Fragmentation and change create opportunity for industry investors

Two deal makers and two leading private equity firms discussed what is driving investment in a discussion lead by Gayle Meyers.

Stream this panel discussion on-demand here.

Our thanks to Partnerize for sponsoring this panel.

Ten years ago, the idea of top tier banks and private equity firms pouring money into partnership would have seemed – if not impossible, then highly unlikely. Yet over the past several years, we’ve seen massive investments in a broad range of partnership industry participants, from tech platforms, to OPMs, vertical content publishers, and influencer technologies. The first panel of the Martech Record Marketing, Content, and Commerce event was about what has attracted all this money and expertise to the industry and why this investment is poised to continue in the years ahead.

Martech Record brought together two private equity firms, each owners of one of the biggest agencies in the space and two investment banks who have been the most active dealmakers in the market. Speakers Maneesh Chowla, Senior Partner at Comvest, Blake Saunders, Managing Director of Methuselah Advisors, Bob Berstein, Managing Director at JEGI-Clarity, Bennett Thompson, Managing Director of Mountaingate Capital, and moderator Gayle Myers of The Winterberry Group had a lively discussion that covered both the common denominators of why there has been so much investment in the space and why the fundamental characteristics of the industry are creating so much investment opportunity.

So what has changed to make so many investors interested in partnership today? Panelists pointed to a few significant factors:

  • Industry Legitimacy: Brand “affiliate” is no longer solely associated with coupon and deal publishers. While these categories continue to play an essential role in driving bottom-of-the-funnel conversions, the emergence of other partner classes like tier-one content brands has helped reshape marketer perceptions.

  • Scalability: New classes of partnership and vital innovation from traditional affiliates have made the channel a viable and scalable alternative source of customers versus Google, Meta, and Amazon. As costs on these tech platforms climb, brands need alternatives that demonstrate strong ROI and volume potential.

  • Fragmentation: Partnership remains a remarkably fragmented market, which opens an opportunity for investors to acquire and aggregate industry participants and enhance their performance cost-effectively. When no company dominates an industry, there are far more opportunities to build value.

  • Category Blurring: As the distinctions between publishers, content creators, brands, and agencies drop, there are more ways for investors to find untapped business opportunities.

For many longtime industry observers, investor interest in agencies has been particularly surprising. After all, investors traditionally prefer to acquire technology versus service businesses. The speakers noted that a modern partnership program's complexity and platform-specific expertise create significant opportunities for marketing services teams.

It has become all but impossible for advertisers to manage all channels and partner types without outside assistance. Further, each piece of the ecosystem piece is best served by individuals with specific expertise.

Investors are also spending to acquire many vertical content businesses, driving value by accelerating the convergence of content and commerce. Additionally, advertisers are growing more interested in top-of-funnel marketing activity beyond the control of Google, Meta, and Amazon. That is powering even more investment in tier-one content creators.

Investors are also encouraging acquired publishers to integrate affiliate programs with other types of brand marketing activity. Again, the theme is customer-centricity – helping advertisers deliver a consistent brand regardless of the media buying model.

According to your speakers, there has been so much recent investment in the publisher sphere that it isn’t uncommon for 10 to 15 buyers to be interested in buying a differentiated property that has demonstrated an ability to deliver incremental customers to brands. Many would-be purchasers now recognize the potential growth available in an undercapitalized publisher that understands its audience.

Further, an increasing number of those buyers are major brands. Brands – particularly those with a high customer acquisition cost (CAC), are interested in publisher platforms that can access customer bases. As technology makes it easier to demonstrate the outcomes that a publisher can drive, the value of these companies will continue to climb.

Finally, when the conversation turned to the uncertain economic signals of late, our investors noted that partnership has a decisive value proportion to deliver to advertisers – pay for outcomes at scale. Thus, they were all fairly bullish on industry prospects for the months ahead. Several panelists expected resurgent growth in the traditional deal-centric affiliate segments as brands focus more limited resources on those tactics most likely to drive short-term growth.

Martech Record wishes to thank Partnerize for their sponsorship of this enlightening session.

More Event Coverage (stream other panels below):

Content and Commerce Collide at the Latest Martech Record Event

Brand and Publishers Expect Strong Industry Growth Despite Economy Challenges

Partnership Brings Remarkable Business Opportunities to “Old” and “New” Media

The Changing Face of the Affiliate Agency Ecosystem

Check out photos of the panels and the rooftop cocktail hour.

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