Changes in M&A strategy highlight ad tech model of the future

In the realms of ad tech and martech, the changes and themes that are currently driving consolidation are incredibly indicative of where modern ad tech companies are headed. After all, M&A activity is about shaping tomorrow's businesses today.

The ad tech and martech spaces have been on a rollercoaster ride – and the ups and downs will continue through 2023. According to LUMA Partners, ad tech and martech mergers and acquisitions have slowed significantly in 2022, after a a particularly robust year 2021. The causes were predictable: rising inflation, impending recession, uncertainty in global markets. But despite continued economic and market tensions, LUMA expects activity to rebound – and given the reality of our industry, that's a reasonable assumption.

With the elements required for a modern ad tech company in mind, let's examine the forces that will drive consolidation in 2023 and beyond.

The era of secure data programming

The wave of consolidation in 2021 did not happen despite the ongoing privacy and identity shifts that were reshaping the digital advertising landscape; it happened because of that. And these forces are not only still at play in the market. They are accelerating.

The need to develop end-to-end, omnichannel solutions for marketers and publishers will drive further industry evolution throughout 2023, and this activity will happen with a view to future-proof solutions so businesses can stay relevant to privacy. first advertising environment. This means structuring companies (and our industry as a whole) so that less data is shared with fewer partners.

This desire to lock down access to consumer data is evident in the continued rise of walled gardens, but it's also at the forefront of how ad tech companies operating on the open web trace their way, in terms of mergers and acquisitions and internal development. From cleanrooms to compliant targeting solutions, we're going to see greater focus across the board on technology that enhances and respects privacy.

The general trend of industry consolidation is often presented as a monolithic process: the idea that a few industry players are trying to become the ultimate player in an industry on a global scale. But when it comes to ad tech, there will be a lot of disparity in how tech is acquired, packaged, and positioned in different markets around the world.

Simply put, not all markets are ready for all products. For example, there are global markets in which prestitial advertisements are an accepted standard format, whereas such advertisements tend to be abhorred by American audiences. It's a relatively small geographic distinction in the grand scheme, but it's indicative of a larger strategic truth: Companies with global ambitions are always going to think regionally when it comes to filling the gaps. of their offers. As marketers weigh the implications of the deals they see making headlines over the coming year, they should do so knowing that consolidated offerings will still vary widely from market to market.

Regionality also plays an important role when it comes to partnerships with publishers. Global and local supply is important, so the presence of partnerships with local publishers will also be a key factor in acquisitions.

Above all, we should keep in mind that M&A in ad tech and martech isn't just about buying Silicon Valley from Silicon Valley. There is great technology everywhere today, and the most successful acquirers will be those who expand their sights into the global marketplace. Global technology maturity means companies can acquire better technology at lower cost by looking to the EU, APAC, Latin America, Israel and other regions outside of traditional technology corridors.