Amazon acquires key Sizmek ad tech as rivalry with Google grows

UPDATE: May 31, 2019: Amazon confirmed in a press release that it has entered an agreement to acquire Sizmek's ad server and dynamic creative optimization (DCO) solution. Financial terms of the deal were not disclosed. Sizmek's ad server and DCO will continue operating as separate entities from Amazon Advertising for the time being. "Sizmek and Amazon Advertising have many mutual customers, so we know how valued these proven solutions are to their customer base," the release said. "Sizmek has been searching for a buyer for Sizmek Ad Server and Sizmek DCO, and we are both committed to continuing serving their customers at the high standards they’ve come to expect."

Dive Brief:

Amazon is close to acquiring the ad-serving technology of Sizmek and could announce the deal as soon as this week, Bloomberg reported, citing two anonymous sources briefed on the matter.
As noted by Bloomberg, Amazon buying Sizmek's ad-serving offering is a likely bid to better compete against Google and specifically the Alphabet-owned company's Google Marketing Platform, which was formerly branded as DoubleClick. Sizmek's technology would help Amazon better serve and measure online ad campaigns on the back end and also bolster its credibility with marketers who might associate the company more with e-commerce than with advertising.
Sizmek filed for Chapter 11 bankruptcy in late March and initially pegged that its total assets could fetch between $100 million and $500 million, per Bloomberg. The company sold off its digital ad marketplace, which included its demand-side platform and Rocket Fuel DMP unit, to the data marketing firm Zeta Global for $36 million in April.

Dive Insight:

Amazon's advertising business has exploded in the past few years, but even with meteoric growth, the Seattle-based company's command of the total digital advertising market remains small compared to the duopoly of Google and Facebook. Analysts believe that dynamic will change in the near future, however, and Amazon acquiring Simek's ad-serving tech would potentially be a powerful way to further shorten that timeline.

The deal, if substantiated, would also be yet another shot across the bow at Google, a platform Amazon competes more closely with than Facebook when it comes to key marketing channels like search and winning the ad dollars of brands in sectors like packaged goods. The rivalry between the two will probably only grow more fierce as Facebook adjusts course to focus on private, encrypted messaging, while Amazon and Google continue to converge around similar areas.

There are a few other reasons Amazon might be turning to acquisitions to strengthen its marketing foothold now. Though Amazon's "other" category, which largely consists of advertising, has been the company's fastest-growing for awhile, it's showed some signs of slowing down. Ad sales rose 34% to $2.72 billion in Q1 2019. Those numbers aren't shoddy, but pale in comparison to prior quarters. Sizmek's ad-serving tools could reignite some of Amazon's momentum in the space and also help the platform diversify its advertising services into new frontiers where it's reportedly shown more interest of late, like mobile video ads.

At the same time, Google is quickly building out ad products that make it look a lot more like Amazon. At its annual Google Marketing Live conference earlier this week, the platform unveiled a revamped Google Shopping experience that lets users complete purchases in Google Search, Google Images, on YouTube and more. New advertising formats trotted out at the show, such as Discovery ads and Gallery ads, are similarly focused on growing the amount of digital real estate Google has to offer marketers and helping them to drive e-commerce sales. The pivot to focus more on online shopping comes as Google is seeing its own growth stagnate. In April, Google reported ad revenue growth slowed for the fourth consecutive quarter, pointing to a broader tapering off in the digital ad marketplace as it reaches new levels of maturity.

Sizmek moving to sell its ad-serving tech isn't at all surprising amid bankruptcy proceedings, but underpins the tight spot many once-hot players in ad tech find themselves in as investments dry up, data privacy laws pose barriers to business operations and heavy hitters like Google and Facebook continue to dominate the industry and shrug off the hefty regulatory fines that would put many smaller companies under. Other recent ad tech deals of note include Acxiom's sale of its data marketing division to the ad giant IPG last year for $ 2.3 billion and Publicis' purchase of Epsilon — a similar business to Acxiom from a similar buyer to IPG — from Alliance Data Systems Corporation for $4.4 billion in April.