Third Screen Media Inc. finally found a well-heeled suitor, agreeing to be acquired by Time Warner’s AOL Internet division for an undisclosed sum. The question now is, who’s next?
Third Screen was snapped up for a rumored $80 million and will operate as a subsidiary of AOL’s Advertising.com business, which the Internet giant acquired three years ago. The company had reportedly been in talks with Microsoft Corp. last year;
rumors of an AOL tie-up surfaced several months ago.
Microsoft Corp. earlier this month settled on ScreenTonic, a Paris-based mobile advertising firm with several European carrier plans, for an undisclosed amount.
“AOL is one of only four at-scale advertising businesses on the Internet, and the acquisition of Third Screen Media gives us a very strong position in the fast-growing mobile space,” said AOL CEO Randy Falco. “It also lets us offer advertisers a more complete set of solutions, from display advertising to search and now a superior set of mobile solutions.”
One of the earliest-and most influential-players on the wireless advertising field, Third Screen delivers marketing efforts via text messaging and on the wireless Web. The company boasts an impressive network of 185 publishers including USA Today, MasterCard and The Weather Channel, and delivers 225 million ad impressions every month. Third Screen in January teamed with the U.S. Navy to launch one of the first click-to-video mobile campaigns in the United States.
Relationships key to deal
While Third Screen offers a Web-based mobile ad management and delivery platform, dubbed MADX, industry insiders say the deal had more to do with the company’s carrier and publisher relationships than with its technology.
“ScreenTonic has a very European focus whereas Third Screen Media is strongest in the U.S. market,” Ovum analyst Eden Zoller wrote, contrasting the AOL and Microsoft deals. “(ScreenTonic) does not have an ads network but does have an established ad platform and relationships with several European operators, including Orange. This makes sense as Microsoft seems keen to sell advertising on operator portals and does have strong links with mobile carriers worldwide, unlike AOL.”
The moves underscore the increasing importance U.S. advertisers are placing on wireless. Mobile advertising in the United States is expected to grow from $221 million last year to $4.7 billion by 2011, according to eMarketer, and the global market reach $11.3 billion in the next five years.
Money flying into segment
And the acquisitions come amid a billion-dollar feeding frenzy of online advertisers. Microsoft said last week it would shell out a whopping $6 billion for aQuantive, one of the last independent companies in a rapidly consolidating market. Google Inc. last month agreed to buy DoubleClick-which has dipped its toe in the mobile waters-for $3.1 billion. Yahoo Inc. spent $680 million for Right Media, and WP Group will acquire 24/7 Real Media Inc. for $649 million. Publicis, a French advertising firm, sparked the flurry of activity with its December buyout of Digitas for $1.3 billion.
Onlookers expect the spending spree to extend further into wireless as companies scramble to provide a one-stop shop for advertisers looking to reach consumers across the Internet, on television and through mobile phones. And there is no shortage of targets: At least a half-dozen U.S. startups including Millennial Media Inc. and AdMob Inc. have joined the wireless advertising ranks in the last two years, joining established players such as Enpocket and The Hyperfactory, a New Zealand-based outfit with an astounding seven years in mobile media.
Indeed, the momentum continued last week as Buongiorno S.p.A., an Italian content behemoth, said it plans to spend $5.4 million to expand its mobile marketing business with the acquisition of Flytxt.
“I think there’s still a very healthy M&A market; there are still a lot of big ad agencies that want to buy in, a lot of online portals, a lot of big media companies,” said John Puterbaugh, founder and chief strategist of Nellymoser Inc., which partners with both Third Screen and Millennial Media. “I think there’s a lot of dry powder.”
Pure-play mobile ad startups aren’t the only targets in the arena, of course. Content-delivery outfits, mobile search providers and others will become increasingly attractive to outsiders looking to buy their way in as advertising begins to support an array of applications and services.
Even as millions pour into the space, though, the future of wireless advertising is far from certain. Companies have much to learn about how to deliver targeted, relevant ads in a way that doesn’t provoke a consumer backlash, Puterbaugh warned.
“I think it’s going to take longer than people think” for the market to get legs, he predicted. “I think you’re still three or four years out before you see the growth curve and understand how big it’s going to be.”
