Acxiom and Identity

Acxiom, the publicly traded data broker, recently announced two acquisitions - Arbor and Circulate. Neither of these companies were very large, the total outlay for both combined was $140M, yet they show Acxiom's continued momentum building a true identity-based competitor to Facebook, Google, and Verizon.

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In our side of the business, we rarely discuss data players in much depth, so it's worth taking a minute to discuss who Acxiom is. Headquartered in Arkansas, the company is nearly 50 years old. Acxiom started in the days of direct mail, phone calls, and market research. In the past several years, it has moved forcefully into the digital space by merging its huge traditional data business with online identity tools. The company maintains huge records of offline behaviors, including credit card purchases, medical conditions that it can legally access or infer, deeply detailed demographic information along with online records - often linked through credit card numbers, email addresses or other deterministic-ish data sources. Their acquisition of LiveRamp only furthered the push into unifying disparate digital data sources into a holistic understanding of the customer. (Many have concerns about some Acxiom business practices, but this is beyond the scope of this discussion. Feel free to read more here: http://www.nytimes.com/2012/06/17/technology/acxiom-the-quiet-giant-of-consumer-database-marketing.html and https://www.ftc.gov/news-events/press-releases/2014/05/ftc-recommends-congress-require-data-broker-industry-be-more).

LiveRamp is a platform that allows entities to move data between partners. For example, if a company has a CRM with its customer data, it can use LiveRamp to upload that data and sync it to its partners by understanding the user IDs of the various partners (e.g. ad networks, Facebook, etc) and pushing the data to be available in all of those systems. This even means that if you're an offline company, you might be able to use credit card purchases of your customers, sync those with LiveRamp's ability to tie credit card numbers to online identities, and create a targetable pool of users online. So whatever your data is, and whatever identity key you have for that data (e.g. telephone numbers), as long as LiveRamp also has that identity key, that data can be used wherever through the LiveRamp system. This is valuable for marketing to those customers, licensing this data out, or enhancing various other data attributes. And, of course, Acxiom's extensive and valuable data can be matched and distributed through the same mechanism.

LiveRamp recently announced the acquisitions of Arbor and Circulate. Both companies were focused on mobile with similar missions. Both offered publishers recurring revenue based on their logged-in users - without publishers adding additional advertising to their sites. Users often provide some form of ID for email updates or other login purposes. These are then synced offline with Arbor / Circulate, and matched - often focusing on device ID as a main key. In effect, Arbor and Circulate were beginning to recreate LiveRamp's CRM connectivity offering, but designed for a mobile-first world (so adding things like location that hadn't been as important for LiveRamp). They had established a combined ~250 publisher relationships. While their revenue was limited - $5M combined, estimated for 2017 - they presented a growing thread to LiveRamp's CRM matching hegemony.

As Google and Facebook create closed silos of data, LiveRamp has created a very open mechanism to move and understand data. That said, with Google and Facebook, users have some understanding that their data may be tied to marketing data. Most consumers have no idea that Acxiom / LiveRamp exists, nor that when they enter their email into a form they are creating a persistent link for their identity to a device. The opt-out mechanism is hard to understand because the device provider is hard to trace. Thus, while their open platform is generally good for marketers - it is significantly more likely to be regulated than either Facebook or Google's opt-in systems (you do have to agree to their terms of service, regardless of whether you read them).

Verizon / AOL + Yahoo! Merger

You all are probably aware of the big, but not actually that big, news that Verizon/AOL is buying Yahoo!'s operating assets. Y! is comprised of three main assets, a big stake in Alibaba, a big stake in Yahoo! Japan (primarily owned by Softbank), and then the operating business that you all think of as Yahoo!, which is actually the least valuable of the lot.

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The transaction itself involves the entity Yahoo! selling the operating assets (yahoo.com, tumblr, brightroll, flurry, etc) to VZ. The remaining entity will become a holding company for the other assets. This whole thing was a tax gambit for Y! shareholders. Y! wanted to divest the other assets (Alibaba, Y! Japan) in a tax-free spinoff for its shareholders, but the IRS said no - it wouldn't be tax free. The tax burden would be 35%-ish of the value of those assets - 0.35 * $30B or so. Instead, Y! sold itself and has a tax of only $5B * .35, and the shareholders effectively have a tax-free-ish spinoff of the remaining assets, since now they're all that remains. This paragraph itself speaks mainly to the idea that running a public company is often quite divorced from optimizing the operations of the operating company itself, and also is quite boring.

There's a lot written about why AOL would buy Y!'s assets, and a lot of it is more thoroughly considered than what I will bring to the table. Quick summary, Y! struggled in a new world of mobile and social, and struggled to bring its assets and strategy into a cohesive package that grew in the new ecosystem. From a media perspective, Y! has a number of interesting, but declining, assets, including Y! Finance, News, Mail, their Homepage, and Tumblr. From an ad tech perspective, Y! has bought and developed a lot of tech, ranging from failures, like Right Media (disbanded) and Blue Lithium (https://en.wikipedia.org/wiki/Gurbaksh_Chahal), to varying degrees of successes, like BrightRoll (video ad exchange / platform), Gemini (native ad platform), Flurry (mobile ads & analytics), and Interclick (behavioral ad tech).

Verizon is a massive cell company. They own AOL, which has its own network of declining media properties (AOL.com, AOL Mail, MapQuest, Moviefone) and ad tech plays (Millenial Media, Convertro, Vidible, Gravity, Adap.tv, Quigo, AdTech, Tacoda, etc). Facebook and Google each have an incredible amount of data, reach, and targetable inventory. As a result, they've been able to capture a significant percent of digital ad spend. The bet is, simply, that Y! + AOL (possibly + VZ data and distribution) can create a bona fide third player at the same scale as Facebook and Y!. 

Whether that outcome happens depends. Both Y! and AOL have done mediocre jobs integrating their breadth of ad tech into a single platform as independent entities. There will assuredly be challenges integrating technologies, systems and egos across a much larger ecosystem. Verizon itself has incredible data - they can see all their subscriber's data on both cell and cable systems. Currently the FCC imposes limits on the degree to which this can be used, but it's not impossible to see that changing. It's also not impossible to see VZ creating cable and cell content channels exclusive to VZ subscribers based on AOL on Y! media and other value-add.

Neither AOL nor Y! are platforms designed for the next generation of content consumption. So the biggest question is whether they can move from the large websites that they represent today to meaningful players in the media world of tomorrow. They certainly represent large audiences, so can the combined weight of VZ + Y! + AOL create a platform and advertising ecosystem that rivals the attractiveness of Google and FB over the years to come? It remains to be seen. But for Verizon, the upside is potentially huge and the cost to its business was relatively small, so it's an interesting bet to make. For TripleLift, it means that potential competition in Y! and AOL will likely be distracted in lengthy merger and integration challenges while we continue on our mission.