M&A Alert—June 6, 2017
Snap acquires location-aware analytics startup Placed for up to $200 million.
Author: Eric Xu, John Ascher-Roberts
Transaction Size: $125mm–$200mm
On June 5, 2017, Snap Inc. (NYSE: SNAP) announced its acquisition of location analytics and ad attribution measurement startup Placed for up to $200 million.
Placed allows advertisers to evaluate the impact of ads on offline consumer behavior and geographically target campaigns. The startup offers three products: Placed Attribution, Placed Targeting, and Placed Insights. Placed Attribution measures increases in store visits and purchases attributable to advertising, Placed Targeting targets ads based on geography and other attributes, including business visitation and apps used, and Placed Insights measures and analyzes visitation trends. Competitors include Foursquare, Gimbal, Kochava, AppsFlyer, TUNE, Ninth Decimal, PlaceIQ, and Euclid.
David Shim, CEO, founded the Seattle-based company in 2011. Placed received $13.4 million in funding from Madrona Venture Group (Matt Mcllwain), Two Sigma Ventures (David Joerg), and Shane Atchison. They currently employ over 100 people.
Founded in 2011, Venice-based Snap Inc. develops the photo messaging app Snapchat, the wearable camera Spectacles, and the personalized stickers Bitmoji. Snapchat has expanded from private photo sharing to include ad-supported short-form content, geofilters that tag photos with location information, and Snap Ads, a self-serve ad manager. Snapchat has 158 million daily active users and generated a net loss of $514.6 million in 2016.
Snap has a market capitalization of $22.9 billion and LTM revenues of $404 million. Snap launched its IPO in March of this year.
Snap is acquiring Placed for $125 million in a deal that could potentially be worth over $200 million including stock payouts, according to Bloomberg.
Transaction Value: $125mm–$200mm
TV / Invested Capital: 9.3x–14.9x
Comparable transactions include The Mobile Majority’s acquisition of Gimbal in December 2016 (undisclosed, covered here), Acuity Brands’ acquisition of GeoMetri in January 2016 (undisclosed), Tyco’s acquisition of Shoppertrak in December of 2015 for $175mm (2.3x LTM revenue, covered here), SK Planet’s acquisition of Shopkick in September 2014 for $250mm (9.5x LTM revenue), Acxiom’s acquisition of Liveramp in May 2014 for $310mm (11.0x LTM revenue, covered here), Nielsen’s acquisition of eXelate in March 2015 for $200mm (6.3x invested capital), and Service Management Group’s acquisition of Locately in August 2012 (undisclosed).
Snap’s acquisition of Placed allows Snap to increase the effectiveness of Snap Ads by improving measurement systems like Snap to Store, which tracks how many store visits result from ads in Snaps. When users send friends a picture with a geofilters ad, Placed’s technology will help track visits friends make to the advertiser’s store due to the ad. Improving visibility of how mobile ads impact real-world store visits is a crucial but not yet mature capability that is critical to advertising. This also allows Snap to demonstrate a clear return on ad investment to their advertising clients, increasing the value of Snap Ads and allowing Snap to charge higher prices per ad to help sustain revenue growth despite slowing user growth.
Architect Partners’ Observations
Understanding how mobile ads translate to store visits and offline purchases is a fundamental capability that advertisers and publishers both covet. We expect more M&A activity to follow as others seek to deliver this capability. Mobile advertising continues to expand, particularly in areas that Snapchat specializes in such as video advertising and interactive advertising, with mobile video ad spend projected to grow from $4.35 billion in 2016 to $6.72 billion in 2017 (BayStreet.ca).