2022 Full Year Market Report

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LUMA is excited to announce the release of our 2022 Full Year Market Report!

2022 was in many ways a pivotal year, not just for the Digital Media & Marketing ecosystem, but for technology and the broader economy as a whole. From the start of the year several macro challenges began to emerge including inflation, rising interest rates, geopolitical uncertainty, and the threat of a recession, all of which persist to this day. These factors, and the uncertainty surrounding them, made for a challenging year in both M&A and the public markets.

While M&A deal volume across our coverage area technically increased in 2022 (+2%), much of this was driven by sub-scale consolidation transactions (<$100mm), particularly in the digital content vertical. On the other hand, scaled (≥$100mm) deal making fell 64% YoY for the annual period across the three verticals. Despite the drop off, we have seen continued momentum from private equity in these sectors, as well as strategic and financial focus on key growth areas such as CTV, mobile, commerce media, and the changing data landscape.

The hot equity capital markets of the pandemic-era proved to be short lived, and quickly cooled down in 2022. There were no new entrants to the LUMA Indices, though there remains a healthy pipeline for when the appetite is restored. Both the Ad Tech index (“LUMA.A”) and the MarTech index (“LUMA.M”) were down substantially this year (59% and 52%, respectively) alongside the broader tech market, with Nasdaq-100 down 33%.

With this downturn, valuations have decreased substantially from the 2021 highs and settled in line with their 10-year historical averages, ~4-6x net revenue. As we enter 2023, we are beginning to see some stability in these valuations as they have persisted since Q2 ’22, which is a level of consistency we have not seen since before the pandemic. As these valuations “season” we expect to see an uptick in deals as the disparate views on valuations align between buyers and sellers.

Private financing activity began to tighten as public and private valuations contracted. Despite overall venture-funding returning to pre-COVID levels, the number of scaled finances in the Digital Media & Marketing ecosystem was flat from 2021 to 2022.

Key 2022 Takeaways

  • Coming off the emphatic rebound of 2021, 2022 experienced substantial exogenous headwinds including rampant inflation, ongoing conflicts in Ukraine, monetary tightening, a wide-spread labor shortage and the implosion of the crypto market.
  • The convergence of these factors has resulted in a sharp decline in M&A activity across Ad Tech and MarTech. Digital Content, however, managed a YoY increase in activity thanks to increasing interest in mobile and gaming.
  • We expect M&A activity to pick up from the low in Q4 as valuations “season” throughout 2023 and the disparate views on valuations align between buyers and sellers.

LUMA Indices Highlights

  • Both LUMA.A and LUMA.M lost a constituent each due to acquisitions. LUMA.A lost ironSource via a merger with Unity Software (U-US) by which Unity was the surviving entity. LUMA.M dropped Zendesk following a go-private acquisition by a consortium led by Permira and Hellman
    & Friedman.
  • For the year, LUMA.A and LUMA.M were down 59% and 52%, respectively. This compares to the performance of the broader market indices of the S&P500 and NASDAQ-100 which were down 19% and 33%, respectively.

Download the report to get smarter on the sectors and check out Director Conor McKenna’s viewpoints on the stabilizing markets, historic trading multiples, and what’s next for 2023.