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Q4 2015 Market Report

LUMA partners

Digital Brief 006

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Mobile  

LUMA’s Singular Focus on Digital Media

Technology  

Media  

Marke2ng   MarTech  

Digital  Content  

Ad  Tech  

Ø  LUMA’s  exper,se  is  at  the  intersec,on  of  Media,  Marke,ng  and  Technology  

Ø  At  this  intersec,on  exists:  §  Digital  Content:  content  sites,  MCNs,  game  publishers,  aggregators  

§  Ad  Tech:  display,  search,  video,  mobile,  social,  content  marke,ng/na,ve,  connected  TV  

§  MarTech:  data,  analy,cs,  sales  and  marke,ng  automa,on,  email,  predic,ve  tools,  commerce  technology,  shopper  marke,ng,  payments  

Ø  Mobile  prolifera,on  has  a  major  impact  on  these  markets  and  LUMA  is  deeply  knowledgeable  on  mobile  

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Overall Commentary on Consolidation Ø  In  our  third  Market  Update,  we  reported  76  

acquisi,ons  in  digital  media,  highlighted  by  strategic  buyers  in  Media,  Marke,ng  Technology,  and  Commerce    

Ø  The  deals  we  track  in  this  report  fall  into  one  of  four  categories:  §  Large  (over  $500  mm)  §  Medium  ($100  –  $500  mm)  §  Small  ($20  –  $100  mm)  §  Sub  $20  mm  exits  are  considered  tech  and  team  deals,  

capitula,ons,  or  undisclosed  

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U.S. Digital Media M&A Activity by Sector

Source: LUMA Partners

#  of  Transac2ons  

Ø  In  2014  we  saw  the  inflec,on  point  of  rising  programma,c  adver,sing  spend  and  very  strong  Ad  Tech  M&A  ac,vity  to  reflect  it  

Ø  In  2015  M&A  in  digital  media  and  marke,ng  transac,ons  exploded  as  strategic  interest  across  all  digital  categories  exceeded  historical  levels  

95   67  

46   86  

61  

109  

0  

50  

100  

150  

200  

250  

300  

2014   2015  

Ad  Tech   MarTech   Digital  Content  

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U.S. Digital Media M&A Activity by Sector

Source: LUMA Partners

#  of  Transac2ons  

Ø  M&A  ac,vity  slowed  during  Q4,  but  s,ll  completed  a  record  year  for  deals  

19   20   18  10  

17   21   26  

22  

22  28  

32  

27  

0  

10  

20  

30  

40  

50  

60  

70  

80  

Q1  2015   Q2  2015   Q3  2015   Q4  2015  

Ad  Tech   MarTech   Digital  Content  

6 6

MARKETING  TECH  

CRM  SOFTWARE  

INTERNET  ORIGINALS   TELCO  

MARKETING  

MEDIA  

DATA  

CONSUMER  INTERNET  

TECH  SERVICES  

COMMERCE  

Right Time Decisioning of

Consumer Data    

(Ad Tech and MarTech)

A Growing Robust Pool of Strategic Buyers

Ø  So\ware  solu,ons  that  enable  decisioning  of  consumer  data  is  a  capability  that  a]racts  deep  pocketed  strategics  from  a  wide  variety  of  industries  

Ø Many  companies  from  Ad  Tech  and  MarTech  have  developed  these  capabili,es  

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Digital Media M&A Activity by Strategic Buyers 2015  

Ø  It  is  no  surprise  that  the  Media  set  of  buyers  led  M&A  ac,vity  this  year  to  take  advantage  of  the  new  Golden  Age  of  Content  and  the  matura,on  of  digital  adver,sing  pla_orms  focusing  on  mobile  and  video  

Strategic  Buyers  Transac2ons  

Total  Transac2ons  =  243  Source: LUMA Partners

16%  

17%  

4%  25%  

15%  

3%  

4%   6%  7%  

3%  Consumer  Internet  Commerce  Telco  Media  Marke,ng  Tech  Tech  Services  Data  Internet  Originals  CRM  So\ware  Marke,ng  

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Digital Media M&A Activity by Strategic Buyers

Total  Transac2ons  =  59  Source: LUMA Partners

13%  

6%  

6%  

25%  

6%  6%  

6%  

13%  

13%  

6%  Consumer  Internet  Commerce  Telco  Media  Marke,ng  Tech  Tech  Services  Data  Internet  Originals  CRM  So\ware  Marke,ng  

Q4  2015  Strategic  Buyers  Transac2ons  

Ø  In  the  last  quarter  of  the  year,  the  representa,on  of  strategic  buyer  categories  was  more  even  than  past  quarters  

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Ad Tech M&A Activity Ø  Full  Year  Observa2ons  

§  The  growing  pool  of  new  strategic  buyers  will  be  the  catalyst  for  M&A  in  Ad  Tech  for  years  to  come  

§  7  of  the  11  deals  over  $100  million  focused  on  mobile  and  video,  confirming  the  industry’s  most  important  growing  trends  

 Ø  Looking  Ahead  –  Cross  Channel  Tools  

§  Outside  media  intermedia,on,  we  expect  to  see  ongoing  emphasis  in  workflow  automa,on,  measurement,  and  analy,cs,  as  the  ecosystem  seeks  to  simplify  processes  across  channels  and  gain  more  holis,c  insights  

#  of  Transac2ons  

Source: LUMA Partners

3   2  5  

1  

19   19   13  

9  

0  

5  

10  

15  

20  

25  

Q1  2015   Q2  2015   Q3  2015   Q4  2015  

Over  $100M   Under  $100M  

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Ad Tech – 2015 Notable Deals Acquirer Capital

Raised Enterprise

Value Comments

Source: Crunchbase

$32M   $200M   By  adding  data  management  pla_orm  Exelate,  Nielsen  will  be  able  to  offer  clients  media  measurement  data  and  programma,c  adver,sing  data  

NYSE   $4.4B   With  AOL’s  adver,sing  technology,  Verizon  will  be  able  to  mone,ze  its  customer  data  through  more  advanced  cross-­‐device  targe,ng  

$40M   $720M   Vista  Equity  Partners  acquired  Mediaocean,  a  leading  workflow  and  planning  automa,on  company,  to  further  develop  its  digital  video  and  TV  products  

$18M   $533M   Twi]er’s  mobile  ad  capabili,es  will  become  more  sophis,cated  a\er  integra,ng  with  TellApart’s  retailer-­‐focused  retarge,ng  technology  

NYSE   $238M   AOL’s  acquisi,on  of  mobile  ad  network  Millennial  Media  is  the  missing  piece  to  Verizon’s  complete  adver,sing  strategy  

$25M   $176M   With  the  acquisi,on  of  Unruly,  News  Corp  will  gain  access  to  the  company’s  exper,se  in  video  distribu,on  and  Ad  Tech  pla_orm  for  its  long  list  of  brands  

NASDAQ   $732M   The  merger  forms  a  comprehensive  data  pla_orm  that  combines  ComScore’s  digital  audience  data  with  Rentrak’s  census-­‐based  data  on  TV  

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MarTech M&A Activity #  of  Transac2ons  

Ø  Full  Year  Observa2ons  §  Email,  data  management  and  

analy,cs  remained  key  acquisi,on  target  areas  

§  2015  saw  acquisi,ons  of  early  predic,ve  analy,cs  tools  such  as  Fliptop  and  C9  

 Ø  Looking  Ahead  –    Convergence  

§  MarTech  acquisi,on  ac,vity  is  expected  to  be  high  in  2016,  with  buyers  across  the  “marke,ng  clouds,”  eCommerce  and  internet  sectors  targe,ng  sectors  such  as  iden,ty,  predic,ve  analy,cs,  data  management  and  “Sales  Tech”  

Source: LUMA Partners

2  5   5   4  

12  

16  21  

18  

0  

5  

10  

15  

20  

25  

30  

Q1  2015   Q2  2015   Q3  2015   Q4  2015  

Over  $100M   Under  $100M  

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MarTech – 2015 Notable Deals Acquirer Capital

Raised Enterprise

Value Comments

Source: Crunchbase

$154M   $600M   MasterCard  acquired  Applied  Predic,ve  Technologies  which  offers  cloud-­‐based  predic,ve  analy,cs  that  are  used  for  marke,ng  and  pricing  strategies  

N/A   $4B   The  acquisi,on  of  Dealertrack  and  its  digital  marke,ng  services  for  dealerships  will  enable  Cox  Automo,ve  to  create  a  broader  suite  of  tools  for  the  automo,ve  industry  

N/A   $5.3B   Informa,ca,  a  leading  enterprise  data  integra,on  vendor,  was  taken  private  to  focus  on  its  cloud  integra,on  and  data  management  offerings  

NASDAQ   $925M   Permira  Funds  acquired  eBay  Enterprise  which  includes  four  different  divisions:  Magento,  eBay  Marke,ng  Solu,ons,  Enterprise  Services  and  Opera,ons  

N/A   $841M   Cision,  a  provider  of  PR  and  social  media  technology  services,  acquired  PR  Newswire  to  help  its  clients  be]er  manage  the  lifecycle  of  communica,ons  

NASDAQ   $1.1B   Endurance  Interna,onal  Group,  a  provider  of  web  hos,ng,  will  acquire  email  giant  Constant  Contact  to  expand  its  growing  digital  marke,ng  capabili,es  

$88M   $450M   With  the  acquisi,on  of  MarketShare,  Neustar  adds  a  leading  omni-­‐channel  marke,ng  solu,on  to  its  product  suite  as  it  transi,ons  into  a  digital  marke,ng-­‐first  company  

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Digital Content M&A Activity Ø  Full  Year  Observa2ons  

§  Digital  content  M&A  this  year  was  highlighted  by  companies  buying  new  businesses  outside  their  core  business  from  Under  Armour  acquiring  mobile  app  MyFitnessPal  to  LinkedIn  acquiring  online  learning  company  Lynda.com  

Ø  Looking  Ahead  –  Golden  Age  of  Content  §  The  new  Golden  Age  of  Content  is  

driving  increased  strategic  interest  to  publishers  that  have  achieved  scale  across  all  channels  and  significant  footholds  in  premium  video  

#  of  Transac2ons  

Source: LUMA Partners

9  2  

7   4  

14   25  

25  23  

0  

5  

10  

15  

20  

25  

30  

35  

Q1  2015   Q2  2015   Q3  2015   Q4  2015  

Over  $100M   Under  $100M  

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Digital Content – 2015 Notable Deals Acquirer Capital

Raised Enterprise

Value Comments

Source: Crunchbase

$154M   $1.6B   With  the  Orbitz  Worldwide  acquisi,on,  Expedia  will  own  all  the  companies  under  its  umbrella:  Orbitz.com,  HotelClub,  CheapTickets,  and  ebookers  

$18M   $475M   Under  Armour’s  acquisi,on  of  MyFitnessPal  signifies  the  sportswear  giant’s  ambi,on  to  become  a  complete  digital  pla_orm  for  athletes  

$289M   $1.5B   By  buying  online  learning  company  Lynda.com,  LinkedIn  adds  educa,on  to  its  core  business  of  connec,ng  job  seekers  with  new  opportuni,es  

N/A   $2.4B   Liberty  Interac,ve  Corp.  acquired  Zulily,  a  flash  sales  e-­‐commerce  company,  which  will  complement  Liberty  Interac,ve’s  TV  home-­‐shopping  channel  QVC  

$55.6M   $442M   German  publisher  Axel  Springer  acquired  digital  news  publisher  Business  Insider  to  broaden  its  interna,onal  audience  and  diversify  its  English-­‐language  brands    

NASDAQ   $3.9B   Expedia  acquired  HomeAway,  to  stake  its  posi,on  in  the  increasingly  popular  vaca,on  rental  home  market  

NYSE   $5.9B   Console  video  gaming  giant  Ac,vision  /  Blizzard  acquired  “Candy  Crush”  creator  King  to  strengthen  its  foothold  in  mobile  gaming  where  the  market  is  expanding  quickly  

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-­‐100%  -­‐80%  -­‐60%  -­‐40%  -­‐20%  0%  20%  40%  60%  

1/2/15   2/2/15   3/2/15   4/2/15   5/2/15   6/2/15   7/2/15   8/2/15   9/2/15   10/2/15   11/2/15   12/2/15  

MM   TUBE   RUBI   TRMR   MXPT   YUME   FUEL   CRTO   MRIN   NASDAQ  

Ad Tech – 2015 Stocks Performance

Market Data as of 12/31/15

Ø  More  of  the  Same  in  Q4  for  Ad  Tech  §  Collec,vely,  Ad  Tech  stocks  fell  5%  in  the  

final  quarter  of  the  year  §  TUBE  soared  in  Q4,  rising  30%,  but  is  s,ll  

almost  40%  off  of  its  high  §  MXPT  con,nues  to  struggle  in  the  public  

markets,  plumme,ng  over  58%  in  the  quarter  

Ø  Programma2c  vs  Managed  Service  §  Although  the  sector  faced  a  tumultuous  year,  

falling  over  35%,  technology-­‐first  programma,c  companies  are  showing  strength  in  their  business  models  

§  Managed  service  companies  on  average  fell  over  47%    

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MarTech – 2015 Stocks Performance

Market Data as of 12/31/15

§  While  Q4  was  strong,  most  of  the  MarTech  /  SaaS  companies  struggled  in  2015,  declining  more  than  4%  

§  Of  the  eight  public  MarTech  companies,  only  CRM  and  HUBS  finished  year  in  posi,ve  territory,  growing  34%  and  68%,  respec,vely  

Ø  MarTech  Closes  Strong  in  Q4,  A[er  a  Difficult  Year  §  The  sector  outperformed  the  NASDAQ  in  the  

quarter,  soaring  9%  §  The  biggest  bright  spot  in  Q4  was  BCOV,  climbing  

more  than  26%  a\er  dropping  36%  at  the  end  of  Q3  from  the  beginning  of  the  calendar  year  

-­‐60%  

-­‐40%  

-­‐20%  

0%  

20%  

40%  

60%  

80%  

1/2/15   2/2/15   3/2/15   4/2/15   5/2/15   6/2/15   7/2/15   8/2/15   9/2/15   10/2/15   11/2/15   12/2/15  

CRM   MKTO   HUBS   BCOV   BV   CTCT   DWRE   JIVE   NASDAQ  

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Q4 Key Startup Financings to Watch Lead Investor Capital Raised Valuation Comments

$200M   $4.4B   Vice  Media  has  raised  more  capital  to  build  its  media  brand  across  all  pla_orms  from  television  to  virtual  reality  

$158M   $1.9B   AppDynamics,  an  applica,on  performance  management  pla_orm,  now  has  over  1,600  customers  and  is  preparing  for  an  eventual  ini,al  public  offering  

$53M   N/A   Tag  management  provider  Ensighten  will  be  using  its  new  capital  to  push  innova,on  and  sales  of  its  growing  omni-­‐channel  customer  data  pla_orm  

$105M   $1.0B   Online  educa,on  company  Udacity  has  raised  a  new  round  of  funding  as  it  reaches  profitability  with  11,000  paying  students  

$75M   N/A   Earnest,  a  company  trying  to  reimagine  lending,  is  tackling  now  a  very  crowded  market  that  is  ripe  for  disrup,on  and  technology  intermedia,on  

$350M   $1.4B Jet.com  recently  moved  away  from  an  annual  membership  model  to  focus  on  its  pricing  engine  and  “Smart  Carts”  that  give  customers  the  lowest  prices  

Source: Crunchbase

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LUMA’s Recent Content

State  of  Digital  Marke2ng  Presented  at  DMS  West  15  

Ø  At  our  inaugural  Digital  Marke,ng  Summit,  we  presented  the  State  of  Digital  Marke,ng,  which  provides  our  views  on  the  market  and  significant  trends  in  the  digital  marke,ng  ecosystem  

The  State  of  Digital  Video  Presented  at  VidCon  2015  

Ø  At  VidCon  2015  we  presented  our  views  on  the  rise  of  the  digital  video  market  and  its  surge  against  tradi,onal  TV  

Digital  Brief  004  Back  to  Mad  Men  

Ø  In  our  fourth  Digital  Brief  we  explained  what  the  future  holds  for  ad  agencies  and  five  strategies  they  make  take  in  a  compe,,ve  marketplace  

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LUMA’s M&A Deals in 2015

December 2011 December 2015

has been acquired by

The undersigned acted as co-financial advisor to MarketShare Partners.

December 2011 May 2015

has merged with

The undersigned acted as exclusive financial advisor to MyBuys, Inc.

December 2011 September 2015

has been acquired by

The undersigned acted as exclusive financial advisor to Unruly Holdings Limited, Inc.

December 2011 April 2015

has been acquired by

The undersigned acted as exclusive financial advisor to Yieldex, Inc.

December'2011'October'2015'

has$been$acquired$by$

The$undersigned$acted$as$exclusive$financial$advisor$to$Millennial$Media,$Inc.$

a$division$of$

20

acquired  by  

December  2015  

MarketShare to be Acquired by Neustar LUMA Partners acted as Financial Advisor to MarketShare Partners Announced November 5, 2015

Strategic  Ra,onale  Ø  Through  the  acquisi,on  of  MarketShare,  Neustar  will  gain  access  to  the  company’s  exper,se  

in  marke,ng  planning  and  cross-­‐channel  a]ribu,on    

Ø  Neustar  has  evolved  in  recent  years  from  an  informa,on  and  security  business  to  a  broader  informa,on  services  and  so\ware  business,  with  a  strong  focus  on  marke,ng  technologies.    MarketShare,  with  its  CMO-­‐level  offerings,  broadens  Neustar’s  MarTech  solu,ons  and  elevates  its  importance  to  CMOs  

Ø  MarketShare  has  top-­‐,er  clients,  including  Ford,  Best  Buy,  Hilton,  The  Home  Depot,  Neiman  Marcus,  Intel,  SAP,  MasterCard,  The  Po]ery  Barn  and  SAB  Miller,  enabling  cross-­‐sell  between  Neustar  and  MarketShare  customers  

Ø  Enables  MarketShare  to  join  forces  with  a  company  who  has  long  been  an  expert  in  first-­‐party  data,  a  vital  asset  in  digital  marke,ng  today  

LUMA partners

Ø  MarketShare  helps  marketers  grow  revenue.  Combining  advanced  analy,cs  technology,  scien,fic  leadership  and  deep  domain  exper,se,  MarketShare  enables  large  companies  to  measure,  predict  and  drama,cally  improve  Marke,ng’s  impact  on  revenue—typically  genera,ng  a  20%-­‐30%  improvement  in  marke,ng  effec,veness  and  3%-­‐4%  revenue  increase,  yielding  a  3x-­‐50x  first-­‐year  ROI.  Widely  considered  the  market  leader,  MarketShare  helps  direct  tens  of  billions  of  marke,ng  investment  dollars  globally.  

Ø  Neustar,  Inc.  (NYSE:NSR)  is  the  first  real-­‐,me  provider  of  cloud-­‐based  informa,on  services,  enabling  marke,ng  and  IT  security  professionals  to  promote  and  protect  their  businesses.  With  a  commitment  to  privacy  and  neutrality,  Neustar  operates  complex  data  registries  and  uses  its  exper,se  to  deliver  ac,onable,  data-­‐driven  insights  that  help  clients  make  high-­‐value  business  decisions  in  real  ,me,  one  customer  interac,on  at  a  ,me.    

$   Overview  Ø  On  11/05/2015,  Neustar  announced  that  it  

would  acquire  MarketShare  Partners  for  $450  million  in  cash  

Ø  The  transac,on  is  expected  to  result  in  approximately  $60  million  in  tax  benefits  and  $10-­‐$15  million  of  cost  synergies  

Ø  Deal  terms:  Ø  Enterprise  value:  $450  million  Ø  EV/LTM  Revenue:  7.9x  Ø  EV/2015E  Revenue:  7.5x  Ø  EV/2016E  Revenue:  5.0x  

PLANNING

ANALYSIS / OPTIMIZATION

ACTIVATION

MEASUREMENT

ATTRIBUTION DATA INGESTION

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CREATIVE

360º  Marke2ng  Cycle  

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LUMA’s Differentiated Value Proposition

Ø  LUMA  has  developed  a  differen,ated  value  proposi,on  based  on:  §  Focus  §  Exper,se  §  Objec,ve  Credibility  §  Trust  §  Performance  

Ø  LUMA  has  built  a  differen,ated  global  brand    

Ø  We  leverage  our  brand  to  op,mize  financial  and  strategic  objec,ves  of  select  quality  clients    

LUMA partners

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LUMA’s Content-Driven, Expert-Based Approach

Conference  Keynotes  

Publica2ons  (over  2  million  views)  

Corporate    Teach-­‐ins  

LUMAscapes  (over  4  million  views  from  211  countries)  

DISPLAY MOBILE VIDEO SOCIAL NATIVE SEARCH MARTECH COMMERCE GAMING STRATEGIC BUYERS

Completed    Deals  

Digital  Briefs  

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New York | San Francisco | Palo Alto

Access. Insights. Execution.

LUMA partners