NetworkNewsWire Editorial Coverage: The evolution of media and advertising dates back to ancient societies carving on rock. Ironically, carving on a rock is probably about as effective today as an email blast, which was all the rage only a few years ago. Hard to fathom where digital media and advertising will be in another 5,000 years, but safe to say that future innovations will continue to build upon technologies evolving today. The industry moves so fast based upon consumer trends that steadily cross inflection points and determine the history of modern digital media. It is clear that the new era of digital media will redefine how brands connect with consumers, as innovation pushes the boundaries in digital media strategies to make advertising personal and native like nothing seen before. Email marketing is dead and taking static banner ads with it, replaced by more intelligent and fluid technologies supported by artificial intelligence. This next generation of digital media is being spearheaded by companies such as DGTL Holdings Inc. (TSX.V: DGTL) (OTCQB: DGTHF) (Profile) with its strategy to build a digital media conglomerate in the categories of social, mobile, gaming and streaming. DGTL has begun with a comprehensive software solution platform in the social category complete with innovative content, measurement and distribution solutions, alongside engagement and communication tools and the technology designed specifically for identifying the most-efficient strategies. Companies know that consumers are ultra-savvy and intolerant of meaningless ads, which is driving business to DGTL. Other savvy companies, including Constellation Software (TSX: CSU) (OTC: CNSWF), Magnite Inc. (NASDAQ: MGNI), ESE Entertainment Inc. (TSX.V: ESE) and LOGIQ Inc. (OTCQX: LGIQ), are seeing opportunities for growth and evolution in their respective industries, often acquiring or partnering with others to stay on the leading edge of innovation.
- DGTL is working to complete acquisition of Engagement Labs, which is modeled to add C$3.5–$4 million to DGTL revenue.
- DGTL Holdings and Spaceback have partnered for the world’s first certified social influencer advertising platform, converting content to web ads for any screen format.
- DGTL acquired CaaS provider Hashoff in 2020 at 2x revenue, saw sales expand 71%.
- DGTL Holdings has completed the latest version of Hashoff 2.0, positioning the company to target video ads on apps such as TikTok, YouTube and Snapchat.
An Acquisition at 0.5x Sales
DGTL Holdings Inc. (TSX.V: DGTL) (OTCQB: DGTHF) had already established itself as a premier digital media software portfolio company focused on Content-as-a-Service (“CaaS”) and is now in the process of completing the acquisition of Engagement Labs (“EL”), which will give DGTL ownership of Total Social, Engagement Labs’ fully commercialized social media analytics software. Total Social is essentially the only AI-driven platform that provides a total online and offline diagnostic of an enterprise level social media ecosystem.
DGTL has a history of savvy acquisitions, and EL certainly qualifies in that category, expected to add C$3.5-$4.0 million in annual revenue to DGTL at a purchase price of C$1.7 million, or 0.5x sales. This is particularly impressive considering DGTL has a market cap currently around C$11 million. DGTL founder John Belfontaine recently called Total Social “a perfect complementary asset to our existing social media CMS software, Hashoff” as TotalSocials analytics platform validates how effective Hashoffs campaigns are, and Hashoff provides a stable of global brand customers for Total Social.
The strategic acquisition also marries perfectly with DGTL’s new partnership with Spaceback and the launch of Hashoff 2.0, which puts DGTL on the leading edge of video-based social media markets. The next-generation video technology is a significant development for DGTL insomuch that it presents the opportunity for clients to seamless identify and succinctly target users of popular video applications globally, including the wildly popular TikTok and SnapChat, which could be the gateway to billions of consumers. The benefits are bidirectional, meaning that adding video platforms further expands the population of social media influencers, which the company can add to its marketing arsenal by more than one billion monthly active users.
These solutions position DGTL at the forefront of the emerging mobile/social media environment. When integrated, the company should have one of the most comprehensive packages for both the marketing technology (martech) and digital media industries. The corporate acquisition strategy aligns with broader market trends as indicated in a Goldman Sachs note, which reported that so far this year 29 SPACs have raised $73 billion in proceeds, up a stunning 462% from the same period in 2020 and outpacing traditional IPOs by $6 billion.
Brand Names Equal Growing Revenue
As is often commonplace in the ad market, DGTL, Hashoff and Engagement Labs can’t disclose every client’s name for competitive reasons. Still, investors can put together the puzzle to figure out who some are. For example, DGTL didn’t spell out the name of one of its newest clients in a press release in April, but it didn’t take a gumshoe to understand it was alcohol-purveying juggernaut Suntory Beam. Other times, however, as when DGTL announced a major Asian airline as new client, the picture is opaque, although it is likely safe to say that it is a big company considering the named $200,000 contract.
Specific names are great, but only if they translate to sales, and DGTL’s portfolio clearly does. During fiscal Q3 ended February 28, 2021, DGTL reported C$1.25 in revenue, a jump of 68% from Q3 fiscal 2020. That followed a 70% year-over-year rise in revenue during the second quarter to C$1.25 million. During the first nine months of the fiscal year, DGTL booked C$3.67 million in sales, which is fodder for analysis of the market cap and the incoming sales with the Engagement Labs acquisition.
A Word on Hashoff
As mentioned, DGTL’s business acumen shows through in deal structure. For instance, the Hashoff acquisition in January 2020 for just two times revenue included stipulations that Hashoff sales must rise from C$3 million to C$10 million in order to receive 100% of the stock and cash promised as part of the C$6 negotiated valuation, or else the purchase price is subject to clawbacks. Management has a knack for incentivizing the target company, while building and protecting value for DGTL shareholders.
Hashoff allows brands worldwide to identify, optimize, engage, manage and track top-ranked digital content publishers for localized brand marketing campaigns. The company works with brands of all sizes, offering its package a la carte to represent campaign size, inclusive of more than 150 million freelance influencers that hold the key to consumer’s attention no matter what or where any product or service is being offered.
Want to sell lime beer in San Francisco or flip flops in Miami? Hashoff has the database of influencers to find the most likely customers. That explains why the likes of DraftKings, Door Dash, Veritone, Anheuser Busch-InBev, PepsiCo., Nestle, Post Holdings, Danone and Keurig-Dr. Pepper, Ulta Beauty, Pizza Hut, Live Nation, the CW, Scribd, and Novartis, to name a few, have run campaigns with Hashoff.
The First to Market — and a Big Market It Is
DGTL is a trendsetter as the inventor of a new social media marketing category. Called “social influencer advertising” and “content-to-commerce,” DGTL’s CMS is the first of its kind that quickly and efficiently converts social media content into web advertisements. This technology can turn the DSP banner ad market on its side and command ad dollars in multiple verticals, such as digital out of home (“DOOH”), signage and broadcast television.
The scale of this market opportunity is difficult to completely comprehend. Global Industry Analysts estimate the global digital advertising and marketing size at $350 billion in 2020 and more than doubling to $786.2 billion by 2026. Drivers include an accelerated shift to digital advertising brought on by the coronavirus pandemic that forced companies to either explore the digital space for the first time or dedicate more resources to the space to try and reach stay-at-home consumers.
In every facet of technology, investors are looking to get in front of the next hot trend. Social display ads look to represent this type of opportunity. According to Spaceback, which specializes in bridging the gap between social and paid media, these new ads are “authentic recreations of social media posts configured to deliver in traditional banner placements, supporting programmatic campaign goals (awareness, prospecting, direct response).” Pioneering the market, Spaceback is working on the first certified content creators for social display ads.
New Ways of Getting in Front of Consumers
DGTL is the new kid on the block focused on disrupting the space, but DGTL is by no means alone. Companies big and small are looking for the latest technologies to establish a presence in a wide range of markets. That is best accomplished by progressive companies making the most of the latest tech. As it goes, the market is ripe for consolidation as savvy companies acquire or partner up to maintain a competitive edge.
Constellation Software (TSX: CSU) (OTC: CNSWF) is an international provider of market-leading software and services to a number of industries, both in the public and private sectors. In the past six months, the company announced the completed sale of FICO’s Collection and Recovery business to Constellation’s Jonas Software operating group, a leading provider of enterprise management software solutions, as well as the acquisition of SSP Limited by Volaris Group, a CSU subsidiary; SSP Limited is a leading global supplier of technology systems and software for the property and casualty insurance industry.
Magnite Inc. (NASDAQ: MGNI), the largest independent sell-side advertising platform, last month launched the first-of-its-kind performance marketplace through a partnership with Quigley-Simpson. Magnite’s robust platform is optimized for long-form video and supports high-quality advertising and viewing experiences. With more than one-third of U.S. households no longer reachable through traditional TV in the next few years, Magnite’s CTV looks to play a fundamental role in advertisers’ media plans.
ESE Entertainment Inc. (TSX.V: ESE) is a Europe-based entertainment and technology company focused on gaming and esports. The company just completed the acquisition of 100% of the shares of Auto Simulation Limited T/A Digital Motorsports, an Ireland-based provider of advanced simulation racing infrastructure, technology and support. “Closing this deal catapults our digital motorsports business to a new level, providing us with an industry leading ecommerce platform, new technologies, global tier 1 partnerships and additional esports infrastructure,” said ESE CEO Konrad Wasiela. “The synergies are clear, and our vision to become the #1 global brand for esports in the Motorsports industry remains”.
LOGIQ Inc. (OTCQX: LGIQ), a global provider of award-winning e-commerce and fintech solutions, has partnered with GumGum, a global media and contextual intelligence company, to provide e-commerce marketers a powerful targeting solution for their digital advertising campaigns. GumGum will offer its contextual intelligence solution, Verity(TM) through the Logiq Digital Marketing(TM) platform. This combination creates a powerful solution that scans the entirety of a digital media environment, providing a precise understanding of the overall context through text, imagery, audio and video.
Technology is a key factor in evolution, whether in advertising or any other industry. As long as technology grows and advances, so will the services and products offered by companies committed to being leaders in their fields.
For more information about DGTL Holdings Inc. (TSX.V: DGTL) (OTCQB: DGTHF), please visit DGTL Holdings Inc.
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