U of Digital Newsletter - 10/30/24 (free)

October 23rd-October 29th

Below is a roundup of last week’s notable industry news, with summaries and our opinions. Google reported Q3 earnings and IAS might be on the block…

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Integral Ad Science Explores Potential Sale
Source: Bloomberg
October 29th, 2024

Summary: Takeover interest has inspired Integral Ad Science (IAS) to take a look at a possible sale. The brand safety and ad verification vendor has tapped Jefferies Financial Group to help it consider its options. It's pretty early in the process, so there's not a ton of details available and no guarantee that an acquisition will actually happen, but it's an interesting development, nonetheless. 

The company was recently dragged into a controversy when research firm Adalytics published a report suggesting that its tech failed to flag brand ads running alongside offensive content.

IAS went public in 2021 at a $3.3B valuation. The stock has had a rocky run since then. As of this writing, the company was valued at ~$2B. Its largest shareholder is Vista Equity Partners, which holds a 40% stake in the company. As LUMA Partners’ Terry Kawaja noted, IAS is valued at less than 4x its net revenue and 11x EBITDA:

Opinion: Major buying opportunity for a strategic investor? Maybe! Or maybe not. IAS feels like a company that may be on the cusp of taking a nosedive.

Brand suitability and fraud continue to plague the digital advertising ecosystem, while marketers spend more and more money on brand safety technologies to “protect” themselves. It doesn’t seem to be working all that well. Marketers are starting to realize that there are many solutions out there that can help protect their brand and don’t require expensive brand safety tech; just a bit of attention to detail (e.g. inclusion lists, private deals, publisher direct buys, scrutinizing your supply chain, etc). Given that, and given IAS and direct competitor DoubleVerify have pretty much cornered the entire brand safety market, where will growth come from?

Growth will come from evolution. These companies will have to start evolving. We offer two ideas:

1. Align their incentives to outcomes

   • Instead of charging for tech, charge for the outcome the tech is striving to achieve (brand safe, performant campaigns). They will organically drive better results, their clients will be happier, the ecosystem will get cleaned up faster, and everyone (including these companies) can move on to solving bigger and better problems.

2. Diversify their business into new, adjacent areas

   • Speaking of solving bigger and better problems, these companies should be looking to grow into areas like media measurement, fraud detection, identity / addressability, ad serving, and more.

That second point gives you a sense of who we think could be a logical acquirer, acquiree, or merger partner for IAS. Companies like TransUnion, LiveRamp, Nielsen, Mediaocean, and Innovid could make some sense…

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That’s It For This Week 👋

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