Last week, LiveRamp, one of the leading data collaboration platforms, announced that it has entered into a definitive agreement to acquire Habu, a data clean room software provider, in a cash and stock transaction valued at approximately $200 million. This acquisition is supposed to further accelerate LiveRamp’s ability to offer global data collaboration at scale, across all clouds and walled gardens, solving fundamental challenges for customers while also unlocking powerful measurement and analytics use cases. LiveRamp expects the acquisition, inclusive of revenue synergies, to deliver approximately $18 million in revenue in FY25.
Not for a long time, Adtech has seen an acquisition of this scale, particularly, if one considers the multiple. At 11 times the projected revenue next year, acquiring that company this year for $ 200 million, that too for a data clean room, which as a category is yet to establish sustainable revenues is a very interesting story. When Google announced the Privacy Sandbox initiative in response to Apple blocking the trackers in 2019, not many had a clear timeline on when this happens. Now that Google has started deprecating 1% of the third-party cookies starting 4th Jan 2024, the stage is all set for the revival of all privacy enhancing technologies (PETs) to come to the forefront. Data Clean Rooms are one such PETs and hence the frenzy!
Read More: MAdtech Point: Data Clean Rooms are the new age media agency
IAB TechLab launched Project Rearc around the same time when Google announced its Privacy Sandbox initiative to with a specific objective to rally the industry towards some common standards. Third party cookies were free with no clear ownership. Aggregation of inventory came at no additional cost, and with no obligations as well. For the past three years, the industry is still struggling to set these common standards that enables privacy compliant aggregation of inventory without the help of third-party trackers. The Trade Desk, with lots of fanfare launched UID 2.0, but it is still struggling to offer the same scale that free cookies offered. Any replacement to a free cookie can only come from an independent, and neutral entity which has no linkage to the inventory that is being sold. And there in lies the challenge for the industry today.
Back to Data Clean Rooms. The data clean room technology has the potential to offer this independent and neutral solution as a middleware technology for the industry. Which is where the $200 Mn dollar question on the future of data clean rooms come in. By triggering of an acquisition like this, it suits LiveRamp very well to make their RampID through SafeHaven, privacy compliant, but it still does not provide the solution to offer scaled up aggregated inventory that so far, the third-party cookies offered, albeit in a not so compliant manner. As such the industry is grappling with 30+ ID solutions today. And there are only 4-5 data clean room companies in the world today. Imagine, if all these data clean room companies are bought over by all other ID solution providers? That is like to killing the goose that is laying the golden egg, too far too soon.
Read More: Explained: What is a data clean room?
Media agencies have a golden opportunity to play a critical role at this juncture. They are the original aggregators. To Publishers, they aggregate demand, negotiate volumes; underwrite or cover commitments at steep discounts. And to Brands, they aggregate supply, optimise value, underwrite, or cover outcomes for incentives. They can also now play the independent, neutral role in offering inventory at scale including the much-needed measurement that is gone missing totally. For too long, media agencies have remained focussed on talent and bequeathed the technology advantage to system integrators and software companies, which is why, despite them playing a critical role in the adtech ecosystem, their multiples have remained less than 5, but a newbie data clean room, gets a valuation multiple of 11!
If only the media agencies can transform themselves into a full suite, managed service adtech company, under which both talent and technology reside! They can stop the role of data clean rooms from being yet another point solution, but a middleware technology that aggregates demand and supply in a neutral and independent manner. It is good business. For sure!
Gowthaman Ragothaman is a 30-year media, advertising and marketing professional and CEO of Aqilliz, a blockchain solutions company for the marketing industry.