SingTel unit in US$359m buys

[SINGAPORE] Singapore Telecommunications (SingTel) is making a big statement about its digital ambitions, with its digital advertising arm Amobee - acquired two years ago for US$321 million - now acquiring advertising technology companies Adconion and Kontera for over US$350 million to become a global one-stop digital advertising platform.

Adconion, comprising Adconion Direct North America and Adconion Australia, will be acquired for US$209 million, excluding debt. The Santa Monica-based firm, founded in 2005, provides multi-channel digital advertising solutions - mobile, video, email, display and social - across all devices, on a unified platform.

Kontera, a big data advertising firm founded in 2003 with offices in the US, UK and Israel, enables advertisers to serve the most relevant advertisements to users and make real-time decisions about their brands and marketing campaigns, via its real-time digital content analysis platform. It will be acquired for US$150 million.

"Amobee's mission is to be the global leader in mobile-led digital advertising. With these latest acquisitions, I believe we will have an integrated solution that can even one-up Google," Mark Strecker, chief executive officer of Amobee, told The Business Times.

For instance, if a user searches for Louis Vuitton (LV) bags on Google, Google AdSense may show up images or advertisements related to the French fashion brand, but it does not know (with certainty) if the user wants to purchase a LV bag there and then, he said.

Amobee's digital advertising solution, which will integrate Kontera's real-time analytics technology and Adconion's multi-channel capabilities, can do that, he claimed.

It will track in real-time all the sites the user is on (for instance, an e-commerce or fashion site), as well as his geo-location, so as to determine his buying intent, allowing for better personalised advertising and return on investment.

The integration of both companies into Amobee will be fairly straightforward, and likely to be completed by the fiscal year end, added Mr Strecker.

Adconion will contribute to Amobee's sales, while Kontera - bringing its real-time technology - will boost Amobee's engineering capabilities.

"Mobile and digital advertising are the engines of growth for advertisers today. As more users get locked in a 'contextual mobile moment of need', the opportunity to insert highly-personal, contextualised advertising will be the goal for all brands," said Forrester's telco analyst Clement Teo.

"SingTel has made a good bet, but it remains to be seen how it will use the new digital tools to add value for its clients," he added.

OCBC Investment Research analyst Carey Wong agreed, saying it is still early days yet. "SingTel's management has also alluded it may still take three to five years for Amobee to break even and become profitable, so I guess we have to be patient as well."

The telco's latest investment comes while Amobee is still running at a loss and not contributing to the group's bottomline.

"It's not just about cash and profitability ... but value too. There is value in Amobee, even though it is currently loss-making," said Allen Lew, CEO of SingTel's Group Digital L!fe and chairman of Amobee.

He added that Amobee needed a "transformative acquisition" - buying Adconion and Kontera would be a game-changer for the Redwood City-based mobile advertising firm.

Last year, Amobee acquired Los Angeles-based GradientX for about US$15 million, to add real-time bidding technology onto its platform.

In 2012, it acquired Palo Alto-based AdJitsu for an undisclosed price to bring in 3D technology.

In the same year, SingTel set aside $2 billion to establish its Group Digital L!fe unit to capitalise on the global digital advertising market - primed to hit US$100 billion in 2017, according to eMarketer.

With the latest acquisitions, and including what Amobee spent last year, over a quarter of the $2 billion has been used, revealed Mr Lew.

Yesterday, SingTel's shares opened flat at $3.86 and reached $3.87 shortly after the deal to buy Adconion and Kontera was announced.

The counter closed unchanged at $3.86.