Category: Insights

A view on North America by Wilma Jordan

The interest rate cuts in the latter half of this year, along with the possibility of more cuts in 2025, should help fuel deal making and work wonders in reducing the buyer/seller valuation gap that created a two-year bottleneck for deals getting done. Thus, we anticipate this discrepancy between what sellers want and buyers are offering will dramatically narrow in 2025.  Companies emerging from 2024 and poised to show strong revenue growth and expanding margins for 2025 will be rewarded with improving EV multiples and an eager pool of financial and strategic buyers, if and when they go to market.

In the past 18 months, we have seen a vastly reduced number of PE exits due to this very subdued buyer’s market.  The mountain of dry powder among private equity firms in the US has reached record levels. Many PE portfolio companies are well past their natural holding periods; these companies either need to be aligned with adjacent players to create synergies, or divested to other companies that can fuel their growth. The combination of dry powder, increased holding periods, and lower interest rates should result in increased PE activity in North America, while well-stocked corporate coffers will also help fuel very healthy buyer competition for prized assets.

Meanwhile, we are well into the first wave of AI anticipation, investment, and realization. Companies and investors alike have come to appreciate that well-designed and purposeful AI tools can be highly effective in complementing and evolving existing business models, rather than posing a near term threat of disintermediation. Business owners are increasingly aware that the only moats they can build around their businesses will result from going deep into a vertical and owning that market.

All these factors will make for a healthier M&A environment in 2025, boosting confidence and sparking a high level of enthusiasm among both buyers and sellers for getting deals done.

A view on the UK by Richard Vaughan

The Bank of England’s interest rate cuts in the latter half of 2024 – and the potential for further reductions in 2025 – are expected to be a key driver in reviving deal activity. Lower borrowing costs should help narrow the valuation gap that has hampered deal-making over the past two years, encouraging both buyers and sellers to align on price expectations.

Private equity activity in the UK is also showing signs of pick up as we head into 2025. The prolonged period of muted exits and subdued deal flow has created a backlog of PE portfolio companies that are overdue for divestment. With dry powder in the UK and European markets at record levels, alongside improved market conditions, PE funds are well-positioned to capitalize on opportunities in 2025. Simultaneously, corporates with robust balance sheets are expected to fuel healthy competition for high-quality assets, intensifying the demand for attractive opportunities.

We also expect cross border transactions to remain an important driver of activity in 2025 – in 2024 cross border M&A activity involving UK targets increased ~15% vs recent years. Some of that is a function of currency movements but equally a function of economic growth and confidence in key global markets, predominantly the US.

The above is certainly reflected in our own pipeline of business where we have seen a marked pick up in new pitch activity in late Q3/Q4. Many businesses we talk to have been head down for much of 2024 ensuring a return to normalized revenue growth and margin expansion and with that hard work done are now feeling more confident to start strategic conversations.

As we look ahead, we are optimistic on the UK M&A market in 2025 certainly vs 2024 and 2023. Both buyers and sellers are entering the new year with a renewed sense of enthusiasm backed by more confidence in the deal-doing environment.

A view on UK Private Equity by Marcus Anselm

Private equity exits have slowed since 2021, while unrealized assets under management (AUM) have risen to £307bn by 2024. This has heightened pressure from limited partners (LPs) on general partners (GPs) to accelerate distributions, as echoed by an EY survey revealing over 80% of GPs face at least moderate pressure from LPs to boost distributions.

Secondary markets have provided some relief, attracting record investment to create liquidity solutions. Meanwhile, the market remains flush with £139bn in dry powder, ensuring ample capital for deal making in 2025.

The fundraising landscape has been mixed. Mid-market fundraising dipped to £7.9bn in 2023 but rebounded to £10.3bn by September 2024. To sustain investor confidence and attract new capital, private equity firms must deliver strong returns—a factor likely to drive exits and deal activity in 2025.

During the year ahead, we’re expecting to see businesses with diverse leadership teams or a measurable sustainability or social impact story increasingly becoming attractive to private equity investors. A McKinsey report predicts that by 2030, nearly half of UK private equity investments could be classified as sustainable, underscoring the importance of these trends.

Artificial intelligence is reshaping private equity too. Bain research shows 20% of portfolio companies already generate measurable value from AI, with a further 32% of portfolio companies in the development stages. By 2025, deals leveraging AI strategies could deliver extraordinary returns, with 57% of investors anticipating significant value creation within five years. AI is also transforming due diligence, as 70% of investors report walking away from at least one transaction due to AI-related concerns. Currently, AI is considered in 30% of due diligence processes, a figure expected to double by 2027. However, a gap remains between investor expectations and companies’ AI readiness. Our role as advisors is helping to bridge this divide through early preparation with owners and deeply understanding the priorities of the investors.

With favourable market conditions, a surge in bolt-on acquisitions, and mounting pressure to deploy capital and for liquidity, 2025 could well mark a turning point for private equity. For owners, aligning with market trends and leveraging experienced advisors will be key to standing out in an increasingly competitive landscape. Meanwhile, the integration of AI and sustainability themes offers significant opportunities for forward-thinking investors and portfolio companies.

A VIEW ON VENTURE CAPITAL BY SAN DATTA

From an investor perspective, the market has remained equally difficult. From a fundraising perspective, global ventures funds raised $83bn by Q3 2024, down 13% on the same period in 2023, while from an exit perspective, over 20% of funds said exits were their number one challenge. Unsurprising given a difficult exit environment resulting in exit volumes being down close to 60% against the same period in 2021, and 20% lower against 2022. From an internal perspective, many investors also continued to face difficult repricing discussions and hard conversations with management teams and other shareholders.

Looking into 2025, we feel much more positive about the outlook on both a macro and micro basis. It feels like we will see an increasing bifurcation between the real winners who have shown they can either deliver or return to proper growth, and those which while they have battled through, are left in a more stable but fundamentally low growth state. For the former, they really will have a strong set of options ahead of them.

Large cap enterprise software players’ balance sheets, particularly in North America, remain very well capitalized, and they are keen to buy growth and capability, while many of the sponsor backed software platforms have now got their houses back in order and have returned to the acquisition trail. For the latter, as internal capital structures get resolved and valuation expectations align around buyers and sellers, there will also be increasing exit options for these players.

If you have any queries or would like to have an in depth discussion on this article or the broader market please Contact us.

M&A activity in digital marketing services is accelerating, as we anticipated in July, read full article here. Over the past two quarters, deal volume exceeded the quarterly average of 300 transactions over the last 7 years.

Notable deals, such as ECI’s acquisition of Croud, advised by JEGI CLARITY, highlight this trend. Looking ahead, we expect 2024 M&A levels to align with 2023, following the record-breaking momentum of 2021 and 2022.

M&A Activity in Digital Marketing Services since 2010:

*Source: Pitchbook Financial Database

While global M&A saw a decline in 2023-2024, valuations for high-quality digital assets remained resilient. The median EBITDA multiple since 2023 has remained around 13x, aligning with the long-term median of 13.4x, reflecting strong investor confidence in well-positioned, scaled assets.

EV/LTM EBITDA for Select Transactions since 2010:

PRIVATE EQUITY (PE) HAS AN ACTIVE ROLE IN DRIVING SECTOR CONSOLIDATION

PE represented 32% of YTD M&A activity in digital marketing services, with notable transactions like ECI’s investment in Croud, as mentioned earlier, Bridgepoint’s investment in SAMY and Alaris Equity Partners’ investment in Shipyard – all advised by JEGI CLARITY, demonstrating PE’s active role in driving consolidation. Key attractions for investors include the market’s impressive growth prospects – with the market projected to increase from £4.3bn in 2023 to £14bn by 2032 (CAGR of 14%), and the buy-and-build opportunity presented by the fragmented landscape.

DIGITAL MARKETING GROWTH FUELED BY NEW CHANNELS AND INCREASING DATA COMPLEXITY

The growth expected for digital marketing services will be driven by CMOs’ increasing emphasis on data-driven strategies and the shift toward digital engagement across a rapidly evolving landscape. Emerging channels such as CTV, Retail Media, and Social Commerce introduce added complexity, making agency expertise invaluable as brands navigate targeting and personalization. Privacy regulations are further constraining data visibility, increasing brands’ dependence on agencies to leverage advanced targeting solutions effectively. Growth in paid media and programmatic is expected to remain strong, with hyper-growth expected in these new channels.

INVESTORS ARE GROWING COMFORTABLE WITH GENERATIVE AI (GenAI)

Investors are increasingly comfortable with GenAI’s impact on the agency model, seeing parallels with the evolution of digital and programmatic advertising, which added complexity to media buying and increased reliance on agency expertise. As with the rise of programmatic, AI enhances agencies’ roles in defining data-driven audience groups and personalizing campaigns. By leveraging AI to optimize media spend across channels, agencies are positioned as crucial partners in navigating a more intricate advertising landscape, using advanced tools to deliver highly tailored, effective omnichannel strategies.

SCALE AND EXPOSURE TO TIER 1 MARKETS ARE KEY VALUE DRIVERS IN DIGITAL MARKETING SERVICES M&A

Valuations in digital marketing services are influenced by several key factors:

• Differentiated Proposition: Agencies with scalable, Tech and AI-driven, or specialized services command higher valuations.
• Scale: Our data suggests that size matters when it comes to valuation, with larger assets, EBITDA over £12.5m, trading at a median multiple of 16.5x, while smaller assets, EBITDA between £4m and £7.5m, trade at a median of 10.8x.
• U.S. Revenue Exposure: Higher U.S. revenue draws N. American PE interest (directionally >25% of revenues), creating competitive tension, in turn driving valuations.
• Strong Financial KPIs: attractive revenue growth, healthy margins, and strong client retention are critical for driving valuation multiples.
• Evidence of integration in Buy-and-Build: For companies following a buy-and-build strategy, effective and successful integration of acquisitions is a key value driver.

EBITDA range vs EBITDA multiple for Select Transactions:

CONCLUSION

M&A GROWTH EXPECTED TO BE DRIVEN BY ECONOMIC RECOVERY, PE EXIT AND DEMAND FOR SPECIALIST SKILLS

Looking ahead, we expect M&A activity in digital marketing to increase as economic conditions improve. Private Equity funds will likely continue deploying capital and exits will accelerate considering current hold periods. On the trade side, large agencies, driven by client demand, are likely to continue acquiring digital capabilities that are difficult to build internally.

Over the next 18 months, several PE-backed digital marketing groups across Europe and the US, held for over four years, are likely to come to market, including the likes of Labelium, Jakala, IDHL, Adswerve, Plus Company, and Tinuiti. Additionally, we foresee some consolidation among large PE-backed platforms across Europe, as agencies look to broaden geographic reach and potentially achieve the scale required for public listings.

The U.S. digital marketing services industry faced challenges in 2023, but it has seen a return to optimism in 2024. Agencies are pursuing M&A, building integrated capabilities, and leveraging AI and data analytics to drive growth and benefit from underlying market tailwinds.

JEGI CLARITY and CIL have conducted a survey of leading independent businesses across the U.S. digital services market to understand their outlook for 2024-25 and what opportunities they see for the year ahead.

The survey focused on three areas:

• Market conditions: How demand for services has changed in H2 2023 and H1 2024, and likely areas for growth into 2025.
• Industry trends: Specific initiatives digital marketing agencies are taking to drive top-line and bottom-line growth and benefit from market tailwinds.
• M&A outlook: Which areas are going to be the focus for investment and the outlook for M&A.

If you would like an in depth discussion on this topic please contact us. If you have any issues receiving the report, please contact Kelsey Kovachik at kkovachik@jegiclarity-us.com.

Author: Scott Mozarsky (Managing Director, US)

At JEGI CLARITY, we have observed strong growth across the majority of subsegments of the legal sector, including litigation support; the market segment for our two latest deals, the sale of litigation support services provider First Legal to Aurora Capital Partners and the sale of Counsel Press to Align Capital Partners. The litigation subsegments of the Legal Tech and tech-enabled services market have an aggregate TAM of over $50B which includes eDiscovery, litigation support, legal research, legal practice management software and litigation workflow platforms.

The Legal Tech market’s growth is driven by technological disruption, increased access to capital and the emergence of alternative business models. These factors are creating a fertile environment for investors and expanding deal opportunities in the market.

Market Drivers

2023 marked a year of solid growth for Artificial Intelligence (AI), with Generative AI becoming more mainstream. While 2023 focused on theoretical advancements and proofs of concept, 2024 has seen the emergence of tangible AI applications and their integration into organizational operations. Although AI’s impact on the legal industry will be profound, it is still early. AI is maturing and evolving every day.

As AI adoption has increased, several companies and financial sponsors have focused on leveraging AI to differentiate tech-enabled service offerings, which in some instances is enhancing value and profit margins in what historically were commoditized markets.

AI has served as a catalyst for technological innovation in the sector. This innovation includes AI generated transcriptions for court reporting and depositions and workflow improvements relating to document automation. AI is also being used to highlight inconsistencies in testimony in real-time during hearings and depositions for attorneys to enable them to better serve their clients. Another area that is gaining momentum is law firms leveraging AI for predictive analytics relating to likelihood of winning cases and size of potential settlements and damages awards.

The alternative legal services provider market segment continues to exhibit solid consistent growth driven by increased adoption by law firms and in-house groups. Investments in legal operations, technology as well as Legal Process Outsourcing (LPO) and Business Process Outsourcing (BPO) providers have generated strong momentum over recent years.

The recent loosening of restrictions on nonlawyer ownership of law firms under Rule 5.4 in Arizona and Utah has also stimulated activity and served as a catalyst for financial sponsors to come into the market. Some financial sponsors are deploying capital into law firms through managed services organizations similar to the patterns we have seen in the medical, dental, and tax & accounting verticals.

M&A Overview

Despite a choppy M&A market in 2023, the legal market was highly active for tech-enabled services deals, particularly in litigation support. Notable deals included the sale of JEGI CLARITY-advised Counsel Press to Align Capital Partners with the shared vision of building a diversified litigation support platform, as well as Gridiron Capital acquiring Esquire Deposition Solutions, Veritext acquiring Litigation Services and GCP Capital Partners acquiring KCC. Other legal market tech-enabled services sub-segments were also quite active including legal process outsourcing led by Consilio’s acquisition of Lawyers On Demand, and business process outsourcing led by Renovus Capital continuing to create a market-leading global platform at Harbor Global.

Legal software market deal activity was less consistent in 2023. That said, several marquee businesses were acquired at strong valuations including, among others, Casetext, Fastcase, Aosphere, Elite, Litify and Cipher. While the broader software market has not come back to the same consistent levels of activity and high valuations that we saw in 2021, quality businesses in the legal market are trading for strong valuation multiples.

We anticipate this trend to continue into 2024 and beyond.

2024 has seen multiple subsectors experiencing heightened M&A activity including litigation support, claims administration, alternative dispute resolution, legal process outsourcing, eDiscovery, and IP management. A consistent theme in the deals that have closed and the other deals in market is a focus on leveraging technology and AI in particular to drive better results and efficiencies.

We are anticipating a significant rebound in M&A activity for the Marketing Services sector as we enter the back half of 2024. Supported by our recent Digital Services market studies in Europe and North America, where we interviewed executive leaders at global independent digital services companies, as well as recent signs of broad recovery in global M&A activity.

Transaction activity in Q2 2024 shows an 11% increase from Q1. In Q2 2024, 424 transactions were completed globally, up from 383 in Q1 2024. This rise is particularly significant as Q1 marked the eighth consecutive quarter of decline from a peak of 617 transactions in Q1 2022.

*Source: Pitchbook Financial Database

Within the Marketing Services sector specifically, our recent engagements and pitches indicate robust activity for Q4 2024, with the potential to return to recent peak volumes in the first half of 2025. This optimism is shared by many in the industry, reflecting a broader sentiment of recovery.

Factors driving this positive trend include the following:

• Decline in inflation and interest rates: Declining inflation and the anticipation of interest rate reductions are primary influences, which in turn are easing debt markets and facilitating transaction activity.
• Recovery of marketing budgets: Marketing budgets are bouncing back faster and being deployed more rapidly, improving visibility, and leading to the majority of agency CEOs interviewed anticipating stronger performance in the second half of 2024.
• Backlog of companies seeking an exit: Several Private Equity-backed Digital Services platforms are eyeing an exit after delays of up to 24 months, with many waiting for three to four quarters of robust growth as a trigger to launch a process.
• Olympics and U.S. Presidential Election:  Notable spending attached to the Summer Olympics and anticipated windfall of political budgets will create additional momentum.
• Operational efficiencies beginning to be felt with AI:  The adaptation of AI as an efficiency tool across disparate operational functions from Enterprise to SMB businesses are beginning to be realized.

As we navigate this dynamic landscape, the groundwork is being laid for sustained recovery in Global Marketing Services M&A activity, reflecting renewed business confidence and economic stability.  

If you would like to speak to us about this topic or the broader market, please contact us.

 

Director, Patricia Vicente, recently attended the Mergermarket Private Equity and M&A Forum in Madrid, Spain. An annual event that gathers stakeholders across the Iberian M&A and Private Equity market to hear industry leaders participate in interactive panel discussions, and network with others in the dealmaking community. Here are her key reflections from the event:

General Market Conditions

Although 2023 was a challenging year, the Spanish economy has shown some resilience, attracting substantial international interest including in the Tech space.  However, many transactions took longer to close and were harder to execute, due to increased due diligence requirements and the introduction of more complex earnouts to bridge valuation gaps.

Private equity activity was impacted by general market conditions.  Yet, there were some significant transactions that took place including JEGI CLARITY advising on the Bridgepoint investment in Samy Alliance, that accelerated the company’s growth as a social-first integrated digital marketing company.

As those at the event concluded, there has been a positive shift in sentiment recently, with the Technology, Media and Telecommunications (TMT) market buoyant in the first half of the year. Internet, Software and IT services ranked as the second most active sector based on the number of transactions in the first month of this year. 

There is optimism after the European Central Bank (ECB) reduced interest rates, from 4% to 3.75%, fostering a positive market outlook.  Combined with transactions such as Cinven’s sale of agritech company Planasa to Germany’s EW Group, with a reported valuation of around EUR 900m, there are clear signals of market momentum.

Source: Mergermarket

Healthy Pipelines

Key plenaries and stakeholders agreed that transaction pipelines appear robust, with the expectations that the valuation gap will narrow. Despite last year’s challenges, high quality assets that traded last year held their value well.

Future activity will require innovation

Attendees acknowledged that future activity would require innovation and flexibility from buyers, with bidders utilizing alternative finance tools and seeking ways to cover liability where the seller is not willing to assume it. Debt is also making a comeback, including more diverse funding sources and creative solutions. There was also optimism about a resurgence in initial public offering (IPOs).

If you would like to speak to us about the Iberian or EMEA markets, please contact Patricia Vicente directly.

 

While the digital services industry faced challenges in 2023, there are signs for recovery and growth in 2024, with a focus on building integrated capabilities, leveraging AI, and driving scale via M&A.

JEGI CLARITY and CIL have conducted a comprehensive survey of leading independent businesses in the European digital services market to understand their outlook for 2024 and what opportunities they see for the year ahead.

The survey focused on three areas:

• Market conditions: how demand for services has changed in 2023 and likely areas for growth in 2024.
• Industry trends: how margin dynamics have impacted group structures and which trends are having the greatest impact.
• M&A outlook: which areas are going to be the focus for investment and what
  is the outlook for M&A.

If you would like an in depth discussion on this topic please contact us. 

Recent breakthroughs, such as the advent of Generative AI tools herald a new era set to rival the impact that personal computers, the internet, and smartphones had on our lives.

This wave of innovation has the potential to propel industries forward at a pace, promising to revolutionize the way businesses operate. Tasks, once mundane, are being automated, insights are generated with greater precision, and decision-making is reaching new heights of sophistication. At the same time, AI is opening up fresh avenues of growth, sparking product and service innovations, redefining value propositions and driving operational efficiencies.

One fundamental theme, something that has been consistent across all of our research, remains the importance of the human touch. As the story unfolds, AI’s true power lies in its ability to complement and enhance human capabilities, accelerating progress and efficiency, and delivering higher quality end products and experiences. Firms are actively harnessing AI and related capabilities fueling a surge in M&A activity, as they strive to gain an edge in an increasingly digital economy.

Our report is designed to identify key themes arising from AI developments and their subsequent impact on businesses and M&A
across the following sectors:

We look forward to continuing the conversation as the story unfolds. In the meantime, if you have any queries or would like to have an in depth discussion on this topic or the broader market contact us. 

JEGI CLARITY’s 20th Annual Media & Technology Conference in New York City brought together senior executives and investors from across the global media, marketing, information, and technology sectors.

At the conference, Philipp Mueller, Chief Analyst & Product Officer of Outsell moderated a panel titled, “Value Creation with AI – Productivity vs. Growth.” 

The panel featured Sejal Amin, Chief Technology Officer of Shutterstock, Nikesh Kalra, Chief Operating Officer of DeepMedia, and Ilya Meyzin, SVP, Head of Data Science at Dun & Bradstreet.

The discussion kicked off with Philipp reminding the audience that ChatGPT was only launched 15 months ago. While there has been time to understand what real value creation with AI can look like, achieving it still remains elusive for a lot of companies. He continued by sharing findings from a survey conducted by Outsell in Q3 2023 that revealed that over 80% of senior executives were experimenting with Gen AI, with a third feeling very confident that it would drive productivity improvements in their enterprises. However, nearly half of the respondents lacked confidence in the ROI of their AI investments, with only 10% anticipating revenue and growth.

The Impact of Generative AI on Productivity

Gen AI’s impact on productivity was the first area of discussion with the panelists.

Sejal Amin elaborated on Shutterstock’s utilization of Gen AI to enhance productivity across their operations by improving customer experience through actionable insights to their customer and sales teams, optimizing developer workflows, and bolstering infrastructure security.

Ilya Meyzin, added that Dun & Bradstreet had been employing LLMS for several years (large language models) to improve data quality, ingest data, and generate new types of insights.

The Issue of Trust and Safety with Gen AI

As Gen AI adoption increases, concerns regarding trust and safety become more acute.

Nikesh Kalra from DeepMedia discussed AI’s role in helping trust & safety teams combat nefarious content, which he quoted is now a $20bn market. 

Adopting Gen AI solutions from the third quarter of last year, Ilya from Dun & Bradstreet, emphasized the importance of addressing biases and hallucinations in AI, implementing rigorous data governance practices, and most importantly, using trusted and validated data.

Shutterstock has been using AI well before Gen AI became the norm, explained Sejal, to understand the users and meet their needs through personalized search, recommendation engines and content discovery tools. With the growth of AI usage within their business, they had increased their trust and ethics practices.

Nikesh Kalra reminded the audience that generated content was not just gathered from social media, but also from Zoom calls and across other platforms. With even the larger news and information services now turning to user generated content from sources like TikTok, he spoke about a move towards greater investment in the authentication of the data supply chain.

Licensing and Growth resulting from Generative AI

The conversation shifted to the potential to drive revenue and growth through Gen AI.

Dun & Bradstreet is navigating the delicate balance between licensing proprietary data and protecting market competitiveness, carefully weighing the revenue upside with strategic threats. Meanwhile, Shutterstock capitalized on its immense repository of assets through partnerships with Gen AI hyperscalers, resulting in their first deal with OpenAI in 2022. Sejal Amin, however, noted a shift in demand towards tailoring smaller data sets for more conversive models.

What’s in store for Generative AI in 2024? 

Finally, the panelists speculated on what the biggest development in AI would be in 2024.

For Nikesh Kalra it was the weaponizing of AI during the perfect storm of global elections, virality of social media, and the adoption of AI on a massive scale. Both Ilya Meyzin and Sejal Amin envisioned that the “rubber will hit the road” on Gen AI with worldwide enterprise adoption of it. Ilya also highlighted that in 2024 the emphasis on guardrails – LLM safety controls and protocols – will become increasingly important.

In conclusion, the discussion emphasized the potential of Gen AI to drive value, productivity, and growth, alongside the imperative of addressing the challenges of risk and governance for all.

For more information about our conference please click here.

JEGI CLARITY’s 20th Annual Media & Technology Conference in New York City brought together senior executives and investors from across the global media, marketing, information, and technology sectors.

The Conference finished on a high with a captivating session featuring Wilma Jordan, Founder and CEO, North America of JEGI CLARITY, in conversation with Duncan Painter, Chief Executive Officer of Flywheel, in a session titled, Flywheel: The Global Vision for E-commerce.

Stellar track record of build and sell

Wilma began by introducing Duncan, highlighting his stellar track record of building and selling businesses with achievements including a $848m deal for WGSN with private equity Apax Partners and the sale of Flywheel Digital to Omnicom for $835m. Duncan shared insights from his career, from founding consumer intelligence provider ClarityBlue, to navigating the challenges of transforming Emap from a company with zero market value through an IPO, generating a 1.5x return.

Omnicom’s purchase of Flywheel

Transitioning to Duncan’s current role within Omnicom, the conversation turned towards retail marketplaces as a pivotable force shaping the digital landscape, and the impact they will have on the consumer orientated purchase industry. Duncan highlighted the seismic changes looming and cited John Wren, Omnicom’s Group CEO, for his foresight in positioning the organization at the forefront of change with the purchase of Flywheel.

Future of E-commerce

The discussion naturally progressed to Duncan’s perspectives on the evolving landscape of e-commerce and the future of retail.

Duncan emphasized the dynamic nature of retail markets, comparing them to the stock market. He highlighted that the role of first party data is one part of the change but emphasized that the most significant element will be the provision, for the first time ever, of direct-to-consumer capabilities at mass scale with a real time view of trading across all environments. He quoted staggering statistics demonstrating Flywheel’s influence across global marketplaces with ownership of 50% of the top consumer packaged goods (CPG), 6,000 clients that use their platforms across 29 countries globally.

He continued by explaining that when they started to build Flywheel in 2015, they realized that they had to be inside the walled gardens of the marketplaces, building and leveraging capability for their brands. This approach not only allows the manufacturer to meet, and sell to their customers directly, but to know how every single US$ spent performs, allowing for pure retail optimization.

The future of bricks and mortar retail

With this retail trajectory, Duncan predicted that there will still be physical stores in 20-30 years, however they will be transformed into warehouses for collection rather than for customer facing retail space. With online retail sales expected to meet 40% of market share by next year and grow to 60-70% in the next five years, Duncan stressed the importance of a digital first approach, particularly as Generation Alpha had already reached 97% digital engagement.

The role of humans in future retail

Wilma inquired about the impact of digital retail on the retail workforce in the next 10 years with Duncan explaining a shift towards a more dynamic approach, where retailers would need to be “hedge fund managers rather than portfolio managers”. He explained that last year 70% of net growth on marketplaces within Amazon in the US came from direct brands from China trading directly, selling to the US population. He warned that Western retailers need to rethink their sales strategies to remain competitive against East Asian retailers whose P&Ls don’t include high salaried product, sales, and marketing directors, and therefore having the ability to invest in optimizing their products on retail marketplaces.

The rise of retail media

With the retail media market growing 100% year on year, even before optimization is realized, Duncan believed it will become the largest retail platform, boasting unparalleled attribution capabilities, “for the first time ever attribution is pure.” He underscored its transformative potential in advertising effectiveness and revenue generation, particularly evident in Amazon’s revenue streams.

For more information about our conference please click here.