E-Commerce Adtech M&a Expected to Rise in 2022: Experts

  • The M&A market for tech firms that help facilitate retail advertising is heating up.
  • Agencies and private equity firms are gobbling up companies in the space.
  • Insider spoke to buyers about what they’re looking for in acquisitions.

Ecommerce advertising is booming as people shop more online, and retailers like Walmart and Macy’s are scrambling to build bigger advertising businesses.

This mad dash is kicking off a wave of deal making from ad agencies and private equity firms who are racing to buy companies that use artificial intelligence and machine learning to make retail advertising more effective.

The stakes are big. Boston Consulting Group estimates that e-commerce advertising is a $100 billion market for retailers.

E-commerce ad dealmakers don’t typically disclose their terms. However, private equity has done 293 e-commerce deals so far this year, up from 220 last year, according to PitchBook data. And venture capital has invested in 2,906 e-commerce deals so far this year, up from 2,514 last year, per PitchBook data.

Private equity has been particularly aggressive in acquiring these firms to build one-stop shops for sellers’ e-commerce needs. Ad agencies and consultants like Publicis Groupe and Ascential are also active buyers.

“Any of the largest agencies that don’t have commerce will struggle if they’re doing business with consumer brands,” said Chad Hetherington, CEO of e-commerce agency The Stable, which is backed by private equity firm Growth Catalyst Partners.

This year:

  • Publicis Groupe bought adtech firm CitrusAd.
  • Private equity-backed Assembly acquired adtech firm Pacvue.
  • Ascential acquired e-commerce firms Perpetua and SKU Ninja + WhyteSpyder.
  • Tinuiti acquired Amazon firm Ortega Group.
  • Private equity-backed Jungle Scout acquired Amazon agency Downstream.
  • E-commerce agency The Stable acquired The Retail Firm.

Insider spoke with retail and ad experts about what they look for in acquisitions and what types of companies could be acquired next.

Experts predict more consolidation

Hetherington said he’s looking for companies that help brands sell on platforms like TikTok and Instagram.

Jonathan Opdyke, partner at Greatwater Opportunity Capital and managing member at Beyond Hook Ventures, said adtech companies that help sellers advertise and manage prices across retailers are attractive targets.

He also sees more demand for companies that help advertisers measure the efficiency of their ad spend.

“Whenever a retailer opens an API, people rush to fill it, and then it becomes a pricing war,” he said. “Those with the biggest war chests to acquire companies will win there.”

Advertisers are seeking help navigating retail media

Amazon has spawned a cottage industry of firms that help brands sell and advertise on its platform. But as other retailers build advertising businesses, adtech firms and agencies that work with those sellers are in demand.

Unlike digital advertising, which is dominated by Google and Facebook, the

retail industry

is fragmented, so there’s a land grab for ad dollars flowing to non-Amazon retailers.

Walmart, for instance, is the biggest grocer in the US but only controls a little over 20% of the grocery market, Morgan Stanley estimated.

“Retail is inherently fragmented whereas brands are global, so they want e-commerce solutions that permeate across borders,” said Patrick Miller, co-president of digital commerce at Ascential, which recently acquired SKU Ninja + WhyteSpyder, a tech firm aimed at Walmart sellers. “As the ad side has gotten bigger, the complexity has also increased.”

The Stable is another agency acquiring Walmart-focused firms, like Arkansas-based The Retail Firm, which has brought in new tech and big Walmart sellers like beauty, personal care, and grocery companies. The Retail Firm also has tools that show brands data like sales and if an item is in-stock, Hetherington said.

Most retail firms specialize in specific retailers’ platforms, which limits their scale, he said.

Greatwater Opportunity Capital’s Opdyke predicted more ad agencies would be acquirers.

Microsoft is another likely buyer because it already owns retail media firm PromoteIQ, which helps retailers like Home Depot create advertising businesses, he said.

Companies like Thrasio and Perch have raised billions to buy Amazon sellers, and sources view them as potential acquiers as a way to diversify their revenue into new areas like advertising.