Report: Funding in Traditional Advertising surges with $423M invested in 2015 [116 Pages]

2015 saw the funding volume surge, owing to ComScore raising $287M in a round from Wind Point Partners

The Traditional Advertising space has witnessed a good amount of M&A Activity in recent times, with 38 companies being acquired till date. The trend has continued on to 2016, as well, with Rentrak being acquired by comScore in for $767.7M.

Due to this trend, investor sentiment in the sector has been revived, with the amount invested increasing by 182% in 2015, with startups in the space raising $423M, marking the sector’s highest funding volume since 2008. Among the notable investments of the year, ComScore contributed to a majority of the funding, raising $287M in an unattributed round from Wind Point Partners.

The increase in funding volumes can be attributed to the fact that the M&A activity in the space has been relatively high, with the 38 acquisitions taking place so far, the most recent being Rentrak’s acquisition by comScore for $767.7M. ComCast has also been active in the M&A scene having acquired This Tech and Visible World in 2015. With investors now presented with viable exit opportunities, we can expect funding in 2016 to follow the trend.

Moreover, with global advertising spending expected to increase in all areas, apart from print media, we can expect funding to increase further. Mobile will be the fastest-growing (41.7% CAGR) advertising channel followed by desktop advertising. With the current growth rate, Internet advertising (Desktop and Mobile) is expected to exceed TV as the highest ad spending medium by 2019. Unfortunately, there is no good news for print publications on the horizon, as Print media advertising spend is expected to decline, and it will lose its market share by ~ 6% in 2017

Late Stage Round Funding Dominates

Moving back to funding activity, the number of funding rounds has, in fact, been on a decline. But the surge in 2015’s funding volume indicates larger ticket sizes, due to the fact a majority of the funding in now coming in through late-stage rounds. In fact, the average ticket size during 2015 has reached $16.7M.

A similar trend was followed during the 2006-2008 timeframe, which resulted in 2008 witnessing a peak in funding during that period. Post-2008, however, funding volumes did decline, and the 2013 period witnessed the most number of early stage rounds, signifying that the industry had gone into ‘reset’ mode during the period. This is due to the fact that many companies during that period decreased their advertising spending drastically due to global economic conditions. Moreover, the move from traditional to digital advertising can also be attributed to the change in focus.

But now, with the increase in late stage rounds, the average early stage deal ticket size is also reducing gradually with 2015 seeing the lowest ticket size at $1.2M.

The number of companies has decreased steadily since 2011

While 2011 witnessed the most number of companies being formed, the figure has been declining since, due to the advertising budget shift from traditional to digital advertising (including mobile). Post-2011, however, Ad Networks for OOH advertising (including digital OOH), Transit Advertising, Audio Ad Network, Location based advertising are the business models that are gaining traction. Digital OOH, in particular, is increasing at a rapid pace.

Over the next few years, programmatic TV is expected to lead the next phase of growth in TV advertising revenue, in spite of challenges due to inadequate technology, and unavailability of programmatic inventory.

Analytics and Data Management Platform are the most funded business models
Companies into TV analytics and data management have received the maximum funding, signifying that the industry is moving towards a data-based model for TV ads. In fact, the surge in funding during 2015 has been led by Analytics, data management, and Interactive TV advertising companies.

Programmatic technology (for TV, Audio, DOOH) companies, multi-channel attribution, Location based OOH advertising, DOOH advertising are the emerging areas which could witness funding growth in coming years. Digital OOH ad networks have received more funding than OOH ad networks, signifying the shift in industry trend towards digital outdoor advertising

Moving forward, with the advent of programmatic technology and the advertisers’ need to improve ROI, access to reliable data and deriving insights from consumer demography, behavioural, geographical analytics is a crucial step for targeted ads.

Battery Ventures, Atlas Venture, and Menlo Ventures are the Most Active Investors

Battery was the most active investor in traditional advertising, having invested in 4 companies; Jelli, Bluekai, Lotame, and Spot Runner. Atlas Venture with investments in DataXu, Clypd, and OwnerIQ. Menlo Ventures also features in the list with Invidi, DataXu, and eXelate in its portfolio.

Note: The report covers the companies operating in Traditional advertising space that includes TV, Audio, Print and OOH advertising. We have covered companies which use technology to provide solutions in above mentioned sectors. We have included the companies which provide technology or facilitates the process of ad buying, ad selling, providing data, analytics, creative etc. We have excluded the companies for which the primary business focus is not into TV, Audio, Print or OOH. Media Agencies and advertising giants such as Google, Facebook and Twitter are also excluded from the scope of the report.

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