M&A Alert - July 21, 2009
Adknowledge Agrees to Acquire Super Rewards
Transaction Overview
On July 21, 2009, Adknowledge announced that it has agreed to purchase Super Rewards for an estimated (source: TechCrunch) amount of $50mm.
Target Description
Founded in 2007, Vancouver, Canada-based Super Rewards, also known as KITN Media, provides a virtual currency monetization platform to allow monetization of social network, mobile application, virtual world and MMO users. Its product enables application users and gamers to earn virtual points or currencies to use in games or applications. These virtual currencies are convertible to real dollars. Users and gamers can buy virtual points by using their credit cards, or by accepting offers such as service subscription offers, coupon ads and free trials from advertisers in exchange for virtual points. Super Rewards share the revenue it generates from advertisers with its customers. Super Rewards’ customers include over one thousand applications and game developers and publishers, including Mob Wars (top Facebook game), Texas HoldEm Poker and YoVille (top Zynga’s games). Competitors include OfferPal Media.
Buyer Description
Kansas City-based Adknowledge, Inc. operates a multi-channel advertising network that displays ads on social applications. It offers traffic targeting services through channels such as email, search, messaging, display, and social advertising. The company serves publishers, advertisers, and application developers. Adknowledge’s recent acquisitions include social media ad businesses including Miva (peer ad network for $11.6mm), Lookery, Adonomics, Cubics and Media Run. To date, Adknowledge received total funding of $48mm from current investor, Technology Crossover Ventures (Partners Henry Feinberg and Will Griffith serve on the Company’s Board of Directors). Adknowledge has over 5,000 publisher customers, generating 25 billion impressions in pay per click ads per month. The Company is expecting revenues to reach $100mm in 2009.
Transaction Parameters
Super Rewards is profitable and based on various news sources, it appears revenues are approximately $10mm annually.
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| Transaction Value 1 | $50mm |
| Transaction Value/Revenue 1 | 5.0x |
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1. Estimated, data, unclear as to form of confidentiality.
Strategic Rationale
Super Rewards’ virtual and mobile currency monetization platform fits nicely with Adknowledge, Inc’s online and mobile advertising services. Monetization has been a significant challenge for social application developers over the past couple of years. Virtual currency is proving to be a very effective vehicle to drive revenue from the millions of social media users. Super Rewards has added a significant twist to the virtual currency model, by incenting advertisers to sponsor the virtual currency cost. Super Rewards brings the white label virtual currency platform as well as over 4,000 advertiser relationships, making them an attractive monetization partner for social media sites and application developers.
Architect Partners’ Observations
As publishers and application developers continue to seek to monetize and advertisers seek innovative ways to advertise, virtual currency monetization will have an increasing strategic importance. The purchase multiple of revenue strikes us as very reasonable given the attractive growth potential of the Super Rewards’ business.