Will Amazon's Acquisition of Sizmek Create a Google Contender?
Recent news reveals that Amazon has acquired adtech company Sizmek. Amazon has acquired over 80 companies ranging from AI to wearable tech, supply chain, and hardware, notables including IMDb, Good Reads, Pill Pack and Ring.
As a company Amazon is, of course, no stranger to advertising. The company spends over $8.2bn in advertisingand also reaps the benefits ofadvertisers on its own platform. According to the Outdoor Advertising Association of America (OAAA), they are one of the top 10 spenders on OOH advertising. Its own platform includes sponsored products (akin to paid searches), and the ability for advertisers to buy ads on a host of other web and mobile publisher properties. Earlier this year they launched in-app video ads and reward options that publishers can offer to customers.
New York-based Sizmek is considered to have the tech to enable Amazon to compete with behemoth Google's Marketing Platform. Sizmek filed for Chapter 11 of the U.S. Bankruptcy Code. Amazon has agreed to buy Sizmek Ad Server and Sizmek Dynamic Creative Optimization, a tool that helps personalize ads using data.
I spoke to David Jorgenson, CEO of Equiteq, a global boutique investment bank and strategy advisor about the acquisition. He noted the value of Sizmek's product offerings to deliver competitive advantage for Amazon:
"There is a strong demand for personalized marketing. I think targeting and personalization of advertising are not easy, and there is a lot of intellectual property around that. Also, it's hard to do. So I think that if you look at Amazon it's clear why they see why they might want it.
The deal will also enable Amazon to work with advertisers that don’t sell products on Amazon — like airlines and restaurants — but want to use Amazon’s data and target Amazon’s customers.
French startup Ycor made rumblings about an outbid with CEO Maurice Levy telling The Drum" An Amazon purchase of Sizmek leaves the market without an “independent alternative.” The company has since withdrawn.
David detailed "I think it's very interesting to take the perspective of maintaining an independent alternative because that's not the mandate of the bankruptcy process. There's nobody with a fiduciary duty to the market to maintain it. So, I don't necessarily see that as an argument winning the day. What wins the day is economics."
Innovations are rapidly evolved in the mechanics of connecting consumers with digital advertising. Consumer preferences are really changing. David asserts that with the speed of combinatorial innovation creating an ever-evolving advertising landscape,
"In a year there might be another acquisition that’s developed around another solution. I don't think Amazon will rest on any aspect of their business. If you think about the history of a company and what they've developed in different areas, I wouldn't expect them to rest in any aspect."
What is clear is that adtech startups (even those in financial dire straights like Sizmek) are increasingly offering innovative solutions to problems plaguing advertising stalwarts. Adtech and martech M&A's have been prolific over the last few years, and it's likely to continue for the rest of this year.