BDO Mediatalk 2020

19 MEDIA talk | FLEXIBLE, VERSATILE, RESILIENT

CONTENT RULES AS KING Apart from a few outliers, media remains a locally based business model. In Latin America, M&A in media often happens because of synergies and savings generated by consolidating backend functions. However, without locally relevant, high- quality content, consolidation efforts will struggle. Google and Facebook remain dominant forces in advertising spend. However, their struggles with manipulation, conspiracy theories and fake news may end up with the pendulum swinging back toward traditional media outlets. Thanks to their fact-checking pedigree, their gravitas as purveyors of trusted information remains stronger. Time will tell whether consumers, because of such issues, will prefer subscriptions and traditional media over the likes of YouTube and Facebook – and if advertising will follow suit. This will, for many media companies, be what decides their future fate.

M&A ACTIVITY DROPS SHARPLY As is the case elsewhere, deal activity in the region plummeted due to COVID-19. Mergermarket reports a total of 199 mergers and acquisitions worth $8.1 billion during the first six months of the year, down from 316 deals worth $35 billion the year before. The 77% decline in deal value is the worst on record. Domestic activity within the region (120 deals worth USD 3.5bn in 1H20) dropped 75% by deal value in the first half of 2020 compared to the same period last year (178 deals worth USD 13.9bn in 1H19). The TMT sectors have seen comparable developments. Japan-based Softbank has driven much TMT activity, making 13 acquisitions worth a combined USD 2.7bn in the region since 2017. The drop in activity will likely be temporary, as more high-quality distressed targets are available due to COVID-19, as well as increased focus on digital transformation. This also applies to the media space, and the likes of big data analytics, and digital advertising solutions will be high on companies’ wish lists.

ADVERTISING KEEPS GOING DIGITAL An eMarketer report describes how digital advertising spend in Latin America has doubled to $9.33 billion in just five years. In 2020, digital will account for nearly 40% of the ad market. 57% of total digital ad spending will be used on display ads, focused on video and social media. Consumers are often viewing media content via mobile devices, and mobile digital ad spending growth will account for nearly three-quarters (73.7%). Much advertising spend resides with big international companies like Facebook and Google. Ad, marketing, and media companies competing with the tech behemoths for advertising revenue and eyeballs are, in some instances, turning to M&A. Digital solutions like programmatic ad buying (for example, MightyHive’s acquisition of ProgMedia) and digital agencies (S4 Capital’s acquisition of Circus Marketing) have seen their share of activity, as companies in the region, as well as globally, look to build out service portfolios and digital capabilities. The trend will likely continue in the coming years, as Latin American media companies look to expand into more use of big data and perhaps also AI-powered solutions to engage with users and advertisers.

Made with FlippingBook HTML5