The report, the 16th annual edition of "Acquisition Prospects for Media, Marketing Services and Digital," is based on online survey of more than 7,400 executives in the advertising, marketing services, digital marketing, marketing technology, media or digital media businesses, and related venture capital and private equity investors. It finds that 70% of the respondents have a "stronger" view of the economy in the year ahead, while 29% think it will remain the same, and only 1% believe it will worsen. That compares with only 3% or believed it would get stronger, and 80% who thought it would get weaker when AdMedia Partners surveyed them a year ago.
That outlook has also transferred to the advertising economy, with respondents projecting that overall ad spending would rise 3% this year, vs. a decline of 5% a year ago. Expectations for interactive ad spending, the sweet spot within a struggling ad economy, have also grown much better, with respondents projecting a 10% gain this year vs. a 5% gain a year ago.
Those expectations are fueling the underlying values of advertising- and media-related investment decisions, and based on the results, AdMedia Partners says the mupltiples - or M&A valuations - of companies has grown to 7 to 8 times EBIT (earnings before interest and taxes) for digital agencies and marketing services firm, which compares to a multiple of only 5 times EBIT for traditional agencies and 6 to 6.5 EBIT for traditional marketing services firms.
The valuations for pure play online media firms is even healthier - 8 to 9 times EBIT - while the multiples for traditional newspaper operators are the worst: 3 times EBIT.
Asked when the online businesses of traditional media categories would represent more than 50% of their total revenues, 44% of respondents said that inflection point would occur within five years for the newspaper industry, while 38% believe it will happen within 10 years. Nearly two-thirds of respondents (65%) believe those business models would flip for B-to-B publishers within the next five years, while only 21% believe it would occur for consumer magazine publishers during that same period.
Despite those expectations, only a minority (20%) of respondents believe that online content companies have developed "sustainable business models, which is actually significantly worse than the percentages citing that in 2009 (30%) and 2008 (51%).
The most "underrated" online business opportunities, respondents said, are for "niche enthusiast content" (49% citing), mobile content (43%), gaming (32%), user-generated content (21%), and ad networks (20%).
The most "overrated" online business opportunity, they said, is "social media networks" (63% citing), followed by "ad exchanges" (51%).