The news last week that DMS has acquired SmarterChaos came as no surprise. This deal seems an obvious one as networks scramble to expand their agency capabilities. It is a good fit between two ambitious and assertive companies. DMS is following fast on their purchase last of W4, one of the leading CPA networks in the industry, while Matt Frary has been acquiring new clients and building out the associated She Is Media network for several years.
The news reaffirms several of the trends in the performance marketing industry that we have been writing about for the last two years:
- As the rest of the martech space has faltered, performance marketing is now recognized by investors as the place to be in 2020;
- There is no shortage of technology investment funding for the right opportunity. COVID-19 has changed M&A from a sellers market to one for buyers, so expect to see more acquisitions being announced in the near future;
- Great companies will always find a buyer. Matt Frary has done an amazing job over the last few years building SmarterChaos into one of the FT’s “Americas’ fastest-growing companies”. DMS are building an excellent portfolio of performance marketing solutions;
- DMS is serious about competing at the top level. In addition to the transactions already mention, they also bought insurance technology company UE.co in November to form DMS Insurance. As of April 23, 2020, they have developed a new corporate vehicle which is expected to list on the NYSE later this year, “with a total enterprise value of $757 million or 13.2x the Company’s fiscal year 2020 expected Adjusted EBITDA of $57 million and 10.0x the Company’s fiscal year 2021 expected Adjusted EBITDA of $75 million.”
All of this supports the new 2020 Vision that we recently defined for the Blue Book:
The future of performance marketing is as the paid media of choice for brands and lead-gen marketers. Its low-risk, high-reward format will come to be seen by media buyers as a major competitive advantage.
The disruption caused by coronavirus is the proverbial meteor that is going to kill off adtech and martech dinosaurs: those channels and companies that do not add real value. Performance marketing is poised to take over significant additional budget share. The future is now.