Earlier this year, McDonalds paid $300 million dollars for Dynamic Yield, a somewhat surprising fit for a fast-food giant and a tech company known for dynamic pricing and personalization. Just this week, MasterCard acquired SessionM, a Customer Data Platform (CDP)/loyalty program vendor (value disclosed, but based on $100 million in investment rounds and some industry chatter, I would assume it to be around the same). Apoorv Durga from Real Story Group has some analysis on what this might mean for them continuing in the CDP space. Wunderman Thompson (a WPP company) also announced a partnership with CDP vendor Tealium. Another data-centric play was Roku acquiring the DSP vendor dataxu. Although not a CDP vendor, this type of vertical acquisition is typical of the type of vertical integration which will start to dominate the data-driven space.

In a sense, vendors and investors in overly-subscribed spaces such as CDP must be breathing a sigh of relief at this trend. In that space, there are 78 independent vendors with 6,745 employees, and $1.7 billion in funding chasing $740 million in revenue (source David Raab, 2019 CDP Industry Update) and there are only a handful of suitors willing to pay that sort of money (and many already have their own investment efforts including Salesforce, Adobe and even Microsoft), so in many ways some of the traditional exit strategies were fast closing (the IPO market having been badly dinged by the aborted or failed offerings of WeWork, Uber and Peloton among others…)

I foresee a continuation of the trend of established blue-chip companies acquiring tech vendors to jump-start internal digital transformation efforts. Some may be extremely successful, and others, like the GM acquisition and subsequent sale of EDS will be a mixed bag or worse (that transaction was wildly profitable for GM, but did literally nothing to change the internal culture or data-led practices at the parent company). Credit cards are closely tied to loyalty programs and other incentives, so SessionM makes total strategic sense – I’m a little less sure that McDonald’s can get the value out of personalizing a menu or prices, but with over 37,000 locations you only need to bump profit a fraction of a percent to make it pay off. Similarly, these companies are facing a crisis of too much capital, with too few places to deploy it at any decent return (which is why we see stock buybacks being more and more common) – so this also makes sense from a macro-economic perspective (at least until there is a downturn).

But in a way, I do hope this makes “traditional” vendors more digital, as it can be argued that good command of software and data is literally the only semi-rational reason why Tesla may have nearly twice the valuation of Volkswagen (despite the healthy balance sheet, dealership network and budding electric business of the latter). To be clear, I don’t necessarily agree with that line of thinking and valuation, but Forbes tries to make the case: “Why Tesla is Not a Car Company and What You Can Learn From Elon Musk” and I expect many firms will hope for a similar bump in mindshare or valuation by dangling the prospect of “digital” enabling some outsized growth.

I would expect any manufacturer or B2C vendor to be able to get value from picking up a struggling CDP at a good price – the possibilities are nearly endless; travel, automotive, manufacturing, retail, fast-food, etc. can all benefit from a better understanding of customers in sales but particularly in an ongoing use capacity.


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