These firms may see a revival of investor interest as e-commerce firms, large international tech companies and offline retailers hunt for valuable data on Indian shoppers
Bengaluru: Advertising technology companies, which were written off earlier by some analysts as unprofitable bets, may see a revival of investor interest as e-commerce firms, large international technology companies and offline retailers hunt for valuable data on Indian shoppers.
Vizury Interactive, Amagi Media Labs and AdNear Pte. Ltd raised $10-20 million each over the past nine months, and others such as Vserv Digital Services Pvt. Ltd are in the market to raise their next round of funding.
Ad tech companies link advertisers with publishers, help place ads, provide data on shopping patterns of consumers; a few even supply real-time ads on websites and mobile platforms.
Some of these ad tech firms are seen by analysts and investors as acquisition targets for top e-commerce firms such as Flipkart and Snapdeal, which are not only spending massive amounts on online marketing, but also trying to expand the business of generating ad revenue on their platforms. Large technology companies such as Facebook Inc. and Twitter Inc. and even international advertising agencies are seen as other potential acquirers of ad tech firms. Unlike most other start-ups, ad tech firms are present in several international markets, although the ones that have the most data on Indian shoppers are expected to benefit from potential mergers and acquisitions (M&A) interest.
Flipkart is close to buying mobile ad tech firm AdIQuity Technologies Pvt. Ltd, Mint had reported on 16 February. Twitter’s acquisition of mobile marketing start-up ZipDial also highlights the interest among international technology companies on getting data on Indian consumers. “Increasingly, (several e-commerce) companies will require specialized advertising technology capabilities which they will either build in-house or acquire from outside," said Manik Arora, managing director at venture capital firm IDG Ventures India, which has backed Vserv and Ozone Media in ad tech. “In India, it is becoming very important for all companies targeting Internet users, especially on the mobile, to get rich data on consumers. The specialized data-intensive companies which can capture the right data, systematically analyse it and then monetize it, will emerge winners in the Indian digital ecosystem."
Having high-quality data and the technology to serve real-time ads will be the differentiators in ad tech because the traditional business of buying and selling ads is made irrelevant, said Rutvik Doshi, director, Inventus India Advisors, which has invested in Vizury. “Any retail, e-commerce or technology company that wants access to a large database of Indian consumers and technology to place intelligent ads would be potentially interested in acquiring ad tech firms here." Real-time ads also affect business at traditional ad agencies such as WPP Plc and Omnicom Group Inc. For instance, France-based advertising firm Publicis has invested in three ad tech and digital advertising firms since October.
“Since the media-buying process is becoming automated, the traditional ad agencies are at risk of losing a large part of their non-creative business. They may have to look at acquiring companies that specialize in online ads," Inventus’s Doshi said. The online advertising market in India is expected to increase by 30% to ₹ 3,575 crore in the year ending March, according to a September report jointly published by lobby group Internet and Mobile Association of India and IMRB International, a market researcher. Much of this digital advertising is happening on a real-time basis and ad tech companies, which link advertisers and publishers, are tying up with telecom firms and others to improve databases. For instance, Vserv, which had partnered with Bharti Airtel Ltd, signed up with other carriers including Vodafone India Ltd and Aircel Ltd last year for collecting data on users. It aims to collect data on 1.2 billion users in two years.
“Our pivot last year was about becoming a smart data platform from being just an ad tech company," Vserv chief executive officer Dippak Khurana said. “The tie-up with telecom companies gives us unrivalled reach to Indian consumers and enables us to collect invaluable data on consumers going forward."
Vizury, which is present in 11 countries, expects sales to triple this fiscal, partly due to the increased digital spending by e-commerce firms, online travel companies and classifieds in India, said Subra Krishnan, vice- president of products.
Some analysts say there is no proven successful business in ad tech model, even globally. In the US, several ad tech firms such as Millennial Media Inc. and Tremor Video that went public over the past three years have seen a fall in their stock prices, as competition from Google Inc. and Facebook hit results.
The number of new ad tech start-ups fell to 50 last year from 80 in 2013, according to start-up data provider Tracxn. InMobi, one of India’s better-known start-ups, has been struggling to raise its next round of funds because of differences over valuation, according to people aware of the matter. InMobi didn’t reply to an email seeking comment. “The switching cost both on the publishers’ and advertisers’ sides is very low, and there isn’t much differentiation between ad tech companies," said Sharad Sharma, co-founder of iSpirt. “There’s high revenue growth, but the margin structure is very unattractive even over the long term. I think consolidation and M&A is inevitable, but it won’t be necessarily favourable toward the sellers."
