SingTel furthers foray into digital ad space with new acquisitions

SINGAPORE — A unit of SingTel has acquired two advertising technology firms for US$359 million (S$449 million) as part of efforts to achieve profitability and expand its footprint in a highly lucrative business, particularly as smartphone adoption swells in emerging markets.

SingTel subsidiary Amobee said yesterday it will buy the United States and Australian assets of digital ad firm Adconion for US$209 million and data analytics and marketing tech firm Kontera for US$150 million. They are valued at US$235 million and US$150 million respectively.

“In the advertising space, we believe there’s going to be a huge platform shift coming up in mobile Internet. Mobile has a distinctive attribute — the ability to be highly personalised and a targeted device,” said Mr Allen Lew, chief executive officer of SingTel’s Group Digital Life and chairman of Amobee.

By the end of this year, 1.76 billion people are expected to own and use smartphones monthly, up more than 25 per cent from last year, showed new figures released yesterday by eMarketer. Consumers in the Asia-Pacific region will account for more than half of all smartphone users this year at 951 million, eMarketer estimated.

In emerging markets, where fixed line penetration is low and mobile penetration is high, opportunities are aplenty, noted Mr Lew. Already, the bulk of SingTel’s profits are starting to come from the emerging markets, he added.

“In a market that is growing at that type of rate … we want to make sure that as one of the players that have gone in with an initial proposition, we accelerate its trajectory. With these two acquisitions, we are very confident that we can accelerate and grab the market share that we need to,” said Mr Lew, pointing out that Amobee has already grown from an about US$30 million company to US$100 million.

The deals will also allow SingTel to use data analysis to provide greater value to advertisers, especially when digital advertising is worth US$75 billion today, said Amobee CEO Mark Strecker.

That said, SingTel is conscious of the need to respect customer privacy, especially in light of the Personal Data Protection Act, which will kick in fully next month.

“When we talk about customer data, we have to be careful about privacy. We will give our customers different choices (on how their data is managed) … and how to anonymise it,” said Mr Lew.

The deals come as SingTel seeks to expand its foray into the digital space. In 2012, the telco bought Amobee for S$321 million, which in turn acquired Gradient X, a developer of a real-time bidding platform for mobile ads, the following year. And last year, SingTel announced it had set aside up to S$2 billion to spend on acquiring digital assets from financial years 2014 to 2016.

Both Adconion and Kontera will be integrated under Amobee, which has a 10 per cent share of the mobile display ad market, Mr Strecker said.

Amobee has yet to turn a profit, but it could take three to five years for new businesses to achieve profitability, Mr Lew said.

IDC associate director of mobility Shiv Putcha said the acquisitions were a good move for SingTel, as there is a need for its advertising efforts to increase in scale. He also predicted that the mobile advertising space would see more convergence.

“It would seem they have also added some technology assets here as well as grown their existing client base. To that extent, this is a good deal.

“In terms of the overall market, I believe the mobile advertising space is ripe for consolidation and therefore will go through a period of relative slowdown over the next year or so. Consolidation has already begun and this is good for the overall market, but it will take time for all these offerings to get streamlined,” he added.