Joining Forces in a Fragmented Marketplace: How Agency M&A will Continue in 2014

In my earlier post about SEOMoz + Getlisted I predicted further commoditization of the SEO tools space. It’s no wonder then that an abudance of tools has lead to fragmentation in the service providers space with many a marketing or PR agency claiming broad SEO expertise. But on the flip side, something else is happening. As the demand for digital marketing products and services hits an all-time high, we’re seeing a significant number of the top tier SaaS and agency players undertake mergers and acquisitions. In 2013, we saw the merger of the Ominicom Group with Publicis to form Publicis Omnicom Group (the world’s largest advertising firm worth $35.1 billion) and the acquisition of Arbitron by Nielsen Holdings for $1.26 billion.

The digital agency space is no different with notable mergers and acquisitions such as Yodle acquiring Profitfuel targeting the SME vertical or Yellow Pages Group acquiring Enquiro to form Mediative. It hasn’t quite been 90 days into 2014 and we’re already seeing this trend continue:

While commoditization in the SEO tools space is on the rise, making the barrier to entry for new service providers fairly low, I predict that the creme de la creme of marketing agencies will continue aggressive consolidation in 2014.

Here are four of my predictions for 2014:

  1. The world’s four largest advertising agencies (Publicis Omnicom Group, WPP Group, Interpublic Group, and Dentsu Aegis Network) will continue to acquire digital marketing firms with solid performance and a significant number of large enterprise clients.
  2. “One of these 5 marketing automation companies will be purchased in the 9-10 figure $ range: Hubspot, Marketo, Act-On, SilverPop, or Sailthru. Marketing automation is very hot, and analysts are already placing bets on Marketo being a target.
  3. “A leading Hubspot Partner will be acquired, but the deal won’t come even close to rivaling Hearst Corp’s $325 million acquisition of  iCrossing in 2010.”
  4. Hubspot or Moz will IPO in 2014. Hubspot is already well on its way having hired Morgan Stanley on a potential deal.

Further reading:  1. 2013 M&A: More Big Deals, And A Flood Of Marketing Tech 2. Rand Fishkin’s 6 Predictions for the Marketing World in 2014

As the demand for digital marketing products and services hits an all-time high, we’re seeing a significant number of the top tier SaSS and agency players undertake mergers and acquisitions. In 2013, we saw the merger of the Ominicom Group with Publicis to form Publicis Omnicom Group (the world’s largest advertising firm worth $35.1 billion) and the acquisition of Arbitron by Nielsen Holdings for $1.26 billion. Salesforce.com acquired ExactTarget for $2.5 billion, Oracle acquired Responsys for $1.5 billion, and Harland Clark bought Valassis for $1.84 billion. Note the prevalence of marketing SaSS companies in the CRM, email, maketing automation and related categories. Adobe’s acquisition of Neolane was also a notable. “Marketing technology, connecting consumers to brand, using a lot more data that brands and publishers already have is a very promising area, whereas ad tech, scraping cookies with little overall contribution, isn’t a very promising area,” said Tolman Geffs, co-president of boutique investment bank Jordan, Edmiston Group Inc. The firm’s annual review of mergers and acquisitions in the media, information, marketing and related technology sectors showed out that the value of announced deals climbed 19% from 2012 to 2013. When asked what deal types were conspicuously absent from 2013, Geffs expressed his surprise at not seeing more M&A movement around retail-enabling technologies. “I expected to see more in retail tech, and I think that’s still going to happen,” he said. “Retailers have so much potential, not just in offering ecommerce but in really digitizing the shopping experience. They are very smart business people but need a lot of help not just in adopting a technology but in re-engineering their own go-to-market processes.” In the digital marketing agencies space, we’ve already seen some significant movements in 2014:

Here are our predictions for 2014:

  1. The world’s four largest advertising agencies (Publicis Omnicom Group, WPP Group, Interpublic Group, and Dentsu Aegis Network) will continue to acquire digital marketing firms with solid performance and a significant number of large enterprise clients. Watch Distilled, SEER Interactive and
  2. “One of these 5 marketing automation companies will be purchased in the 9-10 figure $ range: Hubspot, Marketo, Act-On, SilverPop, or Sailthru. Marketing automation is very hot, and analysts are already placing bets on Marketo being a target. I’m betting on one of these five companies because they’re at a scale to offer a potential buyer competition with Salesforce and Oracle” (Rand Fishkin)
  3. “PR 20/20, Kuno Creative and Impact BND will be acquired, but the deal won’t come even close to rivaling Hearst Corp’s $325 million acquisition of  iCorssing in 2010.” (???)
  4. “One of these 4 digital marketing analysis and reporting SaSS companies will get snapped up by large advertising agencies: Moz, Raven Tools, Conductor, or WordStream.” (???)

Further reading:  1. 2013 M&A: More Big Deals, And A Flood Of Marketing Tech 2. Rand Fishkin’s 6 Predictions for the Marketing World in 2014

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About Alex Rascanu

Alex Rascanu is a digital marketing strategist and speaker. Director of Online New Business Development at The Princess Margaret Cancer Foundation. Founder of EVENTS&. Organizer of the Marketers Unbound event series.