31% year-over-year, according to an industry report. By 2021, US CTV ad spending is on track to reach $11.36 billion, compared to $8.11 billion in 2020. By 2024, eMarketer estimates US CTV ad spending will reach $18.29 billion.
Recent M&A transactions have enabled businesses to create more robust and efficient advertising solutions for both the demand and supply sides while keeping pace with industry trends — including increased consumption of CTV, the need for advertisers to pivot away from cookie-based audience approaches and the expectation for simplified, omnichannel ad buying. So, what trends do these transactions reflect? Why is M&A in ad tech accelerating around CTV, and what do these moves say about the future of the industry? Let’s consider what’s driving these deals, and why consolidation should be seen as a good thing for advertisers, publishers and even audiences.
What are buyers and sellers looking for in a CTV offering?
Advertisers need to be where the people are and, increasingly, that is CTV. Media companies and advertising platforms are making moves to add CTV and digital video advertising products to their programmatic tech stacks to create solutions that ensure data integrity between platforms, facilitate supply path optimization (SPO), enable retargeting across channels, improve performance and simplify processes. Moreover, some ad tech companies are unifying supply and demand-side solutions, connecting the dots across multiple demand-side platforms (DSPs) to ensure optimal data-based targeting and enhanced efficiencies for both sides.
While managed service solutions will always have their place, self-service platforms are driving growth for buyers and sellers in CTV. In the last two quarters of 2020, Tremor experienced a 200% increase in revenue from self-service deals. Publishers expect solutions for optimizing monetization strategies across all media. Agencies and brands are looking for more control over their data, targeting, campaign optimization and post-campaign analytics, in part because more brands are bringing elements of their marketing in-house. Ultimately, these full-stack solutions should improve advertising for consumers, too, as advertisers and publishers use enhanced controls for targeting and frequency capping to improve ad relevance and preserve the CTV user experience.
How does consolidation create a competitive advantage?
CTV is a way to stand out, as not every media company offers it. Consolidation is a means to creating or expanding CTV offerings. It is also a strategy for achieving reach and scale and improves a company’s ability to compete with walled gardens and larger media companies with vast audiences.
Advertisers are also consolidating by merging teams and ad budgets. While TV and digital teams were historically separate entities, CTV’s fast growth is changing how the supply and demand sides structure their organizations. Buyers are increasingly channel-agnostic. They want to be where their audience is — whether that’s Facebook, cable TV or Netflix. Linear TV will continue to evolve — both in its targeting capabilities and ease of buying and selling — to complement digital channels including CTV.
What will the dawn of a cookie-less future mean for CTV’s growth?
Another driver of M&A action is the forthcoming deprecation of cookies. CTV is inherently cookie-less, which could entice advertisers to reallocate budget from digital to CTV as the space navigates targeting in a cookie-free world. Data will still be accessible, as users will opt in to choose if and how they share data between multiple platforms — but achieving scale will be more challenging. Based on industry estimates I’ve seen, cookie match rates hover around 50% to 60% between buyers and sellers, meaning about half of users are not targetable from one platform to the next. The market is hungry for alternative targeting solutions, such as identity graphs and consent-based third-party data, household-level data, second-party data, contextual data, cohorts and, of course, first-party data.
Despite new targeting options, scale could still prove challenging for advertisers targeting niche audiences. Likely, they will look to supplement audience targeting with contextual targeting. This is already happening on CTV, as advertisers strive to advertise alongside certain content — the same way they would approach linear. Fulfilling these requests hinges on supply-side relationships, not just data.
It’s worth noting that mergers and acquisitions are also strategies for competing on the R&D side. Ad tech and media companies are spending millions, even billions, to keep up with industry trends, especially when it comes to CTV. Joining forces helps businesses keep pace.
Rapid-speed development and the next wave of M&As around CTV should usher ad tech into its next phase of maturation — one in which advertising is simple and effective, regardless of the channel, and optimizing monetization strategies for publishers is streamlined across all media.
Guest blog author Kenneth Suh currently serves as chief strategy officer for Tremor International where he manages the global exchange business of Unruly and is responsible for business and corporate development initiatives across the company. Before joining Tremor, Suh served as COO and CSO at Unruly, which he joined in 2014.
Kenneth Suh is chief strategy officer of Tremor International.
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