• by Seth Ulinski , Op-Ed Contributor, May 22, 2014

About six months before Oracle acquired BlueKai for $400M, I wrote an article predicting that an Enterprise Resource Planning (ERP) software company would make a significant investment in the ad tech space to the tune of $500-750 million.  Admittedly I overshot the price tag, but as most can attest, it’s still the Wild West from a valuation standpoint in the world of ad tech.

That said, I believe acquisition activity will heat up for the remainder of 2014 and into 2015 as global ERP players (i.e., Oracle, SAP, Microsoft) better understand how/where/when ad tech overlaps with their ERP packages designed to improve various business processes. Marketing is, of course, a function of the enterprise -- and the digital marketing component in particular is becoming automated through a combination of SaaS, algorithms, and AI (in this regard, IBM’s Watson comes to mind).  

It’s also no surprise that Systems Integration (SI) specialists such as Accenture, Deloitte, and IBM continue to invest in digital via co-branded partnerships with the likes of Adobe -- who isn’t necessarily known as an ad tech company (yet) -- but all parties can quickly make inroads given the aforementioned SI heavyweights' ability to gain audience with Fortune 500 CXOs. 

SAP and Accenture are also getting a better grip of the ad tech ecosystem -- nuances, capabilities, and most importantly, revenue opportunities -- by directly investing capital into ad tech start-ups. For example, SAP Ventures has invested in ad tech companies along the lines of Criteo (CRTO), Marin Software (MRIN), and OpenX.

However, there are challenges as the ERPs navigate the digital waters and attempt to understand the litany of companies listed on the famous/infamous LUMA Landscape. In addition to understanding the respective companies, segments, and ad tech acronyms, corporate M&A teams will be scrutinizing a variety of factors, including:

• Which companies will drive immediate synergies via SaaS? (Conversely, what % of revenue is delivered through managed services?)
• Do we play it safe in the form of bite-size analytics add-ons? Or make a bigger move going after programmatic buy / sell technologies that can make a bigger impact on topline revenues?
• How does the cost of media impact each company’s business and potential acquisition price?

My guess is that the Data Management Platforms (DMPs), BlueKai’s peers, will be the easiest to ingest and sync with existing enterprise CRMs. This makes X+1, Lotame, and eXelate attractive targets. Moving from a pure data management play into the digital media space –- a case could be made that retargeting specialists such as Adroll or Criteo could be appealing for the ERPs, particularly if they carry multichannel CRM features (on that note, Criteo recently purchased an email platform called Tedemis for a two-pronged solution).  

The remaining DMPs will likely command less than BlueKai (~$300 million) with X+1 being the exception, given some of its other revenue streams and capabilities. The biggest/boldest move would be for one of the ERPs to acquire a DSP-DMP combo (i.e. TURN, MediaMath, DataXu), enabling digital media-buying and data management capabilities -- thus going “all in” to create a bridge between Silicon Valley and Madison Ave. This piece of the bridge will likely cost closer to $1 billion. 

UPDATE: since I started writing this piece on May 20, SAP announced the acquisition of SeeWhy, a multichannel remarketing specialist (display & email). The bridge expansion continues!