LifeStreet’s Levi Matkins on M&A adtech in relation to gaming

We chat to LifeStreet's CEO about this recent wave and how it relates to gaming

The past 18 months have seen a boom in mergers and acquisitions across adtech — as companies look to expand their offering and create their own ‘walled gardens’ in response to ATT, and as companies look to secure as much first-party data as possible. Mediacat spoke to Levi Matkins, CEO of LifeStreet, an independent programmatic marketing platform, to find out what’s behind this wave of acquisitions.

Why do you think the adtech M&A boom is happening now, as opposed to five years ago?

Off the bat I’d say this M&A boom is not just limited to the adtech ecosystem, but also closely tied to the gaming industry, which has powered several key acquisitions we’ve seen in recent months. With this in mind, when referring to adtech, I am also including the games industry in the discussion.

There are two main reasons that are driving acquisitions in adtech now, as opposed to five years ago. The first is that public valuations have been far kinder to tech companies, and adtech in particular, than they have previously been (even with the significant tech sell-off in the last 5 months). Due to these increased valuations, companies now have more access to capital to spend on acquisitions, and by offering expanded services & increasing revenue, they can increase the likelihood they’ll be valued even more favourably. Of course, public market valuations of adtech companies have been falling since the turn of the year, meaning that while we’ll continue to see M&A activity, buyers will be acting with a hefty dose of caution until markets recover.

The second is the need for adtech companies to scale campaigns seamlessly, and realize the benefits that working at scale provides. Deep learning was first introduced into the adtech toolbox around 7 years ago and, with it came the realisation that having access to more data continues to make these prediction systems more accurate. The ability to expand existing data pools by accessing this data is a big reason why adtech companies are looking to buy gaming companies, rather than rely on their existing — and increasingly limited, due to privacy frameworks introduced in the last 18 months — data pools.

Do you think consumer privacy concerns are driving adtech consolidation?

There is certainly a growing feeling that first-party data is now the gold standard of reliable insights for advertisers; especially as increasing numbers of users are opting out of being tracked for advertising purposes. It’s highly possible that when Apple introduces iOS16, it will choose to enforce stricter controls around fingerprinting, which is still a widespread practice. This will only increase the need for advertisers to have access to large pools of first-party data; as such I expect this to be a key driver for more mergers and acquisitions in the coming months.

Is consolidation the only way for independent players to compete against big players like Alphabet, Meta, Amazon, Apple and Microsoft?

Consolidation is definitely one solution to competing with the ‘tech giants’. Yet, we do have to remember that these are some of the biggest and most valuable companies in the world, and their reach goes far beyond the adtech sector.

Where I see smaller companies, like LifeStreet, setting themselves apart is in offering greater transparency, controls, and allowing advertisers insight into how and why their data is used. The likes of Meta or Google simply don’t do that. We, alongside other independent adtech companies, are using this differentiator to plug the gaps in the offering of the largest platforms.

Why do you think gaming (and non-gaming) companies are merging with adtech companies?

This is really two questions in one, because there are slightly different motivations behind each type of acquisition.

The explanation for adtech companies acquiring gaming companies is fairly simple, and relates directly to the privacy concerns I mentioned earlier. Essentially, it’s a question of data, and being able to parlay efficiencies in advertising to their advantage. With monetisation shifts in recent years, the hyper-casual game genre has become a huge revenue driver for the industry. Success with hyper-casual games relies upon rapid user acquisition (UA) on a mass scale, to shift users from title to title. Here, acquisitions of gaming companies are hugely important because they allow publishers – who already possess the tech to monetise content at scale – to acquire user data they previously wouldn’t have had access to.

The spate of recent moves from non-gaming companies into the gaming space really highlights the ongoing growth and increased value of the industry as a whole. Obviously, there’s a lot of hype around the metaverse and how this may develop. As such, companies, such as Netflix, with its acquisition of Next Games seem to be taking the opportunity to strike while the iron is hot, getting their foot on the ladder before knowing exactly where it’ll take them. The likely result of this is that we’ll see more and more ‘Content Fortresses,’ especially within media companies such as Netflix as they look to offer their customers a full range of content and keep their customers loyal.

How do you think the M&A we’ve seen recently across gaming and adtech as a whole will reshape the industry?

As an independent adtech company, it’s really encouraging to see gaming companies valuing adtech capabilities as core competencies of a successful business. However, there is the potential for concern if everyone tries to take a page out of Meta’s book, and create their own ‘walled garden’. This could result in a less varied gaming industry, with increasing numbers of independent companies being squeezed out by larger competitors.

Overall, though, the number of acquisitions of companies focused on mobile gaming is a sure sign of the continued strength and growth of the industry. I expect we’ll see companies centred around mobile games go from strength to strength, as mobile continues to be cemented as the most valuable platform for the gaming industry.

Featured image: Next Games