Contact: Scott Denne
Dentsu hasn’t been very active in acquiring digital marketing shops until recently. Now, as it sees an opening with marketers looking to change how they compensate their agency partners, it is moving fast to take advantage. The company announced today the purchase of India-based SVG Media Group, the latest in a string of deals it has made to expand its performance advertising capabilities.
According to 451 Research’s M&A KnowledgeBase, Dentsu has acquired 29 companies since the start of 2016. That’s the same number of tech businesses it bought in the previous 13 years combined. A combination of rising ad fraud and displeasure at opaque agency billing practices, mixed with the growing ability to link media spending to specific outcomes, has marketers rethinking how they pay ad agencies. They are placing more emphasis on performance-based pricing models, a notable departure from the historic practice of paying agencies a percentage of advertising budgets.
SVG Media fits into this role, as it sells pay-for-performance media services and ad networks. Earlier this month, SVG reached for conversion optimizer Leapfrog Online and customer analytics firm DIVISADERO, a bolt-on to the $920m it spent last year to snag CRM agency Merkle.
Although Dentsu may be an extreme case, it is part of an overall rise in acquisitions of digital agencies. Last year saw a record 164 digital agencies acquired. The pace so far this year is a bit below that, but well ahead of any other year. The drive for performance-focused digital marketing accounts for a substantial chunk of that upswing, although there are other factors such as the lack of mobile specialists and the movement of ad spending toward digital channels. Dentsu and other ad agencies aren’t the only buyers here. Consulting firms like Accenture and IBM have been inking acquisitions to capitalize on the same weakness.
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