Social media marketing is generating lots of buzz for brands, but interest in acquiring shops that specialize in it is another story.
In the annual survey of marketing, media and tech companies from M&A firm AdMedia Partners, social marketing shops ranked a distant fourth as an acquisition target—behind analytics, digital marketing and mobile marketing. That’s down from No. 2 a year ago. Put another way, less than half of the respondents expressed interest in acquiring companies in the sector (47 percent), compared to 56 percent last year.
Why the cold shoulder for something that marketers obviously crave?
Big players in the space like MRY have already been snapped up while other types of shops—including PR, digital, media and traditional agencies—are churning out social content and evolving into social specialty shops themselves, as has been the case with 360i.
Moreover, the barrier to entry in social is low. “It’s easier to break into. It’s less technical,” explained Seth Alpert, managing director at AdMedia. “It’s still a pretty high area of interest, but it is definitely down. Some of the hype has settled down, and that’s reflected in these results.”
As interest in social shops wanes, the desire to invest in the old school practice of direct marketing has grown, with 46 percent of the poll respondents looking to buy traditional shops, up from 35 percent last year. As a result, CRM/database marketing has jumped to No. 5 on the wish list from No. 8. The increasing importance of analytics—No. 1 on the list both years—is driving the trend.
“To be successful in CRM or database marketing, basically you have to have good analytics,” Alpert said. “So I think those are linked.”
Overall, the gap between those surveyed who believe 2015 is the time to buy versus the time to sell continues to be relatively narrow. The trend began in 2013 when 70 percent said buyers should act now and 51 percent said sellers should jump—a 19 percent difference. The gap narrowed to 16 percentage points last year and this year held steady at a 17-point difference, with 82 percent saying perspective buyers should act now versus 65 percent saying sellers. In contrast, there was a 60-point gap in favor of buyers just four years ago.
Alpert attributes the more even marketplace to the Federal Reserve’s lowering interest rates years ago, making it less expensive for buyers to borrow money and make acquisitions. Of course, lower rates sweeten the market for buyers, as it gives them ready access to capital, as well as sellers, who could end up with higher multiples. But as the Fed signals it might raise rates, both sides are left thinking that the time to act is now, said Alpert.
Another factor fueling deals, at least among sellers: irrational exuberance around the high prices tech and marketing shops are commanding, Alpert said.
After all, Facebook shelling out $2 billion for Oculus Rift and Publicis Groupe acquiring Sapient for $3.7 billion is bound to get any seller’s attention.