Meet the trends and tech that will drive social media monitoring M&A
There is no doubt that M&A in the space for social media monitoring companies (SMM) has been picking up speed over the last couple of years.
As I have discussed in a separate article, companies are pursuing a wide range of M&A strategies in the SMM space.
Looking closer at the M&A activity reveals a number of trends and emerging technologies that I believe will keep driving M&A in the space.
Big tech and bigger funding rounds drives M&A
The market for SMM’s is evolving. The same goes for funding.
“We are seeing bigger funding rounds, which often involves bigger players from the world of VCs and tech, than we did earlier,” Nathan Gilliatt, Principal of Social Target, a social media intelligence company, says.
There are numerous examples of this being the case.
In July, Sprinklr secured $105 million in funding, bringing its funding total to $239 million. Earlier this year, Sprout raised $42 million while Crimson Hexagon raised $20 million. 2015 also saw its share of big funding rounds, such as, Dataminr’s $130 million Series D round.
The companies are using some of the funding to make M&A plays.
For example, Sprinklr has made eight acquisitions in the SMM space. It puts it at the top of the acquiring list alongside Cision. On the following places are Twitter with six acquisitions, while Meltwater and Hootsuite each have made five.
Many of the acquisitions are about expanding service portfolios, acquiring customers and augmenting existing offerings. The maxim is ‘bigger equals better’. It is a valid approach when considering that big tech is also active in the space.
Companies like IBM and Microsoft both offer social media monitoring capabilities as part of their service portfolio. They have also each made M&A moves in the space.
The big tech companies seem to be focusing on the lucrative enterprise-level segment of SMM. The same can be said to apply to companies like Sprinklr. The enterprise-level segment is crowded, and more M&A activity – or even takeover bids – looks likely in the coming years.
Portfolios still in the driving seat
As I have described in my article about the general M&A strategies (INSERT LINK HERE), consolidation is one of the prime trends in this space. For example with acquisitions in specific geographic markets.
On the technology side, many companies are using M&A to expand their service portfolios and keep up with their competitors. While SMM companies seem to have slightly different takes on what services and applications are essential, there is a large overlap.
As new technologies emerge, many SMM companies are likely to integrate them in their service portfolio, for example through M&A.
One such area is image recognition. There are many great possibilities in combining SMM and image recognition. For example through identifying individual customer preferences via social media images.
I believe the technology will have SMM’s make acquisitions over the coming years. We have already seen one such move, Sysomos’ acquired gazeMetrix in 2015.
New companies entering SMM
Another trend is the expanding market, with new types of companies likely to integrate SMM capabilities. This is partially because the technological – and by extension the economic – entry barrier has been lowered.
“This has already happened in the management consultancy industry with McKinsey, BCG et al. leading the way by hiring a large number of data scientists. Maybe they will start buying social media monitoring software, if it can be repackaged as business intelligence tools. There will be many M&A's that makes sense only if you see the whole industry as ‘advanced analytics services’ of which social media data just happens to be one type of data source that provides signals for many types of client industries such as finance, consumer goods, healthcare, politics etc.,” Mattias Östmar, Computational Media and Communications Analyst, says.
Advertising agencies will also move further into SMM in the coming years.
I have previously looked at the M&A strategy of big advertising companies like Aegis and Publicis Groupe. It generally involves acquiring companies in the geographic regions and/or with specific skills.
So far, pure SMM moves onl rhymes with WPP that has made four acquisitions in the space, between 2007 and 2013.
All the big, international advertising agencies have, however, been making many acquisitions of digital advertising agencies. ‘Digital’ is currently the key word, at it is only a question of time before this leads to them buying up social media monitoring companies.
Bots and AI on the horizon
The advances in artificial intelligence (AI) is affecting many sectors and industries. Social media monitoring is already feeling the impact of AI – and will likely feel it more in coming years.
For example, AI can help SMMs with interaction automation and data analysis.
One of the biggest challenges for social media monitoring is data noise.
If an SMM wants to help a large company, for example a clothes manufacturer like Nike, analyse what their customers are saying about its products on social media it can be quite difficult.
Messages and posts by retailers, as well as general spam, has to be removed. This can be an impossible task for a human, but it is achievable through advances in AI.
Today, many SMM systems can also identify relevant social media conversations. If someone makes a complaint about a product on Facebook or Twitter, the post is automatically entered into a pipeline, and a human customer service representative takes over.
As I have written about before, one of the hottest current news stories in tech is the emergence of conversational bots.
It is not difficult to imagine that social media monitoring tools can help launch direct conversations between a company’s customers and bots.
This is another technology which I believe will drive future M&A in the SMM space.