Luma Partners chief Terry Kawaja: ‘Chinese companies you never heard of will be the next big acquirers in ad tech’
Luma Partners CEO Terry Kawaja speaks to The Drum on who he thinks will be making the big ticket purchases in ad tech over the next 12 months, what they’re likely to be in the market for, plus the ‘a little forced’ role of ad tech at the advertising industry’s ‘Festival of Creativity.
Terry Kawaja spoke to The Drum at Cannes Lions Festival of Creativity
It’s Cannes Lions this week, and even the most cursory of glances up and down La Croisette will tell you that ad tech companies are now a big factor in the equation at this 'Festival of Creativity'.
Of course, the underlying narrative in this sector of the industry is the ongoing consolidation it is undergoing, as advertisers increasingly realise that technology and data will fuel the industry in the years ahead. Kawaja, who has helped broker deals worth billions of dollars in the past, shares his thoughts.
What factors are driving consolidation in ad tech/martech sector?
You have to look at it from both sides; both on the demand and the supply-side. On the demand-side, the buyers of companies are interested in attaining capabilities to complete their stacks.
We’ve seen programmatic growing from being fairly nascent five years ago, to now the majority (and it’s still growing exponentially), and people have come to realise that it’s really hard to build that technology, and therefore buying becomes the default [to attaining this capability], that’s on the ad side.
On the marketing side, there’s a realisation from all kinds of different companies that have large consumer networks (like telcos, and big internet companies) that they need to make sense of their audience, and that requires data assets like a data management platform [DMP] or a device identity platform.
This is because as we move to a world where people are using multiple devices, and we go beyond the world of the cookie (which doesn’t live in a mobile environment) we need a way to manage audience. Those kinds of assets have proven to be attractive to a variety of different strategic buyer groups, that’s on the demand-side.
On the supply-side, naturally companies want to exit (because they’ve raised a load of capital with the explicit premise that they are going to sell for a higher price), so almost always, these guys are ready for an M&A conversation. It’s just that there’s a lot of players that aren’t necessarily going to have that exit, and that’s where things get a little tricky.
Who are likely to be the major acquirers over the next 12 months?
The big ticket buyers will be Chinese firms you’ve never heard of. Everyone knows companies like Alibaba and Tencent, but we have a number of deals we’re working on with large Chinese entities that nobody has ever heard of.
We’re also going to continue to see telcos [acquire]; and in the CRM-space Oracle has made the biggest push, but Adobe is missing capabilities, has just entered the fray, SAP and SalesForce still have incomplete clouds. So there is a lot more buying that is going to take place in this sector.
What is going to be the most attractive proposition to these investors/buyers?
There are certain pockets of capabilities that tend to be more valued than others. I’d say that media intermediation is the least interesting [to such buyers] – although it may be interesting to a WPP, or an existing media company, but most of the big software companies do not want to be involved in the media business, because it has lower margins, and is less predictable.
Plus, I think the big companies that sell media like Facebook and Google, they don’t need to buy a media company because they already are a much bigger and better one. For them, they’re looking for key technology capabilities that they can then roll out to their large audiences.
Finally, what is the role of ad tech players at a 'festival of creativity' like Cannes Lions?
In all honesty, it’s a little forced in the sense that this is a ‘festival of creativity’ (and that’s fantastic), because without those creative ideas advertising cannot accomplish what it’s trying to in terms of demand generation (not fulfilment) on the brand side.
I think it’s still very early days in terms of the interplay between technology and creative, and we have yet to figure out exactly how that will work, and look. I believe there won’t just be one way that technology can aid in the creative process, I believe there will be a variety of ways.
But today, in all honesty, today it feels a little forced, but I feel it’s still the right thing to do to focus on technology at any conference that has to do with market – how could it not? Although today those two worlds live a little bit in parallel, but I believe they will be a little bit close to unity in the future.
Click here to learn more about the most recent Luma Partners 'State of Digital Media 2016' report