Back in 2019, SI Partners’, Jack Mehigan signed off a blog post on influencer marketing noting that “we could be looking at a very different landscape in the near future” following infrequent M&A activity. How right he was.
Since 2018 the value of the Influencer Marketing sphere has almost quadrupled in size from $4.6bn to $16.4bn in 2022. Fuelled by the coronavirus pandemic, which proved the importance of a digital presence, people started spending increasing time online, on their phones and away from the advertising outlets of old.
To quote Vickie Segar, Founder of Village Marketing, for years the “creator economy and influencer marketing have been wildly misunderstood and undervalued”. Things have changed. The recent introduction of advertising standards in this space across many of the world’s developed countries, fewer fake accounts and the increased ability to prove ROI, have provided brands the necessary comfort to invest their marketing budgets into a space that was once viewed with scepticism.
Gartner’s latest CMO Survey cites an allocation of 7.6% of online channel spend to organic social and influencer. Unsurprisingly, consumer goods and retail brands are allocating even more. But it’s not just influencer marketing where CMO’s are spending their money, there is also further allocation on social advertising (10.1%) and content & messaging (7.8%). And where the marketing budget goes, the demand follows from buyers as they look to acquire the required capabilities to get their own piece of the pie.
In Q2 of this year alone, SI Partners helped three separate Social / Influencer agencies find their home: Fanbytes to Brainlabs, L&A Social to Tag and Kobe to We are Social. This is just the tip of the iceberg – 2022 has been a record year for M&A in this space. WPP acquired Village Marketing, Flexion acquired Audiencly, 1000heads was sold to Labelium for a deal said to be in excess of $100m. And while Goat Agency’s claimed “£400m potential valuation” may be a product of their own PR, there are clearly premiums to be found.
However, history has taught us that the M&A market moves on quickly and once these skills are proliferated and embedded in the sector, those premiums will start to fade. As agency groups and PE-backed independents acquire the social and influencer capabilities they need, so competitive tension in M&A processes will lessen and the multiples will soften.
Recent conversations with buyers suggest that isn’t happening yet, but economic uncertainty is already leading to a higher level of buyer scrutiny. Investment cases are now tighter than we saw during the boom of post-Covid M&A activity.
Sellers will need to show, more than ever, that beyond a strong management team and client roster, that they have ‘best-in-class’ skills and technology, strong revenue growth and profit margins (the ultimate proof of quality) and a well-oiled financial operation that provides robust, timely management information each month.
The influencer party isn’t over, but it’s about to get a little more sober.