Will It Be a Summer of Consolidation in Ad Tech?

AOL could just be the beginning as rumors fly

Could Verizon's $4.4 billion purchase of AOL spark a summer of acquisitions in the ad-tech space? It depends on whom you ask.

Yahoo has reportedly considered making Foursquare a big offer in recent weeks. The Google-purchasing-Twitter chatter has gone on for months and won't die. Yelp is reportedly entertaining suitors from Yahoo to Google and Amazon, with some analysts speculating that foreign companies Alibaba and Rakuten are in the mix. Even mighty Salesforce.com has found itself the subject of speculation about a Microsoft takeover.

Rich Guest, president of North American operations, Tribal Worldwide, said the Twitter-to-Google hubbub makes the most sense.

"I think that there were first rumors of an AOL-Verizon tie-up during CES 2015, which gives credence to the school of thinking that believes 'where there is smoke, there is likely fire,'" Guest explained. "Twitter is an amazing platform, which could add value to the product portfolios of many media or technology companies. Given all of the rumors of a Twitter-Google tie-up, I wouldn't be surprised if that happened sometime in 2015."

MediaCom CMO Stephanie Fierman said, "I think many expect a transaction involving Yahoo at some point in the foreseeable future."

Will it be Foursquare? Industry watchers Adweek spoke to wouldn't say.

For instance, Brian Wieser, senior analyst at Pivotal Research Group, declined to speculate what companies might be in buyers' crosshairs, but he offered a clear take on what direction the mergers-and-acquisitions scene is going in the ad-tech space.

"It's not just about M&A in general," he said. "Companies that are not traditionally perceived as participating in advertising are looking to buy companies that have significant ad-tech assets. It could be another teleco [like Verizon]; it could be another data services provider."

Wieser pointed at Alliance Data Systems' $2.3 billion purchase of Conversant in late 2014 as an example of how huge names like Twitter could be taken off the market.

"Anybody can be sold," he said.

McAdory Lipscomb Jr., a tech investor and consultant, thinks that larger companies are unusually interested in taking on digital players, because the Federal Reserve's interest rates may soon be more than near-zero percent for the first time since 2006. It's uncertain when the Fed will lift rates, but most industry analysts expect it to happen in the coming months.

"I believe the consolidation process is indeed moving along because the [threshold] of borrowing money is still low," said Lipscomb. "People are going to make acquisitions while the money is still cheap."

David Eastman, a partner at digital agency MCD Partners, sees the current landscape similarly. 

"[It] shows there's still a significant amount of money in the system, reflected in overseas quantitative easing as well as some of the profits thrown off by the 'GAFAs'—Googles, Amazons, Facebooks and Apples—of the world," Eastman said. "Coupled with the need for brands to increasingly be where millennials are, particularly in the digital space, all signs points to more over-valued deals happening."

Stay tuned.