Advanced TV ad-tech company Cadent secured a new private equity (PE) owner when it was acquired by Novacap earlier this month for over half a billion dollars. And now the company is eyeing M&A as it looks to expand and capitalize on shifts toward converged TV in what’s currently a fragmented ad-tech and audience landscape.
The Novacap deal inked in early August, which saw Cadent switch PE hands from prior owner Lee Equity, is valued at $600 million, the company confirmed. Cadent marks the firm’s fourth investment under Novacap’s TMT VI Fund.
When it comes to Novacap, Cadent CEO Nick Troiano told StreamTV Insider the PE firm was a good fit with its background in software and technology and TMT experience, and it sees the marketplace at an interesting inflection point of TV and digital converging.
“It’s pretty challenging for an advertiser to reach an audience,” Troiano said in an interview with STV. That’s in part due to multiple measurement solutions, a plethora of platforms, various tools for ad inventory and so on. Cadent, meanwhile, has set a foundation for how it can build scale, acquire audiences and do it through automation.
Cadent’s customer lineup already includes global agency holding companies and media buying agencies, over 70 of the Ad Age Top 100 advertisers, along with publishers and content distributors. The company holds tech patents for identity management, audience targeting and ad monetization.
“I think we are strongly positioned, uniquely positioned to take TV dollars and move them into digital and CTV, or to bring digital technologies into a new forefront for how audiences come together,” he said. “So [Novacap’s] strategy is going to be M&A, organic investment, but really expanding our business model.
And M&A is a strategy Cadent has already shown success with through prior integrations.
Plans for M&A: The three As
As consumers shift from traditional TV to connected devices with viewing spread among a wide variety of platforms and different delivery modes, Cadent has built a technology company that can follow those audiences across the TV landscape and aggregate them back for advertisers to target, as well as for publishers.
This enables clients to “essentially make sense of a very dynamic, chaotic industry right now,” Troiano said.
Cadent already pursued expansion through M&A including in the CTV audience base space via its January 2020 acquisition of 4INFO. That helped move the business into digital and CTV and provided an identify graph to follow audiences across supply channels, particularly focused on video consumption within the household, regardless of platform. Earlier this year it purchased a digital marketplace, acquiring EMX by Big Village’s SSP (supply-side platform) technology in a bankruptcy auction, which he said was about getting Cadent closer to the supply side, moving in closer to FAST channels, and fragmented audiences.
As for where Cadent could focus M&A pursuits next, Troiano explained the company broadly thinks in terms of three As: aggregation, automation, and attribution.
On the aggregation front, that would involve expanding into new mediums of audiences. He said that could mean broader into digital, the out-of-home market, social, or any kind of ad-supported medium that consumers are using.
Automation is all about looking to buy technology that can boost efficiency. Troiano noted Cadent is one of the companies whose services span the advertising chain from planning to measurement (though not a measurement company itself).
“We built and bought companies that allow us to unify the total ad stack, but there are holes for us,” he said. “So that could be technologies that augment automation that allows us to expand.”
Finally, it could pursue M&A on the attribution front, for the purpose, as Troiano described, of making sense of data and measurement “in a world where everything is colliding.”
“There are companies that, not necessarily in the measurement space, but touch measurement,” he said. “Could be data, privacy, and areas of reporting that I think would strengthen our aggregation, automation, attribution play.”
Lowering ad tech tax
Part of the strategy around integrating technologies, including via M&A, is the resulting benefit of lowering the ad tech tax, according to Troiano.
Ad tech tax is essentially advertising dollars that get sucked up as they travel a complex ad supply chain, namely through fees paid to various ad tech vendors along the way. However, with an extensive list of players involved and concerns over transparency, the total amount tech tax pulls from budgets isn’t always clear and has been a pain point both for advertisers and publishers.
Helping Cadent on this front is its dual approach with a managed services business as well as a platform business that licenses its technology, where again, it works not only with agencies and advertisers but also publishers. Cadent’s business is around a 50-50 split between contributions from managed services and licensing, according to Troiano.
And it’s the work with both publishers and advertisers that plays into its view on condensing the ad tech stack, resulting in lower tech fees.
To Troiano, this isn’t a negative.
“If we can provide more value back to the advertiser and give more yield to the publisher, it’s a better, healthier ecosystem,” he said. “That’s part of the strategy for us in terms of can we collapse some of the technologies. And I think the market will collapse on the technologies to essentially get some more streamlined efficiencies in the business model.”
That’s not to say Cadent aims to be an island. It works with over 70 different data partners, every major DSP, and counts integrations with all major SSPs – alongside its complementary solutions or “coopetition” with other vendors that enables choice for clients.
Cadent through its Aperture Platform touts nearly 300 partner connections. Currently the company offers both point and broad-based solutions – meaning an identity graph or audience platform for planning purposes with its data marketplace available as a standalone, or the ability to tie it to the company’s end-to-end activation and SSP solution.
And, perhaps unsurprisingly, as Cadent looks to scoop up new tech, Troiano anticipates consolidation in the fragmented ad tech market that has hundreds of vendors.
“I think as the industry consolidates TV and digital, you see it right now, so will the ad tech community,” he said. It’s one place, given its scale, he thinks Cadent is in a good position “to continue to acquire and grow share, either of wallet…or add in complementary technologies.”
That also ties into Cadent’s strategy to unify the tech stack and his belief that there will be a desire by clients for fewer cooks on the proverbial ad tech kitchen.
“I think most of the major players will look to work with fewer vendors, as opposed to more,” he said.
CTV hasn’t figured out efficiency – yet
When it comes to a shift towards converged advertising across mediums, Troiano said hybrid TV/CTV/digital strategies will vary based on who companies are targeting. However, he doesn’t think CTV has quite figured out how to capitalize on the effective reach mechanisms that TV has long been known for.
“TV is a very efficient medium to reach an audience,” he said, adding fundamentally it always has been, even at broad-brush, top of the funnel reach. “I don’t think there’s a good proxy for that in the CTV landscape right now. It’s very hard to reach 45-50 million people through an executed ad buy that is through a system that’s very automated and you know how it works.”
Companies, he noted, need to cobble together many different streaming services across a variety of audiences, add in different FAST channels – and then throw in distribution that is far from uniform when on-demand is at play.
Most Cadent clients plan for both, looking for broad-based reach and using CTV as an add-on strategy for incremental reach or possibly bottom funnel attribution.
He expects this hybrid advertising approach to stick around for a long time, though anticipates some media companies to consolidate their own strategies between streaming and TV business models.
“Right now there’s a separation, even between the major networks. They talk about TV separately from CTV when at the end of the day, we just view it as audience,” he said.
To him the lens should be ‘where’s my audience’ and ‘what’s the average cost to reach that audience across platforms.’
The chief executive pegged TV convergence to accelerate over the next two or three years – helping drive businesses such as Cadent and efficiencies in the overall marketplace.
Looking ahead
Looking ahead, in Q4 Cadent’s focus will be about reestablishing its expansion into CTV, particularly around its April SSP acquisition. Troiano anticipates several more announcements around partnerships related to expansion into converged TV, both on the advertiser and publisher side.
Kickoff of the political cycle could also be a big boon, where the company’s focus on ensuring privacy compliance also comes into play.
“Political is a very targeted data-driven initiative. So I think being privacy first, given our strength in political on our graph and technology side, is a really big opportunity for us.”
Currently, Cadent is mostly focused on North America, but the CEO sees opportunities in international markets, which he pegged as a “larger push for us in 2024.”
Even amid a challenging macro environment in its domestic market, Cadent anticipates being aggressive as it works to expand.
“It’s an exciting time for us at Cadent. Having a partner with Novacap really gives us a strong balance sheet capability to make acquisitions, to be aggressive in the marketplace and to continue to execute,” Troiano said.