Dive Brief:

• Ad-tech company Sizmek on Friday asked the U.S. bankruptcy court to approve the sale of its digital ad marketplace to Zeta Global, which expects a deal to close this month, Ad Age reported. Sizmek, a demand side and data management platform that marketers use for programmatic ad buys, sought an "urgent, expedited" sale to maintain the value of the business, court filings showed.
• Zeta offered an estimated $33 million to $36 million for Sizmek, including a mix of cash and preferred stock. Zeta proposed a private sale instead of a prolonged court-supervised auction with competitive bids, which is common practice in a bankruptcy.​
• Sizmek, a demand side and data management platform that advertisers use for programmatic ad buys, filed for bankruptcy on March 29. Zeta's customer relationship management (CRM) service gives brands first-party data on consumer targets.

Insight:

The potential sale of Sizmek's ad marketplace to Zeta highlights both the challenges and perceived opportunities in programmatic advertising. Sizmek's recent bankruptcy filing follows other consolidation and bankruptcies in the programmatic ad space. An approved sale will make Zeta a more formidable rival to The Trade Desk, the $8.8 billion ad-tech giant that last month expanded its global footprint with its first office in China, given that marketers are looking for ways to streamline digital ad buying at scale. 

While Sizmek's bankruptcy filing primarily resulted from taking on $172 million in unsustainable debt, it also underscored investors' growing uncertainty about the ad-tech ecosystem and challenges facing independent operators trying to compete against tech giants. 

While brand safety and transparency have made advertisers more cautious about programmatic ads, the industry shows no sign of slowing. Two-thirds of digital media ad spend will be traded programmatically, media buyer Zenith estimated. However, the EU's digital privacy rules and infrastructure investments have slowed the programmatic transition. Marketers, who have been attracted by programmatic's efficiency and automation, have also struggled with the inability to fully control where ads purchased programmatically will appear.  

Zeta, the marketing-technology and cloud-software company co-founded by former Apple CEO John Sculley, likely will help Sizmek to achieve greater scale to be more competitive. The judge overseeing Sizmek's bankruptcy filing scheduled an April 29 hearing to consider Zeta's offer, which likely will be approved unless another buyer appears with a better offer. An approved deal will greatly boost Zeta — which has focused on CRM, social media and video — by integrating a demand-side platform (DSP) to help ad buyers find and buy programmatic inventory. 

Zeta's agreement with Sizmek has incentives to consummate a deal. Zeta is entitled to a breakup fee of up to $250,000 and reimbursement of up to $500,000 in expenses if the deal falls through, according to court filings cited by The Wall Street Journal.