Martech Advisor: Snap Inc. to Make Inroads into Ad Tech; Talks with AdRoll ReportedJuly 28, 2017 | By Fluent
Publication date 7/17/2017
Snapchat is keen on acquiring ad tech companies to power up its marketer reach and has initiated acquisition talks with AdRoll. Snapchat is eyeing startups operating in the ad tech and mar tech space to expand its ad business and assuage concerns regarding its stock price. In June, Snap Inc., the parent company of Snapchat, acquired Placed for $200 million to gain access over third-party measurement pertaining to tracking of store visits and purchases in real time.
Snap’s IPO value went down to $17 due to a slower growth rate than what was anticipated after it went public. The pricing terms of the acquisition talks have not surfaced so far and it is believed that AdRoll has had similar discussions with other companies as well. AdRoll serves above 35,000 customers who use its programmatic ad platform and till now, has raised approximately $91 million in VC funds. The acquisition of AdRoll, if it happens, would strengthen Snap’s grip on campaign management and ad targeting together with its expertise in the ecommerce sector.
If the acquisition materializes, it could have a strong analogy to the $3.1 billion DoubleClick acquisition by Google which took place in 2007.
In this context, Michael Connolly, CEO, Sonobi, stated, “Google’s acquisition of DoubleClick was a smart purchase because it was essential infrastructure for the impression based market google operated in. What is driving brands like facebook, twitter and google’s growth is not the impression based market but the addressable based market. Snapchat would need to buy technology that allows it to address audiences outside of the world of the ad server and directly on quality media companies. The only way to do this is through header based technology that lives outside google & building a direct to publisher program — this is not what AdRoll is. This seems like an acquisition that is for the market of yester year and not the market of tomorrow.”
While Snap has popularity among younger audience, it has been under pressure to get the attention of advertisers for its ads. According to Brian Nowak, an analyst at Morgan Stanley, “We have been wrong about Snap’s ability to innovate and improve its ad product this year (improving scalability, targeting, measurability, etc.) and user monetization as it works to move beyond ‘experimental’ ad budgets into larger branded and direct response ad allocations.”
Elaborating on the IPO picture and Snap’s perspective, Jordan Cohen, CMO, Fluent, added, “A study we conducted around the time of its IPO found that Snapchat’s ad formats and targeting weren’t resonating with users: 69% “always” or “often” skip the ads, and that number is 80% amongst its most coveted demographic – those “harder to reach” 18 – 24 year olds. Nothing has changed in the months since we issued that study and its IPO.
In a blog post, I also noted that in the era of Big Data – Snapchat doesn’t really have any. They are almost entirely reliant on 3rd party data, in an age which is also increasingly prioritizing having access to the much more valuable treasure trove of 1st party data. The only 1st party data they have is what filters I put on my face and who my friends are within their walled garden of Snapchat identify — they don’t have my email address, which is the digital currency being used successfully by competitors like Facebook and Google to connect the dots between advertisers’ CRM databases and their own users.
A potential purchase of AdRoll is especially interesting because two years ago, Evan Spiegel specifically said that he wanted Snap to avoid being “creepy” by employing online advertising tactics such as retargeting – and now they are considering buying the biggest retargeting platform in the industry? I assume the stock dipping below its IPO pricing was a healthy gut check in terms of understanding the relative importance of avoiding “being creepy” vs. avoiding making as much money as possible as a business.
I think if this acquisition goes through, AdRoll will bring a successful online ad company into their fold, and along with it, additional data for targeting and tribal knowledge of ad formats, content, and targeting that work really well. But Snapchat will still have the fundamental challenge of not generating its own, owned fountain of 1st party data on its users, coupled with a user experience (and younger user base) that just isn’t well suited to performance marketing in its current form. It’s more about Snap becoming a holding company for Snapchat and AdRoll unless and until they decide to make some pretty drastic changes at Snapchat.”
The Snap-AdRoll acquisition talks have not progressed into an offer yet but Snap is intently looking at other companies that are part of ad tech and mar tech sectors as the gap between the two is constantly getting bridged. Another name that seems to be on the buying radar of Snap is Segment, a company that provides data-tracking tool to marketers. There is no official confirmation on this acquisition approach or talks. Snap began talks with AdRoll prior to going public in March.