The Investment Upside Of MadTech Deglobalisation; Cavai Shortlisted For Greatness; And Digital Audience's Value Arbitrage
The Deglobalisation Of MadTech & The Unseen Investment Opportunities In Crazy Fragmentation
After a 14 day break the FPC newsletter is back. Great to be back.
Last week FPC split itself like a MadTech atom, sending partners to both ATS Singapore and DMEXCO.
The first big takeaway from the week (mostly from DMEXCO): the industry has its best days ahead, but is still chained to a legacy measurement and targeting framework that is falling to pieces, keeping us all stuck in a pointless “privacy hacking” feedback loop.
How many more times do we need to rehash the idea of the unscalable ID?
And when will we realise that we CANNOT beat either privacy regulations (like GDPR) or the sheer might of Apple’s army of product engineers?
The other takeaway worth noting: the continued under appreciation of the fragmentation that now exists across the big markets (namely, US, Europe and APAC), creating effectively three huge bucketed opportunities:
The US, the ultimate monolithic media market that’s increasingly out-of-step on privacy-first innovation and global fragmentation.
Europe, the privacy moat that makes it impossible for legacy IDs and 3p cookies to work at scale.
And APAC, the fragmented mobile-first market, building its own flavour of MadTech particularly around online commerce (social, live and conversational).
That may alarm your average unicorn-obsessed horizontal VC, but to FPC this represents the perfect investing storm.
APAC is a good case in point. At this year’s ATS Singapore event, not once did any speaker or panelist opine about being “behind the US” in terms of innovation.
South-East Asia, in particular, is a unique market. Everything from walled gardens to online commerce to data-driven TV (insert OTT here) to OOH to privacy is different.
The region still indexes heavily to Meta and Google in terms of marketing spend - but there is a lot of unseen emerging technology that is starting to siphon budgets away from the duopoly.
While trade press coverage continues to be dominated by a gloomy outlook, you’ll be glad to know that a whole swathe of next generation MadTech companies is out there, building for our new reality.
These solutions can scale across the big 3 markets, as they are being developed with enablement, fragmentation and privacy in mind from the get-go.
The exciting part is that they are emerging from the unlikeliest of places. And, as ever, FPC will be there to help ad tech’s best and the brightest realise this potential.
Cavai Makes The Grade: Insider Includes The Company On Its 19 Hot Ad Tech List
Cavai is a trailblazer in the conversational advertising space. We invested recently in its Series A round.
We love the company for many reasons: recurring SaaS revenue; enablement tech that can be used on open web and walled gardens; and primed for social commerce and commerce media growth.
This week it was listed in Insider’s trending ad tech company list. Here’s all the great things they said about Cavai and its tech offering:
Alex Rahaman, partner at Idekapital, which has invested in Cavai, said while other chatbots typically focus on post-purchase customer service, the adtech firm differentiates itself by focusing on the entire salesflow, such as before someone even realizes they're in market for a product, or when they first start researching it.
Ciaran O'Kane, general partner at First Party Capital, another investor, said Cavai's conversational tech "is tailored for retail media and the social commerce explosion."
Ad buying agency GroupM predicts ecommerce advertising will grow to a $100 billion global industry this year, while Insider Intelligence expects US social commerce sales to reach almost $46 billion in the US alone in 2022.
"Going into 2023, we are planning a Series B fundraising round to fuel our US expansion on the back of several Fortune 500 client wins and significant partnerships with leading adtech players such as MediaMath," said Mats Persson, Cavai CEO.
Digital Audience: Value Arbitrage That You Need To Know About
Digital Audience is still live on the syndicate platform. It will be closing in the coming weeks.
There is still time to invest in this high growth business, operating in the data activation market across Europe.
The reasons for investing are listed below. Investors should be salivating at the value arbitrage opportunity here given the growth in its revenue. Boring companies get bought. Simple.
DA is ultimately going to sell for between €50 and €100 million - and it’s not going to need a boat load of capital to get there.
To find out more information about this deal, you can access it here:
Those reasons we are investing in full:
DA is on course to do €2+ million in recurring SaaS revenue this year with a very low burn rate.
The company is building a “clean room” tech moat in local European markets where larger solutions are unable to provide the scale required by local advertisers and publishers.
This “clean room” playbook is applicable to at least 10 additional markets, and the company is already making inroads into several new geographies.
There is huge value in aggregating these mid-sized markets as in aggregate it represents a very sizeable TAM, making it attractive to prospective buyers.
Digital Audience will be acquired in the €50-€100 million range in the next 2-3 years, offering investors a great return on the value of this pre-series A round. This is the ultimate value arbitrage.
The team are ad tech veterans who understand the specific needs of the local European market.
Have a great weekend, readers.