Sizmek said Tuesday that it has agreed to purchase Rocket Fuel in a $145 million deal. The move comes just one day after Rubicon Project snagged nToggle for $38.5 million and as an expected ad tech consolidation looms.
Randy Wooten, CEO of Rocket Fuel, previously told Ad Age in a April 2016 interview that consolidation in the industry was imminent, going as far as calling it an “ad tech armageddon.”
“There are 4,000 ad tech companies in the Lumascape,” Wooten previously told Ad Age. “Four thousand ad-tech companies all trying to get their little piece. A lot of them are public, but there isn’t a lot of money out there for these ad tech companies to come out and build their next new thing.”
“We have enough capability in the marketplace,” he added. “So there are going to be companies that are private and won’t get public. And then there will be those that are public but are going to struggle with their cost models, and if they’re not profitable, they’re not going to get more cash. That is something that is going to happen.”
“They’re going to consolidate, get rolled up and disappear,” Wooten said. “And you’re going to see this shake out because the ecosystem and the value chain cannot split up the dollar 4,000 ways.”
Sizmek bought Rocket Fuel to bolster its media sales capabilities.
“It’s an interesting move from Sizmek, which will give them more cross-platform buying compared to StrikeAd [a buy-side platform it acquired earlier] as well as dynamic creatives into programmatic inventory,” said Ben Roodman, director of partner development for North America at AppsFlyer.
Kelly Patterson, director of product marketing at Fluent, says Sizmek’s acquisition is another illustration of how the ad tech space is consolidating to better compete against the duopoly of Facebook and Google.
“For Rocket Fuel, this was a logical move following some tough times post-IPO and will allow them to regroup without Wall Street’s scrutiny,” Patterson said. “Folding an ad server, DSP, DMP and AI into one well positions this new company to meet and deliver on clients’ demands.”
Rocket Fuel was one of the earliest ad-ech darlings. The company went public in 2014 and at one point traded at more than $60 a share. That changed, however, following a report by the now defunct ad fraud company Telemetry that was published in the Financial Times in March 2014. The story claimed that a Mercedes-Benz ad campaign through Rocket Fuel served more online ads to bots than actual humans.
The news caused massive turmoil for Rocket Fuel and the company never seemed to recover. Then-CEO George John was replaced by Wooten in 2015.
Today, the company is trading at roughly $2.60 a share.
“Rocket Fuel and Sizmek are two prominent companies who share a great amount of synergy,” said Will Doherty, VP of business development at Index Exchange. “Consolidation is necessary at this point in our industry’s trajectory and will drive greater access and better tools for partners. If the consolidation trend leads to more transparency across our ecosystem, then this trend will only benefit buyers and publishers in the long-run.”