Too Taboo to Talk Tatto?
As is often the case around the time of a trade show, sometimes the biggest news happens outside of the event and not on its stages. That seems apt in this case, where before ad:tech San Francisco opened, it became known that one of the conference’s larger sponsors had yet again made headlines. Nothing new for this well-trodden firm, except that making news in the past euphemistically referred to landing in hot water. This time around they landed in an apparent sea of green, arousing a chorus of “wtf” from just about everyone else in the performance marketing space. This was not just any sea of green but news that the company had been acquired for an astounding $60mm – USD not monopoly money or perhaps XPF or some other currency with a 1/1000 exchange rate.
Wtf is a pretty strong reaction to a company in the performance marketing space getting acquired. In many ways, it should be considered incredible news as performance marketing companies have not enjoyed a natural path towards exits. It should be a validation of the performance marketing space and a source of optimism for other executives. That, though, is exactly the problem. They wanted to see a transaction that offers guidance on their businesses going forward. They wanted to see a transaction that would lift all parties’ boats, and they didn’t see that here. What they saw was a company known as much for their behavior outside of the office as inside, an aggressive marketer getting rewarded for behavior that many others felt extended beyond not only their own comfort level but projected a less than positive view for those monitoring the industry.
Like many, understanding what Tatto does is difficult to ascertain on the surface. Here is how the company has described itself in the past, this coming from an interview with its incredibly sharp CEO, Lin Mao. “Tatto Media strictly focuses on direct response clients. This enables us to be specialized in two specific areas: targeting (behavioral) and creative design (self serve creative optimization). Because of our global scale, it forces us to build sustainable technology that can automate much of this on a large scale. The sustainable technology that replicates our success on billions of monthly impressions is what differentiates us from the rest of the industry.”
This is how the company describes itself on the official press release. “Over the past six years, the company has applied its expertise in performance advertising to mobile. Tatto Media’s development of next generation advertising platforms is revolutionizing the mobile advertising industry. Since its conception, Tatto Media has been focused on generating real value – simultaneously producing results for advertisers and publishers alike. This balance of advertiser and publisher success is core to the Company’s proprietary ad serving technologies. Tatto Media’s results-oriented ad serving technology is built for results-oriented advertisers and publishers.” Their site is classic performance-marketing vague, and interestingly doesn’t mention mobile.
The release announcing the acquisition provides some, but not too much, color on why Ozura purchased them, saying, “We intend to lead the next generation of mobile innovation. The acquisition of Tatto Media, which is one of the largest North American mobile marketing networks, will significantly strengthen our ability to connect advertisers to consumers worldwide," said Larry Tey, Ozura World Ltd. Chairman. "This acquisition represents a tremendous opportunity for us to support vertical mobile content providers and present advertisers with an effective platform for reaching their well-qualified, targeted audiences."
Tatto made a name for itself during the boom days of mobile subscription marketing. They didn’t invent the model for using the web to sign-up users to subscription services billed to their cell phone, but they sure became one of the most proficient. Arguably they became too proficient, landing in hot water with Facebook over their IQ Quiz “App.” They were not alone in running the high monetizing offer which tempted users to see how they compared to their friends, except that unlike more value-adding apps, this promotion didn’t actually compare to their friends or provide a way to get a score without first being cajoled into joining an unrelated mobile subscription service. Like many, they used their mobile expertise to monetize registration paths and just about any other place where there existed lower intent, high volume traffic, including offers walls. The problem is that the mobile subscription revenues through these channels have come under intense pressure from carriers and changes in regulations have impacted the revenues of those running the offers. All of which leads us to believe the deal didn’t rely on the sustainability of that model.
The hard part about looking to press releases for answers is that more often than not, they are intentionally lacking in details and written by marketing communication departments or a third-party communications firm. In other words, they are written by those without any real knowledge of the business and generally only a passing understanding of the industry at large. So, it’s up to us to try and connect the dots and come up with something believable and not too far fetched. The first piece of that starts with Tatto being acquired. We recall hearing that Tatto had looked for acquirers in the past. That they were acquired does align with their previously expressed interests.
If we had to guess, Ozura’s deal with Tatto focuses on Asia, monetization, and legacy subscription revenue. Ozura is a Hong Kong based company, and by the sounds of their business has had incredible success penetrating the Asia Pacific market. They don’t come across as a white hat, happy go lucky make money later firm like Instagram. They come across as a business with an angle to make money. Tatto then is a perfect cultural fit as one who can leverage Ozura’s monetization opportunities and help them make money off their existing users as well as help them scale the acquisition of new users. Tatto also has cash. Not cash today per se, but they have trailing subscriber revenue that will continue to come in even if they stop marketing. Like AOL’s dial-up business, it’s declining, but it can be modeled and predicted. It would allow another company to raise debt if they so choose in order to acquire them. Who knows, it might also have something to do with their existing short codes and Ozura’s desires to leverage them.
Really, the only bad news is in the perception of others. It’s like being told crime doesn’t pay only to see that you’ve followed the rules while one who didn’t lived a more charmed life. In fairness to Tatto, that’s a gross overstatement and totally unfair. But, there is potential truth as that is how some others think of the company – not as criminals but certainly not statesman. The company wins in the deal, but there is a chance that the industry does not if that is the perception of the company. The industry would lose if such a deal could spur others to take risks they might have avoided taking before, ones that might make them money but not add value to the users. We need to see users win for us to win.
