ADOTAS – Epic Advertising CEO Don Mathis claims he is a healthy combination of very happy and very tired. He has been burning the midnight oil to seal the merger between Epic and Connexus, sorting through last minute issues and the technicalities and legalese inherent in the conjoining of two major operations. However, the enthusiasm in his voice outshines any hints of exhaustion.
“It became to clear to us along the way that if we put ourselves together as companies we could do a lot more for our clients and put ourselves on a great trajectory for growth in the industry,” he beams.
After partnering for around a year and a half, Epic, which boasts the largest privately-owned performance network and search marketing company, and Connexus, parent company of ad network and social media marketer Traffic Marketplace had been formally talking about merging for a few months. As a combined force, it will be hard not to refer to Epic-Connexus as a one-stop shop: a multichannel advertising resource able to reach 80% of Internet users through a global matrix of 225 countries and territories.
The companies yield distinct specialties, such as Epics focus on customer acquisition and Connexus’ relevance-based outcomes for advertisers but found solid overlap on both the publisher and advertiser fronts. Through their time working together, the two companies realized numerous synergies, with the most important factor being a shared style and culture.
“It’s the issue that gets spoken about the least but is the most powerful.” Mathis says. “Sometimes you take two great companies and 1 + 1 = 0. It comes down to the culture.”
Their clients will benefit the most from having a one-stop shop, he says. Agencies in particular have been looking for one network that can solve numerous problems — customer acquisition, branding, distribution search, display and social media all under one umbrella, further bolstering the need for scale.
“Data is critical in doing good work for clients, and you need to have scale to get data,” Mathis says. “It’s not enough to just have great technology.”
Epic and Connexus are highly concerned with having a smooth integration and improving the efficiency of their current interactions. The immediate value of the merger to clients on both the publisher and advertiser sides is greater access — Epic advertisers will be able to take advantage of a broader display network while Connexus advertisers will be able to mine Epic’s search and display channels. Publishers will have a far broader array of advertisers to select from and Epic’s clients will be able to dip their toes in Connexus’ social media expertiese.
As performance marketers continue to fight rampant fraud, enhanced security is another piece of the merger equation. Mathis is hoping to absorb Connexus’ brand protection assets into Epic’s online intelligence unit, run by former g-man E.J. Hilbert. Not only will the merger protect brands the companies work with, it will level the playing field so the “good guys can compete well and the bad guys can’t compete at all, or at least not as well,” Mathis says.
The merger is a sign of the maturity of the performance marketing industry, he says, as the conjoined companies will bring a broader base of online marketing assets while taking advantage of technology improvements — both companies offer advertisers the ability to buy traffic on exchanges and on a real-time bidding basis, something that performance marketers must embrace.
“There’s a den of players looking for a quick buck. They’re the ones that represent the greatest challenge for the industry because that’s not a sustainable model,” Mathis says. “Players that are looking to evolve and have something that is transparent and oriented toward creating long-term value for their clients are the future of performance marketing. That’s the promise of performance marketing and online marketing overall.”
There’s been pressure for consolidation in the space for at least 18 months, though it hasn’t jump-started as fast as Mathis expected, partially because so many companies have complicated capital structures, making it hard to merge even if it makes strategic sense. He believe the Epic-Connexus merger represents a shot across the bow for the industry and will serve as a wake-up call for those that have been resisting doing deals because they don’t think they can get one as big as they want.
Mathis is quite pleased to have one of the first major mergers in North America, but he sees greater consolidation of the online industry overall. There currently are way too many intermediaries creating confusion in the ecosystem, and a shakeout is inevitable.
“Now we have a lot of companies in the $50 million to $150 million market stuck in the middle, but we won’t see too many of those left in the next two to three years,” he surmises. “We see a smaller set of companies that are fairly large, and obviously we intend to be one of them.”