Operative Blog

Tolman Geffs
Co-President
The Jordan, Edmiston Group, Inc.

In the last 2 years, there has been a major drop in acquisitions in the online advertising industry, but we are starting to see a rebound in activity and value.   Brand advertising has taken a huge hit, while direct and promotional advertising have spiked.  This does not mean brand advertising is dead. 

Display advertising demand was always sold on a site by site basis.  Now, selling audience is even more important.  This is a trend that Tolman expects will explode.   Audience targeting will grow a lot faster than typical web site display ads.   Both agency and demand side platforms are changing the way media is being purchased.   As we move forward, you have ad delivery servers vs publishers vs audience targeting sellers.   The winner will change how the online advertising space transforms. 

Premium publishers are losing a key advantage: premium content and premium audience.  What’s happening today is that premium audiences can be built much easier through a network.   The question is, can publishers provide more value to the advertiser and the audience to win back a majority of the margin?

Online video is getting funded at higher multiples than only 18 months ago.   Online video should be growing at a faster rate than most of the online advertising market.   TV budgets are shifting, and being used for both TV and streaming advertising units. 

 Mobile advertising has a good chance, but currently, mobile advertising is geared more towards promotions and direct marketing efforts, as opposed to brand advertising.  

Local online advertising is also experiencing a lot of activity in both mergers and funding.    

So what are the implications of M&A?  

Interactive activity will be robust in the next 18 months.  Innovation is happening faster, ad revenue continues to grow at a nice rate (8%) and there’s a lack of an IPO window.  Strategic buyers will be the busiest people with record cash- they need high growth business.  But, it is not just about big companies.  Private equity will play a major role in the coming years.  With an economic turnaround, we are looking for more activity with strategic buyers in the marketplace.