Kargo acquires StitcherAds for $64M to shore up e-commerce offering

Dive Brief:

Mobile ad company Kargo Global Inc. acquired StitcherAds, a social ad platform focused on e-commerce, for $64 million, according to information provided to Marketing Dive. The Wall Street Journal first reported the news. The deal was paid for largely with cash and some stock.
StitcherAds delivers paid ads for retailers and brands across platforms including Facebook, Instagram, Snapchat, Pinterest and TikTok. Kargo's offering helps marketers buy ads via hundreds of publishers, but wasn't available on large social media platforms.
The acquisition will help Kargo shore up its ability to help retailers and CPG brands drive e-commerce sales — a growth area for the company. The ad-tech industry has seen increased M&A activity this year as the pandemic continues to accelerate the shift to digital.

Dive Insight:

Kargo's acquisition of StitcherAds demonstrates changing marketer priorities amid the continued consolidation of mobile marketing and e-commerce. While Kargo's existing tech helped connect brands with publishers, its inability to deliver special ad formats on leading social media platforms was limiting its offering to retail clients, which have had to quickly adjust to changing consumer behaviors. StitcherAds offers product discovery ads that leverage real-time product feeds and consumer data to deliver personalized product ads within walled gardens.

"The pandemic has accelerated all of the trends where consumers now feel much more comfortable shopping and buying online and picking up in store," Kargo CEO and founder Harry Kargman told the Journal.

As consumers have spent more time at home and on mobile during the pandemic, social media platforms have beefed up their e-commerce capabilities to shrink the sales funnel. Social commerce sales rose 35.8% to $36.62 billion from $26.97 billion in 2020 and $19.42 billion in 2019, per eMarketer. The rapid growth of the space makes investment in it an imperative for marketers and their ad-tech partners.

M&A activity in the ad-tech space has surged as brands, agencies and tech companies look to meet demands around e-commerce, connected TV and data, among other areas. In the mobile world, performance-marketing platforms Liftoff and Vungle in August announced plans to merge, creating one of the largest independent ad-tech companies in the space, while Twitter this month sold its MoPub mobile ad network to game developer and ad-tech company AppLovin for $1.05 billion. While Kargo's deal is smaller, it is another example of consolidation in the space. With this deal, Kargo reports that it will have $550 million in total media spend under its management. The tie-up also expands Kargo's footprint as it will keep StitcherAds' headquarters in Ireland.

Kargo is profitable and its net revenue is expected to exceed $100 million in 2021, the Journal reports. The StitcherAds deal is part of a plan that could lead to an initial public offering down the road. StitcherAds counts Macy's, Wayfair, Saks Fifth Avenue and Bed Bath & Beyond among its clients. CEO Declan Kennedy will become general manager at Kargo Commerce, a new division that combines commerce ad functions at both companies.