Technofile Europe: Specific Media gets Europe with Adviva

Yesterday we announced the sale of our portfolio company Adviva to US-based online advertising network Specific Media. The strategic rationale is straightforward: Adviva will be the European beachhead for Specific Media, the fastest-growing advertising network in the market (and probably the fastest-growing business I have ever come across).

My M&A banking years have instilled a healthy skepticism about mergers between similar businesses (as opposed to acquisitions of point technologies), but in this case, the two companies really are a perfect fit. Both run campaigns for top-end brand advertisers on small, high-quality networks of websites. Both have been using innovative targeting technologies to generate outsized results for advertisers, whether on a CPA or CPM basis. And while Specific Media's network is US-centric, Adviva's network is entirely European, so there is virtually no overlap.

The rapid rise of Specific Media and its move into the European market symptomise a new era for the online advertising industry. This is an industry with issues. Online advertising growth has been torrid but is slowing. The US is in recession, which will hit the overall advertising market hard. The effectiveness of online ads is being questioned as click-through rates on banner ads decline, and consumer audiences are increasingly fragmented across social networks, blogs, etc. The supposed 'next frontiers' of video advertising and mobile advertising remain immature and are simply not delivering results to the many investors who piled into those markets.

Many ad networks have grown fantastically on the back of this booming market. But the pace of growth camouflaged the fact that their offering was difficult for brand advertisers (BMW, P&G, et al) to buy -- the audience segmentation does not match what they are used to in the offline world (A-B-C, etc), and it was hard to measure true effectiveness in spite of (or because of) infinite volumes of data.

Many technology vendors and ad networks made things more difficult by barraging advertisers with fancy new products: behavioural targeting, contextual targeting, performance marketing, etc. It has taken time for the two sides to learn to speak a common language.

This is where Specific Media's approach really stands out. The company makes it simple to advertise on the Web. It boils down to this: tell us who you want to reach and we'll find them for you. Rather than sell new targeting technologies, Specific Media sells the audience and uses all the available targeting technologies in the background to deliver. The advertiser gets the audience he wants, and Specific Media gets a margin as good as its own opimisation technologies allow. Thanks to the huge reach of its network (140m users, just behind Google, AOL and Yahoo), it has enough data on web surfers to deliver the most demanding, targeted campaigns -- always a struggle for the smaller networks.

These are interesting times: a new generation of online ad network is coming into the market just as contradictory macro trends buffet the industry (US recession, declining ad effectiveness vs better targeting technologies, continuing $$ shift from offline to online). More on this later.