Mooreland Monitor Mobile Advertising – Fulfilling Its Potential
Total Page:16
File Type:pdf, Size:1020Kb
Mooreland Monitor Mobile Advertising – Fulfilling its Potential November 2013 CONFIDENTIAL Table of Contents . Market Overview and Trends . Investment and Exit Activity . Snapshot of the Ecosystem . Appendices – M&A Transaction Data – Fundraising Data – Mooreland Partners Overview CONFIDENTIAL 2 Market Overview and Trends 3 Mobile Advertising Has Long Shown Great Promise Despite clear hurdles in the early days of the market, companies throughout the technology ecosystem moved rapidly to acquire footholds in mobile advertising. A number of factors limited traction in the market US Mobile Ad Spend early on… ($B) – Ecosystem still finding its way The New Normal (5 Yr CAGR): • Few smartphones, no tablets 2009 Forecast = 81% 2010 Forecast = 43% • Mobile apps and web in their infancy 2011 Forecast = 39% • No 3rd party data / ability to target end-users 2012 Forecast = 44% – Structural issues to overcome • Data privacy and regulation (opt-in advertising, etc.) • OS fragmentation (scattered inventory) • Device and network capabilities (screen size, 2G, etc.) . By 2009, forecasters projected market growth of 80%+ – Estimates were reduced during the Great Recession – but actual performance soon surpassed the initial forecasts . Global leaders were attracted to the potential growth of the sector; some too early, others in line with market growth – 2005-07: Microsoft/Screentonic, Nokia/Enpocket, AOL/Third Screen Media – 2009-10: Google/Admob, Apple/Quattro Source: BIA / Kelsey CONFIDENTIAL 4 Factors Enabling Mobile Advertising More recently, a number of key factors have converged to support the market. WW Connected Device Shipments (mm units) •Millennial Media acquires . Smartphone penetration, Jumptap ($255mm) emergence of tablets •Twitter acquires MoPub ($350mm) and sets IPO terms •Tablets projected to exceed desktop PC shipments in Q4 . Expansion of mobile ad units (search, navigation, in-app, 2013 web, etc.) 2012 •50% of U.S. mobile phone users own smartphones . Enhanced targeting from •Millennial Media IPO, 2011 SingTel acquires Amobee improved data and analytics •Apple sold 55mm ($321mm) 2010 iPads and over •Facebook IPO (real-time, context, location, 150mm iPhones •Windows Phone social, etc.) release •First Apple iPad 2012 US Ad Spend vs. Consumer Time Share by Media 2009 •Apple acquires •First Android- Quattro ($275mm) . Profound shift in how and based tablet 2008 •Google acquires when people consume media •First Admob Android ($750mm) 2007 Phone •First 4G Native IP network . Market leaders achieving the •First iPhone scale and reach required to 2005/06 work with global brands •Market largely SMS-based Source: IAB, October 2013; Morgan Stanley Research, 2011; eMarketer, October 2012; *Non-voice; **Offline reading only CONFIDENTIAL 5 Large and Growing Market Today, the mobile advertising market is well established and rapidly taking share from other forms of digital advertising. Worldwide Mobile Ad Spend ($B) . The mobile ad market is on pace to reach $13.6B this year and shows no signs of slowing down – Spend is expected grow by ~45% over the next 4 years, reaching approximately $37B in 2016 . In 1H 2013, U.S. mobile ad revenues totaled 15%, or $3B, of all digital advertising revenues – Up 145% from the $1.2 billion (7% of total) reported in 1H 2012 . Today, mobile is the third largest digital ad format, pulling share from classifieds, lead gen, and rich media, and likely to pass display/banner shortly U.S. Digital Advertising Market Share by Format U.S. Digital Advertising Market Share by Format US internet ad revenues totaled $20.1 billion for the first six months of 2013 $17.0B Ad Market Revenue $20.1B Ad Market Revenue Source: IAB, October 2013; eMarketer, December 2012 CONFIDENTIAL 6 Investment and Exit Activity 7 Venture Investment in Mobile Advertising In 2011, financing activity in the mobile advertising sector reached its peak. In the two years since, deal volume has remained relatively constant while the amount invested has fallen. 2008 – 2013 Financing Activity 2013 Estimate Methodology - Q4 2013 estimate is derived Aggregate Value Transaction Count using financing from 2008 – $700 2012 (taking Q4 transaction Inmobi funding of $200M excluded for value and100 count relative to purposes of normalizing funding activity entire year’s data) $600 74 80 83 Estimate $500 69 $447 57 YTD Count Transaction 60 $400 52 $316 $300 $304 $104 Estimate 36 40 ($ in millions)($in 40 Aggregate Value Aggregate $200 $191 $169 $177 YTD 20 $100 $0 0 20082008 20092009 20102010 20112011 20122012 20132013 YTD # Investments 36 40 52 74 69 57 Total Investment $191 $304 $169 $447 $316 $177 ($, Millions) Source: Capital IQ, 451 Group, and publicly available information. CONFIDENTIAL Source: Capital IQ and publicly available information. 8 Most Active Investors in Mobile Advertising Since 2008, the five most active financial investors participated in 34 financings, totaling ~$600mm, while the top 5 strategic investors made 18 investments, for ~$130mm. Top 5 Financial Investors Top 5 Strategic Investors Accel Management 9 SoftBank Capital 5 Draper Fisher Jurvetson 9 Google Ventures 4 First Round Capital 6 Gannett 3 Scale Venture Partners 5 Bertelsmann Digital Media Investments 3 Menlo Ventures 5 D2 Communications 3 Transaction Count since 2008 Source: Capital IQ, 451 Group, and publicly available information. CONFIDENTIAL 9 Industry Leaders “Verticalizing” through M&A Industry leaders have maintained a stronghold on the mobile advertising market through acquisition to fill key product gaps and gain scale. Video / Exchange Mobile Server Rich Media CONFIDENTIAL 10 Wide-Ranging M&A Outcomes Early on, the exit environment was a tale of haves and have-nots. In 2010, multiples started to hover in the 3-5x range. 35.0x 37.5x + Revenue Multiple Revenue Note: size of bubble denotes transaction size. CONFIDENTIAL 11 Taking Advantage of IPO Window Over the last 24 months, a handful of adtech companies that have passed through the open IPO window have been providing increasing clarity around performance in the market. As a whole, the group is delivering attractive growth Revenue Growth1 – All companies have delivered growth of at least 35% in recent years and are projecting growth of 20%+ in 2014 . Gross margins in the market largely fall into the 40- 50% range – Marin Software is the exception – avoiding the gross vs. net revenue question that has long plagued the mobile ad market . Profitability has not been a focal point – with all companies in the data set delivering little to no EBITDA Gross Margin1 EBITDA Margin1 Source: Capital IQ, as of October 31st, 2013 CONFIDENTIAL 12 Multiples in the Market Today, trading multiples of public adtech companies point to values that support M&A exit multiples. Precedent Transactions Public Comparables(1) Median Revenue Multiple (2008 – ’13YTD) - 4.6x Median LTM Revenue Median NTM Revenue Multiple: 3.9x 25 Multiple: 3.1x 22 21 4.0x 6 20 19 19 3.9x 5 15 3.1x 10 2.1x 10 9 4 1.4x Transaction Count Transaction 10.4x 5 3 5.6x 5.0x 0 2 2008 2009 2010 2011 2012 2013 YTD 4.2x 2.4x 1 = LTM Revenue Multiples 1.8x = NTM Revenue Multiples Source: Capital IQ, as of October 31st, 2013 CONFIDENTIAL 13 Acquisition “Hot Spots” Current market trends point to a few growing “hot spots” that are increasingly ripe for M&A activity in the near-term. Select Market Trends M&A “Hot Spots” - Ad networks combatting compression in CPM - Performance-driven models (CPI / CPA) pricing - Need for companies to integrate 3rd party and - Social analytics / business intelligence social data to improve conversion - Proliferation of programmatic buying - Real-time bidding/ exchange platforms - Evolution of monetization strategies in the application ecosystem - Revenue optimization / media buying solutions - On-going need for brands / agencies to optimize spend as dollars flow to mobile - App discovery and recommendation engines CONFIDENTIAL 14 Value Considerations in the Market Based on public company performance, precedent M&A transactions, discussions with buyers and sellers, etc., themes around key value considerations in the market have emerged. Market Positioning - Inventory Type - Remnant - Premium - Geographic Reach - Regional - Device / Format Coverage - Global - Cross-Platform - Sales Approach - Siloed - Impression-Based - Performance-Driven Product Differentiation - Underlying Technology Platform - 3rd Party - Owned - Capabilities - Network - RTB, Programmatic - 3rd Party Data - No Integration - Multi-Source Financial Profile - Business Model - One-Time Campaigns - SaaS - Revenue Scale - Sub-$20mm - $50mm+ - Margin Profile - 20-30% - 50%+ CONFIDENTIAL 15 Snapshot of the Ecosystem 16 Mobile Advertising within Broader Digital Marketing Ecosystem Buy-Side Sell-Side Search Search Engine Revenue Optimization Banner Premium vs. Remnant Rich Media/Video vs. Static Apps Publishers / App Developers Brands Agency Display CPA vs. CPM Subscribers Ad Networks Ad DSP / Exchange / DSP Multi- Network Ad Optimization Location-Based vs. Location Agnostic Media Opt-in Messaging Campaign Management / Messaging SMS Data Suppliers Analytics / Targeting Operators / OEMS CONFIDENTIAL 17 Mobile Advertising within Broader Digital Marketing Ecosystem CONFIDENTIAL 18 Appendices - Relevant M&A Transactions Data - Relevant Fundraising Data - Mooreland Partners Overview 19 Relevant M&A Activity ($ millions) Date Enterprise LTM Revenue Announced Acquirer Target Target Description Value LTM Revenue Multiple Targeted location- and behavior-based mobile messaging SaaS for advertisers