First Half 2010 Interactive and Digital Media M&A Transactions Have Reached Prerecession Levels

Merger and acquisition activity within the marketing services industry has returned to prerecession levels, with big advertising agencies, software companies and institutional investors buying up proven winners and cherry-picking promising startups. In the first half of 2010, 564 transactions in the digital/Interactive media space were for a reported at $9.0 billion, surpassing the same period in 2009 by 68% and 117%, respectively.

Private equity is active in the sector, comprising roughly one-third of deal volume and providing attractive exit opportunities for sellers of traditional marketing services firms. Digital acquisitions continue to be sought after by full-service technology and media players. This activity is a vote in favor of the economic rebound. In the first half of this year, venture capitalists invested $11.4 billion to fund 1,646 deals (in all marketing services categories)—a 49% jump in value and a 23% increase in deal volume from the first half of 2009, according to PricewaterhouseCoopers.

While the number of deals within the marketing services space has returned to 2007 levels, the average dollar amount has not. The recent data for the first half of 2010, disclosed an average deal size of $112 million compared with the same period 2007 of $368 million. One of the most active M&A players has been agency holding company MDC Partners. Last month MDC acquired a majority interest in New York-based experiential marketing company Relevent. That deal followed on the heels of MDC's acquisitions of experiential marketing company TEAM and public relations companies Sloane & Co. and Allison & Partners   The mega-holding companies have been less active.
Eric Kercheval & Associates is currently involved in two buyer-representation and two seller-representation projects. Three of these projects are expected to close by the end of the year.  If making an acquisition or contemplating a sale is on your 2011 calendar, contact us yet this year for a pre-sale or acquisition planning meeting.

Is The BlackBerry Dead?

Far from it. Despite recent buzz that over time, the BlackBerry brand may go the way of the Palm is overblown. As of Feb, 2010, according to ComScore/MobiLens, BlackBerry owned 42% of U.S. smartphone market share (up a share point from 2009) while Apple stood at 25% share (down a share point from 2009). The big winner is Android which as a 9% share of the market (from a previous 4% share in 2009). BlackBerry is still the solid pick for large corporations and firms.  

Android Tablet?

Look for Google to announce some sort of Android Tablet toward the end of the year. iPad has received all of the notice and accolades. But remember that Android is the fast growing mobile platform... with few developer restrictions and higher security features than iPad or iPhone. Our guess is that the Android Tablet will retail for between $200 and $400, will have all the features of the iPad, plus a camera and phone (iPad does not) and will run Flash. If this happens, it will be game changer. 

Why Palm Failed

No apps and very little marketing effort to younger audiences.  Palm has always appealed to an older audience of earlier adaptors (back in the early 2000’s).  This user group stuck with brand, but Palm was not successful in acquiring new, younger users.  Apple, of course became the “Holy Grail” for younger users.  Blackberry has also succeeded in attracting younger users as well (and they hopped on the “app wagon” early on).  Will HP be able to turn Palm’s fortunes around?  Maybe, but only if they start creating a serious portfolio of apps and begin aggressively promoting the device to a younger audience.  But it will be an uphill battle… especially with Android picking up huge momentum.  HP’s best bet is to drop the Palm brand altogether and rebrand it HP.  They have big marketing dollars to build an HP smartphone brand riding on the shoulders of Palm technology.

2010: A Buyer's or Seller's Market?

Social Media

Social media continues to be a high demand talent area. Agencies and marketers are scrambling to find talent in this growth area. A social media "veteran" is a person with 2-3 years experience.. Professionals in this space seem very open to the idea of exploring new opportunities with other firms. New social communities like Four Square are heating this field up. Marketers are finally realizing value of participating in social media initiatives.

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Smartphone Apps

Smartphone applications development is the fastest growing area of the interactive/digital world. Web site browsing is rapidly migrating away from the desk and laptop PC. By the end of 2010, it is estimated at 30-35% of all web browsing will be on the smartphone. Marketers and agencies will need more specialized talent to meet this major shift in digital ecosystems. In fact, by the end of the year, most companies and agencies will give first priority in digital/interactive development and execution to the smartphone app ecosystem for their clients (over the traditional PC ecosystem). An interesting company that is leading this change is IntraApp LLC (www.intra-app.com).

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