Digital marketing and e-commerce technologies are growing together in the battle for competitiveness

According to the latest M&A market reports on the areas of e-commerce and digital marketing from the international technology consultant Hampleton Partners, there was an increase in the published M&A value in 2018 compared to 2017 (Mergers & Acquisitions(i.e. all transactions in the corporate sector such as takeovers, mergers, etc.) in e-commerce by 20 billion US dollars. This was boosted by mega deals such as Walmart's purchase of Flipkart for USD 16 billion and Adobe's acquisition of Marketo for USD 4.75 billion. In digital marketing, the total reported transaction value in the second half of 2018 reached USD 10.91 billion. This is more than twice as much as in the first half of the year.

Private equity firms' appetite for e-commerce has increased since the beginning of 2016, with PE funds now accounting for 15% of transactions. Financial buyers are also increasingly paying more for their acquisitions, as demonstrated by the buyout of Zoopla by Silver Lake Partners for USD 3 billion at 26.4x EBITDA.

The digital marketing industry is currently experiencing a whole series of upheavals and technical changes. The increased emergence of chatbots and AI analytics is forcing retailers to increase their investments and take a closer look at the topics of personalized advice and better customer understanding. At the same time, there is a move away from pre-sales marketing towards post-sales marketing. This is also closing the gap in the customer life cycle.

Amazon Advertising had a significant year and is now estimated to be the third largest advertising marketer in the US after Google and Facebook with a market share of 4 percent. The value of the advertising business exceeded 2 billion US dollars for the first time in the first quarter of 2018, reached 2.8 billion US dollars in the third quarter and continued to record triple-digit growth year-on-year.

Trends in e-commerce and digital marketing

• Personalization and after-sales support: As the number of retail losses and customer acquisition costs continue to rise, brand building and satisfactory post-sales support are becoming critical to customer retention. Personalized messaging is a key part of this support.

In July 2018, advertising agency Interpublic Group (IPG) acquired Acxiom (AMS) for USD 2.3 billion, exceeding its market value of 3.3x EV/S. Acxiom will enable IPG to provide its clients with a base data set covering two thirds of the world's population. Acxiom states that it recognizes 2.2 billion consumers and manages 20 billion customer records.

• Communication and innovation: The introduction of voice recognition, smart home devices and AR/VR is changing the way customers interact with brands and purchase goods and services. Artificial intelligence (AI) is being used in search or filter functions, for data mining and for content creation.

"Both retailers and digital marketers are fighting for consumers in an Amazon world. Amazon is both a huge competitor and a frenemy. Through Amazon advertising and services, thousands of companies can successfully engage in e-commerce commerce," comments Ralph Hübner, Sector Principal at Hampleton Partners, on the current situation.

"In the meantime, the start-up ecosystem in e-commerce is undergoing major changes. On the one hand, the financing value for established e-commerce platforms is increasing. On the other hand, it is becoming increasingly difficult for start-ups to obtain capital at an early stage if they cannot demonstrate the ability to create disruption through a data-driven business model."

Look into the future

"E-commerce will become the largest sales channel in the world by 2021, reaching an estimated value of $3 trillion. We are likely to see more activity from both strategic buyers looking to consolidate their offering and operations with next-generation technologies and marketing software, as well as venture and financing partners looking to capitalize on e-commerce start-ups that have disruptive potential," Ralph Hübner estimates.