During Q3 2021, the Digital Media and Marketing ecosystem continued the pattern of strong growth relative to 2020. The sector showed significant breadth and depth in the marketplace with strong levels of M&A, Private Equity, and IPO activity. M&A deal count was robust across Ad Tech, MarTech, and Digital Content, as deal activity grew on a year-over-year basis. Scaled deal activity (>$100mm) reached new highs with 31 scaled deals across the three sub-sectors (compared to 28 in Q2 2021, and 62 in all of 2020).
In the Public Equity markets, the story is largely consistent with that of M&A: robust, but to a lesser degree than historic levels seen earlier this year. Valuations, though subject to volatility, remain healthy as does financial performance for much of the sector. The IPO window is open, but the market for new public issuances (IPOs / De-SPACs) has decelerated; only three companies debuted this quarter, versus 15 during Q1 2021.
Lastly, as a continuation of our initiative to deliver insights on the public companies in Ad Tech and MarTech through The LUMA Indices, we have built out our published analysis on this dynamic and emergent cohort. Included in the latest report is a benchmarking analysis of all 22 companies in the LUMA.A (Ad Tech) Index. Now, representing almost $200bn in combined market capitalization, the LUMA.A Index is delivering strong financial performance to help support these unprecedented valuation levels. This analysis helps contextualize sector dynamics by showing valuation, financial, and operational data on all the major public Ad Tech players.
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Key Q3 Takeaways
• Q3 maintained strong deal activity as this quarter marks a year since we started the recovery from the initial shocks of the COVID pandemic
• In the public markets, both Ad Tech and MarTech saw mixed results with some companies increasing, but many declining from all-time highs achieved earlier in the year, which LUMA views as a natural and expected regression in valuations
• Private Equity continued to express interest in the Ad Tech Sector. There have been over 10 scaled PE transactions in the last year, including four in the last quarter, making PE the most active buyer group in Ad Tech, a mantle it has long held within MarTech
• Growth Equity / Late-Stage VC investors continued to play a pivotal role in providing large rounds of financings for more mature companies in the sub-sectors on their road to becoming public
The LUMA Indices Highlights
• Last quarter, LUMA launched The LUMA IndicesBETA to track the performance of public companies in the Ad Tech and MarTech ecosystems
• This quarter, three new companies completed their public issuances: Outbrain (Ad Tech), Kaltura (MarTech), and Amplitude (MarTech). These companies will be incorporated in the Indices’ next semiannual rebalancing (at the end of the 2021).
• Additionally, LUMA has made retroactive additions to the Indices to (i) increase international presence and to reflect the global nature of the sector (Affle and Mobvista for LUMA.A; Appier for LUMA.M); and (ii) include companies that upon further analysis, contemplation, and market feedback should have been included in the original launch (Roku for LUMA.A; Quotient for LUMA.M).