Updated: Sizmek acquires Rocket Fuel for US$145m; Rubicon buys nToggle

Two adtech acquisitions announced today reflect ongoing consolidation of the rapidly changing digital advertising supplier landscape

It’s a big day for adtech acquisitions, with programmatic ad player, Sizmek, acquiring Rocket Fuel and Rubicon Project picking up programmatic inventory vendor, nToggle.

Sizmek, which provides a creative optimisation platform for programmatic online advertising, has purchased marketing technology player, Rocket Fuel, in a deal worth US$145 million. Together, the companies said they’ll service 20,000 advertisers and 3600 agencies globally in 70 countries with artificial intelligence-based predictive analytics, dynamic creative and media optimisation, making them one of the largest independent marketing platforms in this space.

Under the terms of the deal, a Sizmek affiliate has launched a tender offer for all outstanding shares in Rocket Fuel stock for $2.60 per share, valuing the adtech company at $145m. Upon completion, Rocket Fuel will become a privately-held company. The deal is expected to close in Q3, 2017 and already has the backing of Rocket Fuel’s board of directors.

Sizmek executive chairman, Dr Mark Grether, said the deal gives clients a self-service predictive marketing platform that optimises campaigns across the entire media plan. Sizmek itself was acquired by private equity firm, Vector Capital, last August in a deal worth US$122m. The company was originally founded under the Digital Generation brand 16 years ago before rebranding to Sizmek in 2013.

“This is the next logical step in marketing automation – media optimisation and full creative optimisation combined, bringing together the context and the creative for the optimal consumer experience,” Dr Grether said in a statement. “The result is advertising that is deeply, personalised, highly intuitive, and AI-enabled for peak performance, redefining the boundaries of creative possibility and media execution.”

Rocket Fuel CEO, Randy Wootton, added the combined offering creates one integrated, full-funnel solution allowing agencies and brand to address paid, owned and earned media activity more efficiently.

“This transaction accelerates our global expansion efforts in more than 70 countries,” he said.

Like Sizmek, Rocket Fuel is another one of the longer standing players in the adtech space and has spent the past year working to reshape the business in order to find sustainable growth. As part of these efforts, Wootton reorganised the US business around two core offerings: Predictive marketing platform solutions and media services.

In an interview with CMO earlier this year, Rocket Fuel’s local country manager, Mailee Creacy, said the changes were about trimming away some of the excess in order to allow the business to shift from programmatic supplier to more of a SaaS-based media company. The changes were also about winning a bigger share of brand-side clients through a platform-based play.

Combined, the companies will have 40 staff in Australia.

Rubicon joins acquisition fray

The acquisition of Rocket Fuel is the second adtech deal announced today. Rubicon Project, a global exchange for programmatic advertising, also confirmed its purchase of nToggle for US$38.5 million in a deal that closed on 14 July.

NToggle’s technology solution is aimed at helping programmatic buyers find key inventory among the billions of bid requests received daily. Under the new deal, the technology will be introduced to the Rubicon Project platform in coming months.

In a statement, Rubicon Project said the nToggle technology makes it easier for demand-side platforms (DSPs) to wade through rising amounts of programmatic bids, opening up opportunities to more effectively identify and target key audiences while lowering infrastructure costs. It does this through algorithm-based software.

“Integrating nToggle’s technology into Rubicon Project’s platform enables buyers to find the ‘signal in the noise’ so they can bid more confidently, win more auctions, and spend more with our publisher and app clients,” said Rubicon Project president and CEO, Michael Barrett.

“This acquisition underscores our commitment to strengthen the Rubicon Project exchange with tools and services that make it easy for buyers and sellers to transact. The needs of our buyers changed with the introduction of header bidding, and nToggle’s technology enables us to address those evolving needs.”   NToggle has been around for about three years and has maintained a partnership with Rubicon project for the past two years. "Traffic shaping--or 'toggling' as we like to call it--is a real force in programmatic advertising, and a mission-critical ingredient for its important players," said its founder and CE, Adam Soroca. "We've spent the last three years building our advanced data solutions, innovative technology platform and talented team, and are excited for the opportunity to accelerate our business by taking this next step.”

Consolidation in the adtech space is well underway. Among the more recent deals were RhythmOne’s acquisition of programmatic vendor, RadiumOne, for US$22 million, and Adobe’s purchase of video DSP vendor, TubeMogul, for US$540m.

Pund-IT principal, Charles King, saw the deal as a significant one Rocket Fuel given the company's "fall from grace" since its 2013 IPO.

"The purchase price is a small fraction of Rocket Fuel's one-time US$2 billion valuation but the company has proven to be far better at generating revenues than profits," he commented. "Rocket Fuel has narrowed its losses during the past year but being purchased should bring even greater levels of discipline and accountability to its business practices. Over time, that could result in significant profits for Sizmek."

A primary burden for RocketFuel has been the perception that its approach to digital ads and business is old school and increasingly out of step with broader market trends and customer needs, King continued.

"If the company hadn't been wholly acquired by a suitor like Sizmek, the alternative would likely have been selling off its assets piecemeal," he claimed. "The purchase price is an obvious comedown for investors once excited by Rocket Fuel's high flyer status but it's better than alternative scenarios. 

King also suggested the Rubicon acquisition of nToggle was Rubicon's way of avoiding a situation like Rocket Fuel's

"The perceptions of RocketFuel being out of touch highlight the importance of staying current in digitally innovative industries and markets," he said. "That can be exceedingly difficult when the pace of change is fierce so it's important for companies to recognize and pursue new, potentially leading edge technologies.

"That's the case with the Rubicon Project's deal for nToggle, which is well known for its machine learning-enabled header bidding solutions."

Follow CMO on Twitter: @CMOAustralia, take part in the CMO conversation on LinkedIn: CMO ANZ, join us on Facebook: https://www.facebook.com/CMOAustralia, or check us out on Google+:google.com/+CmoAu    

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