Ad verification company DoubleVerify announced along with it’s second quarter earnings it has entered into an agreement to acquire French AI-powered adtech firm Scibids Technology sas in a cash and stock deal valued at $125 million. The move follows the partnership formed in June this year to launch the “DoubleVerify Algorithmic Optimizer.” Scibids’ AI algorithm were matched with DoubleVerify’s media quality and ad performance data to optimize advertising campaigns.
The deal is a natural progression from the partnership. DoubleVerify enables advertisers to avoid having their ads appear next to unsuitable content and lets them verify ads having been viewed by real people. Scibids technology takes data generated by an advertising stack to automate bidding and budgeting in ad auctions and how much budget to devote to each campaign.
Scibids’ tech dramatically increased user attention levels and the number of impressions DoubleVerify won in ad auctions across several campaigns with Fortune 500 brands, DoubleVerify CEO Mark Zagorski said.
“We think there’s something really special there and we want it all to ourselves,” Zagorski said .
Market Reaction to DV After Deal and Earnings
- $35.90-6.2 (14.73%) Close
- $35.90 +12.85 (55.75%) Past Year
- $35.90 -0.1(0.28%) From IPO in 2022
- 52wk High $42.51
- 52wk Low $20.38
Adtech companies have been using artificial intelligence and machine learning to target and customize ad campaigns. These models have grown in popularity as Google and Apple move away from identifiers such as third-party cookies and mobile IDs that let advertisers track people across the internet. Scibids AI enables digital targeting as advertising moves away from tracking individual users.
Around $66 million of the Scibids purchase price will be paid in cash with the remainder in DoubleVerify common stock. There is an additional performance component should Scibids reach certain targets by the end of the year. Former LUMA partners Brian Andersen, Dick Filippini, and Mark Greenbaum advised Scibids on the DoubleVerify transaction their last deal before leaving the bank this year.
Scibids has around 70 employees, including over 20 AI engineers and data scientists. These are all expected to move to DoubleVerify as part of the transaction, had previously raised $7.2 million in venture funding.
With high interest rates and a somber IPO market there were only28 AdTech transactions in the first half of 2023, down from 32 in the first six months of 2022 the investment bank LUMA Partners said. Furthermore, only four of those deals this year have been over $100 million, LUMA’s data shows.
DoubleVerify Holdings, Inc (NYSE:DV) stock is trading lower Tuesday after it reported quarterly earnings of $0.07 per share, which beat the consensus of $0.06. The company reported quarterly sales of $133.74 million, which beat the consensus of $133.33 million.
DoubleVerify agreed to acquire Scibids Technology sas in cash and stock transaction valued at $125 million, with additional potential consideration based on certain performance metrics.
Scibids builds AI that automates and optimizes an advertiser’s programmatic buying of digital ad campaigns.
Analysts on the company’s performance and acquisition.
KeyBanc analyst Justin Patterson
- Maintained an Overweight rating on DoubleVerify with a $45 price target.
- The 2Q revenue of $134 million (+22% Y/Y) bracketed Patterson’s and Street’s estimates of $135 million and $133 million. EBITDA of $40 million was above Patterson and Street estimates of $38 million.
- Believes guidance and earnings would have been more robust without MediaMath’s bankruptcy, creating some near-term noise. Operationally, sees nothing thesis-changing, and 2023/2024/2025 EBITDA forecasts are essentially unchanged.
Stifel analyst Mark Kelley
- Reiterated a Buy rating with a price target of $44.
- DV reported a marginally better 2Q, and the 3Q guide was ~in-line (left FY23 unchanged).
- In line with Kelley’s views, management noted a stable macro and advertising backdrop, and DV’s reported impression growth was relatively steady with 1Q (consistent with his Meta Platforms Inc (META) and Alphabet Inc (GOOGL) analysis. MediaMath bankruptcy noise causing slight disruption (advertisers switching DSPs).
- Sees acquisition of Scibids keeps thesis intact as DV’s products remain a must-buy in the advertising world. Kelley says yet to see breadth of exposure to Meta work its way into numbers (launch in the coming months). Given that estimates are essentially unchanged.
JMP Securities analyst Andrew Boone
- Maintained a Market Outperform and lowered the price target from $45 to $43.
- Boone’s key takeaway from 2Q23 earnings is that DoubleVerify is accelerating and emphasizing its performance products by acquiring Scibids.
- He notes opportunity for performance marketing tools is multiples of the fraud and brand safety tools opportunities.
- However, there is differentiated attention given its MRC accreditation and DoubleVerify’s early focus on the metric. He acknowledges his lowered estimates from 2Q23 and believes DoubleVerify is operating well in a volatile ad market. Sees brand safety in the Facebook feed remains a significant catalyst for 2024.
- His DoubleVerify price target multiple is a premium to comps based on his view that DV has a highly defensible business with numerous growth levers, including ABS, social, and attention to name a few, along with 30%+ EBITDA margins that expects to expand as Meta brand safety ramps.
Truist analyst Youssef Squali
- Maintained a Buy rating with a $45 price target.
- Squali remains constructive on DV following solid 2Q23 results and 3Q23/2023 outlook with ~25%+ Y/Y growth and ~31% profit margin.
- The results against overall digital ad spend growth in the high single digit he estimated.
- Key growth drivers were higher ABS adoption, more excellent social coverage (Meta, YouTube & TikTok), and international. DV continues to add clients with an 80%+ win rate, and 54% of the wins were greenfield.
- The acquisition of Scibids to help automate and optimize campaigns with a strong emphasis on performance, should help strengthen its offering, drive its appeal to DR advertisers, and broaden its TAM.
RBC Capital analyst Matthew Hedberg
- Reiterated an Outperform and a $48 price target.
- Solid execution despite an uneven macro led to an upside, albeit less than Q1, for both revenue and adj-EBITDA.
- Strength remained in secular drivers, including Social, retail media, and CTV, while both international and ABS carried the momentum from Q1, partially offset by slower ramp times in large enterprise displacement customers.
- Feels momentum should build in the second half of FY23 and into FY24.
About Scibids Technology sas
Founded in Paris, France, in 2016, Scibids’ clients have included all the major ad holding companies as well as major brands like Diageo, Dell, Allianz, and Spotify. Scibids was listed in Insider’s “most promising advertising and marketing tech startups of 2022, according to VCs” list.
DoubleVerify specializes in verification, brand safety tools and solutions that can target ads based on content. These activation solutions now account for around half of DoubleVerify’s business according to DoubleVerify CEO Mark Zagorski
DoubleVerify debuted on the New York Stock Exchange back on April 21, 2021 today in a string of ad-tech of IPOs. DoubleVerify followed PubMatic, Viant and the mobile app developer software company AppLovin’s IPOs that year.
Source: DoubleVerify, Luma, Marketwatch
From the TradersCommunity Research Desk