Industry Viewpoint: Millennial Media Acquires Nexage

MillennialEarlier this week, mobile ad platform Millennial Media announced it had paid $107.5m (£65.6m) – made up of $22.5m in cash and $85m in shares – to acquire Nexage, a mobile ad exchange and supply-side platform.

Jon Hook, head of mobile at Mediacom, admits that the news took him by surprise – “I actually thought the news was going to be that Yahoo had closed a deal for Millennial!” – but says he believes its a good move for Millennial:

“For a while Millennial seemed to be lacking any real direction,” says Hook. “They were taking a hammering on the stock market, but now they are making some very interesting hires, forging some smart partnerships and this latest announcement clear shows they mean business and are not going to roll over. It opens up a far bigger conversation with Millennial now in terms of mobile web and how we can push the boundaries on this, as too often all of the focus from advertisers is in-app.”

This acquisition builds on the companys first step into programmatic last September, through a deal with AppNexus which enabled Millennial to launch the MMX exchange, which it pitched as the world’s largest premium mobile advertising exchange.

“This move sees Millennial acquiring its own supply-side programmatic technology to enable external buyers to directly access its inventory and not just through a third-party such as AppNexus,” says Strikead COO Gavin Stirrat, previously managing director of Millennial EMEA. “Its a logical move which puts Millennial more in control of its own programmatic destiny, and it will be interesting to see how this impacts the relationship with AppNexus.”

The right time for real time?
“Millennial has needed a decent RTB (Real Time Bidding) ad tech for a while,” adds Zapp360 head of commercial development Jon Mundy. “It made do with the AppNexus deal to some extent, but ultimately AppNexus has its fingers in a lot of pies, and mobile isnt the core of their business – whereas for Nexage, it is. Its a very good move for Millennial, and probably the best product they could have bought.”

While the consensus seems to be that Millennial has made the right move, RadiumOne director of mobile Harvey Sarjant questions its timeliness. “Paying over $100m for Nexage is no small amount, but I cant help but feel Millenial Media is a little late to the party,” says Sarjant. “Clearly, a key factor behind this acquisition is the ability to incorporate the capabilities of the supply-side platform, which will undoubtedly mature its offering and create more buzz. However, when you consider that we recognised, very early on, that mobile can and should be part of a multi-channel offering, I cant help but think its a bit of a delayed move.”

From Nexages point of view, though, its actually possible that the sale could be too early, according to Zapp360s Mundy. “Given it has taken $20m in investment, and sold for $22.5m, excluding shares, its possibly a bit of a premature exit for Nexage,” he says. “But in terms of growing their business, its probably the most sensible option.”

Could the deal also be a positive for the mobile ad industry as a whole?
“There has to be consolidation in the supply space,” says Mediacoms Hook. “One of the biggest challenges for agencies is finding the source amongst our supply partners and getting as close it as we can, without the need for multiple middlemen taking their slice of the pie.

“Look at the Twitter-MoPub deal and now subsequent acquisitions like TapCommerce,” he says. “That has really helped simplify and scale Twitter’s mobile offering, with strategic acquisitions like TapCommerce adding real value from a retargeting point of view. But acquisitions do not automatically translate into guaranteed ease of use to advertisers, and being able to offer however many billions of impressions as a result of the merger is not a USP.”

Its a delicate balance, but as long-time partner of Nexage, Zapp360s Mundy is optimistic that Millennial will be able to pull it off. “Its not going to be an overnight change, but I think in a years time, its going to be quite an impressive offering.”