The advertising company Rubicon Project said on Tuesday that it had agreed to buy the Canadian start-up Chango for about $122 million, in the latest sign that the advertising technology industry is consolidating.
Rubicon Project, which went public last April and had about $125 million in revenue last year, aims to become a centralized, automated exchange for buying and selling ads. With the acquisition, Rubicon, which is based in Los Angeles, is looking to build its premium ad marketplace through Chango’s so-called intent marketing technology, which delivers ads based on a consumer’s intent — implicit or explicit — to buy a particular product or service.
“Taking Chango’s strong technology and data platform, plus their people platform, and pushing this out through Rubicon Project’s massive marketplace is great for the market and great for our customers,” said Frank Addante, the chief executive of Rubicon Project.
It estimates that the intent marketing category will exceed $35 billion globally in 2015.
For Chango, which has about 140 employees, compared with 470 at Rubicon Project, the deal is a way to gain scale quickly and connect with Rubicon’s customers.
“Without a doubt, I think they have more resources available to us, and that’s extremely attractive,” said Chris Sukornyk, the chief executive and founder of Chango, which is based in Toronto. “We’ll just be able to grow that much faster as a combined entity.”
In recent years, hundreds of marketing start-ups have promised to streamline buying, selling and creating ads. Investors flocked to these new companies, buying into the idea that new technology could transform advertising.
While the proliferation of such companies has expanded the options available to advertisers, it has also heightened confusion because so many companies are claiming to provide so many enhanced services. Now, the industry appears to be shrinking. Last year, 95 advertising technology deals occurred, according to the investment bank Luma Partners. In the first quarter of 2015, about 20 deals were made in the sector, almost all worth less than $100 million, compared with 18 deals in the first quarter of 2014.
Analysts say they expect the deals to continue, with bigger companies scooping up smaller ones that have attractive technology or expertise. Some companies may simply fold.
“There will be far fewer companies who are alive in this space at scale in a year’s time than there are now,” said Brian Wieser, a senior research analyst at Pivotal Research Group.
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