Dive Brief:

• IBM plans to sell its Watson marketing and commerce solutions to the private equity firm Centerbridge Partners, the company announced in a press release late last week. Financial terms of the transaction were not disclosed, but the deal is expected to close in mid-2019.
• The Watson marketing platform's leadership team, talent pool and technology suite will be carried over as part of the transition, though Centerbridge aims to create a new name and branding for the unit as a standalone company. Mark Simpson, currently VP of commerce and marketing at IBM, will move into the chief executive role for the new company following the deal's close. IBM also said it will continue to collaborate with Centerbridge on work related to the cloud and artificial intelligence (AI).
• The sale comes as IBM looks to ramp up a focus specifically on the supply chain, including through more development of AI, blockchain and the Internet of Things, General Manager Inhi Suh wrote in a company blog post about the news. IBM previously offloaded parts of its marketing and commerce division to global enterprise technologies firm HCL in December in a deal worth $1.8 billion. IBM has indicated that transaction will also close in mid-2019.

Dive Insight:

IBM has been an early proponent of AI for business, but, going forward, appears to placing its bet on the tech's potential for remaking supply chain management over marketing. IBM's move to sell off its Watson marketing and commerce offerings, which are separate from its overall Watson AI, signals that the company potentially experienced difficulty in scaling up a digital advertising and e-commerce business in a field dominated by players like Google, Facebook and Amazon. IBM centered many of its Watson marketing products around AI, automation and personalization, which are in high demand from marketers as they struggle to integrate technology into their campaigns and tailor relevant customer experiences.

Terms like hyper-personalization are becoming more common in the industry, but many leaders feel ill-prepared to meet those goals. Just 9% of surveyed marketers have completely developed a hyper-personalization strategy, referring to personalized marketing that combines AI and real-time data, according to a recent study by the firm Ascend2.

That gap between the experiences consumers expect from brands and what brands actually deliver was clearly one IBM was looking to fill with its proposition around marketing and commerce that's supported by Watson. Yet signs of struggle might've first arisen when IBM divested parts of its marketing unit to HCL late last year. Regardless, the group steadily introduced new products in a push to stay innovative, which might've made it an appealing target for Centerbridge.

IBM in October unveiled a suite of new solutions, including an interactive, AI-powered display format called Watson Ads Omni; a media optimizer that leveraged MediaMath's cloud-based DSP and DMP; and an Intelligent Bidder tool that used AI to try and optimize programmatic paid media spend and reduce cost per acquisition. The Media Optimizer and Intelligent Bidder are included in the Centerbridge deal, along with IBM's Marketing Assistant, Campaign Automation, Content Hub, Personalized Search, Real-Time Personalization tools and more.

The additional formation of a new, standalone company under Centerbridge, which intends to have its own board of directors with expertise in marketing and software, suggests that these technologies will continue to be viable for marketers to tap into going forward, albeit under a different brand name.

"We are deeply committed to advancing these compelling products through continued investment and intend to accelerate existing product roadmaps and introduce new categories," Jared Hendricks, senior managing director at the New York-based private equity firm, said in a statement.