‘A significant uptick in deal flow’: Why Europe is becoming a hotbed of ad tech innovation

On the face of it, those aren’t anywhere near blockbuster numbers for the very first half of this year. But experts said more offers are bubbling. Already in July, London-based data management business Permutive raised $18.5 million in a Series B round and Zeotap, a consumer intelligence platform based in Berlin, raised a $42 million Series C.

“What I’m seeing is a considerable uptick in dealflow,” from Europe, stated Eric Franchi, operating partner at Math Capital, the endeavor firm he founded with MediaMath CEO Joe Zawadzki in 2018. Mathematics Capital has actually made two financial investments in Europe so far: Zeotap and ID5, a London-based company that provides a user identifier to publishers and advertisement tech companies. He anticipates the fund will make a minimum of another European investment in the second half of this year.

Franchi’s thesis is that advertisement tech organisations over the last years or two were focused on programmatic and using data to drive marketing. While there were some effective European business out of those early days, most huge programmatic companies were found in the U.S. The brand-new epoch of ad tech will be specified by a shift to personal privacy, he said.

“Europe had a head start due to GDPR,” stated Franchi.

The European General Data Security Policy came into effect in 2018 and impacts any international business that processes the individual data of individuals within the EU. A year earlier, Apple had begun tightening up the Intelligent Tracker Avoidance feature in its Safari internet browser. This year, privacy news was available in waves. The California Customer Personal privacy Act entered result in January. That was followed by Google revealing it would get rid of assistance for third-party cookies in Chrome. Then this summer season, Apple revealed users would need to decide in to apps permitting third-party companies to track them.

” [Advertisement tech] companies raising cash now are businesses that have exclusive data protected some method through long-lasting agreements, exclusivity or doing something for a long period of time, effectively,” said Julie Langley, partner at M&A advisory company Results International. She too included the ad tech M&A market had actually been “really quiet” in recent months.

Some investors are still leery of advertisement tech, having been burned in the past. Memorably Rocket Fuel, which had a $2 billion assessment at its peak in 2013, sold to Sizmek for simply $122 million 4 years later on, which went on to file for personal bankruptcy in 2019.

“Ad tech is a subject that generally polarizes a great deal of financiers,” stated Will Gibbs, principal at Octopus Ventures, a financier in Permutive. “The ‘don’t do it’ list is usually advertisement tech, video gaming and pharma, which are viewed as normally nontransparent industries where you have to have expert knowledge to understand how the business can be successful.”

Nevertheless, there is still an interest in privacy-focused ad tech companies with exclusive technology and intellectual residential or commercial property.

“If you can prosper in Europe– especially with GDPR and most likely increased privacy regulation– it most likely indicates it’s much easier to succeed in the U.S.,” said Gibbs. For this reason, he added, it’s most likely simpler to build a new-era ad tech company in Europe and broaden it to the U.S. than the other method around.

For some European ad tech companies, the coronavirus crisis may have even helped to level the playing field with their U.S. equivalents. For one, with everybody stuck at home doing Zoom calls, high-profile customer targets and possible investors are easier to access, said Mathematics Capital’s Franchi.

Not only has deal-making end up being more effective, but “new arrivals– typically [private equity] backed or money abundant– see an opportunity to grab market share [in the data-based tech area] while the competition is distracted,” stated Tristan Rice, partner at M&A advisory firm SI Partners. That includes the likes of new marketing groups such S4 Capital and You & & Mr Jones; private-equity backed digital advertisement specialists like Jellyfish, Croud and Brainlabs and consultants such as Deloitte and EY, Rice stated.

At the very same time, many potential acquirers are currently hunting for bargains. LUMA Partner’s Kawaja stated while there are some “very intriguing identity business coming out of Europe” in the identity space, in general the international advertisement tech market remains distressed.

“I always make a difference in between tactical exits and capitulation trades,” Kawaja said. “If I revealed you the next four quarters of M&A trade, there’s a huge number of capitulation trades, which is a sign of a decreasing market, not an increasing one.”

He included, “Those are just chickens coming home to roost.”