The innovation from artificial intelligence has high-growth software companies taking on multi-billion digital media giants such as Google and Facebook. New digital media and martech technologies continue to see accelerated growth with a global pandemic and soaring media consumption and ecommerce activity trends.
The sector has seen parabolic increases in the large technology markets, with the Nasdaq composite also reflecting a massive spike in new-technology Special Purpose Acquisition Funds (SPACs). In 2020, 250 SPACs raised more than $83 billion — with SaaS (software as a service) as a leading category. A rising tide carries all ships, as seen in a boom of AI software small caps.
DGTL Holdings Inc. (TSX.V: DGTL) (OTCQB: DGTHF) (Profile) is an AI accelerator company that operates much like a mini technology SPAC. DGTL is building a portfolio of fully commercialized enterprise SaaS in the digital media and martech software sectors. DGTL is quickly making a name for itself with an average of 75% YoY revenue growth for the past two quarters and Tier-one global brand clients, including impressive licensing deals with companies such as Quaker Oats, Budweiser, Dunkin’ Brands, Mitsubishi Motors, DoorDash, Stella Artois, Nestle, Keurig-Dr. Pepper, Pizza Hut, Patagonia, and most recently DraftKings — all leveraging the AI-powered social media content management platform of DGTL subsidiary Hashoff.
Usually categorized under the broader umbrellas of SaaS (Software-as-a-Service) or CaaS (Content-as-a-Service), the martech and adtech markets are thriving, leading to rising valuations, acquisitions and initial public offerings as evidenced through market leaders such as Digital Turbine Inc. (NASDAQ: APPS), Viant Technology Inc. (NASDAQ: DSP), IZEA Worldwide Inc. (NASDAQ: IZEA), and PubMatic Inc. (NASDAQ: PUBM).
- DGTL Holdings Inc. reported year-over-year revenue growth of more than 83% in Q1, 70% in Q2.
- DraftKings has followed its NCAA March Madness campaign with Hashoff with a new campaign running during coverage of the PGA Masters, the world’s most popular golf tournament.
- DGTL’s client portfolio includes DraftKings, DoorDash, Shein.com, Anheuser Busch, Quaker Oats, Dunkin’ Brands, Mitsubishi, Stella Artois, Vertone, Syneos Health, Nestle, Keurig-Dr. Pepper, Pizza Hut, and Patagonia, to name a few.
- DGTL’s deal to acquire 100% of Hashoff requires the AI startup to meet or exceed annual sales revenue of up to $8 million, which is a +400% revenue growth from the date of acquisition, in order to receive 100% of cash payments.
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DGTL Holdings Inc. (TSX.V: DGTL) (OTCQB: DGTHF) has clearly amassed an impressive portfolio, one that features a growing list of some of the world’s most recognizable brands that have chosen Hashoff for their marketing needs. Among others, the client portfolio includes Budweiser, Dunkin’ Brands, Mitsubishi Motors, DoorDash, Stella Artois, Nestle, Keurig-Dr. Pepper, Pizza Hut, Patagonia and DraftKings.
Revenues are mounting at DGTL. During Q1 FY2021, ended August 31, 2020, the company’s revenue rose 83% year over year to $1.16 million. In Q2, revenue increased to $1.25 million, up 70% from the year prior quarter. The company has a potential catalyst in the coming weeks when it discloses financial results for the latest quarter.
If the value of the Hashoff technology can be measured by the quality of companies employing it, then DGTL is in a prime situation by combining top trends and tech under one roof. Tier 1 clients have signed on in spades, including DGTL activating a recent campaign for a client described as “a Nasdaq-listed Digital Sports Gaming and Entertainment brand” during 2021 PGA Masters tournament. Disclosure policies don’t allow DGTL to flat-out state its client’s name, but a quick examination of the description (global leader in “fantasy sports and mobile sports betting applications,” $25-plus billion market cap) points squarely to DraftKings.
The new deal comes on the heels of completing a NCAA March Madness basketball tournament campaign with DraftKings. DraftKings fantasy and online betting platform covers essentially every major sport worldwide from college through pros, which speaks to the opportunity for continuous campaigns across multiple verticals going forward. In March, a DGTL campaign was activated for “a globally recognized CPG brand company.” Having to be opaque, DGTL also called the client, which looks to be Quaker Oats, “150 years old. . . an American food conglomerate based in Chicago. . . owned and operated as a subsidiary of PepsiCo.”
Where Consumers Go, So Do Ad Dollars
For more than a decade, there has been a steady erosion of time spent on traditional media in the United States, with a changing of the guard to digital dominance in 2018. Since 2011, people’s average daily time with traditional media (TV, print, terrestrial radio, billboards) has fallen about 20% to approximately 360 minutes. At the same time, usage of digital media has more than doubled from about 210 minutes to 450 minutes. The COVID-19 pandemic only accelerated the trend towards digital.
Companies devote much more advertising and marketing capital to social media and influencer spending than traditional broadcast and print media, etc. To that end, out of an estimated $572 billion in total global ad spend in 2020, $291.7 billion was allocated to digital ads. Social ad spending rose 20% year over year to $43 billion, while social media influencer/content marketing — a hot new trend — jumped 50% to $9.7 billion last year and is expected to double again in the coming 12 to 18 months.
These trends play to the strengths of tech accelerator DGTL, as the company builds a portfolio of B2B enterprise SaaS in the digital media, martech, adtech and e-commerce sectors. Last year, DGTL (an acronym for Digital Growth Technologies and Licensing) acquired Hashoff, an enterprise-level, self-service CaaS built on artificial intelligence and machine learning (AI/ML) technology. DGTL’s deal to acquire 100% of Hashoff requires the AI startup to meet or exceed annual sales revenue of up to $8 million, which is a +400% revenue growth from the date of acquisition, in order to receive 100% of cash payments.
From the outset, Hashoff has been in front of the technical and consumer trends —including social, influencer, AI/ML, and the gig economy — to level the playing field with larger peers and even tilt it to their favor. The company excels in operational efficiencies, which contains costs, resulting in savings passed on to clients while simultaneously improving margins. The company offers a full-service platform that includes more than 150 million freelance content creators. Using cutting-edge AI/ML tech, global brands have the ability to identify the top-ranked digital content publishers for their specific needs, subsequently engaging them, managing marketing campaigns and tracking the performance all within the Hashoff architecture.
A Trend Towards Profitability
Investors will also be listening for rumblings of any additional M&A activity from DGTL. Management, which includes former senior executives from companies including Hearst, Yahoo, AOL-Time Warner, RocketFuel, Facebook, Google, Microsoft, RBC, and IPG, have made it clear that the intent is to grow the company both organically and inorganically. The expedited growth of Hashoff puts the company’s ability on full display – with the first martech SaaS acquisition within its portfolio-based development model.
Importantly, the leadership team has kept the cap structure tight with only 36 million shares outstanding, with approximately $1.5 million in cash and no debt.
With traditional media fleeting, the ethos of the marketing community is next-generation digital processes. Even traditional digital methods, such as pop-up ads and auto-play videos, are becoming quickly archaic. Targeted marketing that feels native, such as with a social media influencer, using AI and ML to most effectively inform both market and strategy are the technologies that will drive the market for decades.
Digital Turbine Inc. (NASDAQ: APPS) operates an on-demand platform for app and content discovery, user acquisition and engagement, operational efficiency and monetization opportunities that has been adopted by more than 40 mobile operators an original equipment manufacturers (OEMs) worldwide. With the technology, Digital Turbine is responsible for the delivery of more than 3 billion app preloads for tens of thousands of advertising campaigns. Late in March, the company agreed to buy Frankfurt-listed Fyber N.V. for $600 million, adding expertise in mediation and real-time bidding technology to its portfolio.
Viant Technology Inc. (NASDAQ: DSP) had a successful initial public offering, pricing its IPO at $25 per share only to open at $44 and close the first day of trading at $47.72. Viant operates a demand side platform, or DSP, branded Adelphic that uses people-based data to assist marketers in planning, executing and measuring omni-channel campaign impact. Customers have the option to work through a self-service portal or to seek the assistance of the Viant services team for their advertising initiatives.
IZEA Worldwide Inc. (NASDAQ: IZEA) is a pioneer in the modern influencer marketing industry. In 2006, the company was the first to launch a technology platform that pays bloggers to create content for brands, growing from essentially a one-man show to a team of over 100 staffers providing influencer marketing technology, data and services. Utilizing data from its proprietary social intelligence platform dubbed BrandGraph, IZEA recently estimated that the global impact on travel and tourism brands is $5.2B in lost earned media per month, which will create a race to capture the “travel consumer wallet.”
PubMatic Inc. (NASDAQ: PUBM) completed its IPO in December after 14 years as a privately held adtech company. The California-based company, which operates a sell-side advertising platform the runs programmatic ad transactions in real time, priced its offering at $20 per shares. In yet another demonstration of investor appetite for the space, shares closed at $33.16 and subsequently went on to reach a high of almost $77 in February. The company truly has a global presence, running 14 offices and eight data centers worldwide.
There are some similarities and a lot of subtle differences between companies in the space, but there is one common thread in maximizing return on investment for advertisers. Brands are going to increasingly earmark capital for digital efforts, especially with economies re-opening worldwide as the fight for consumer attention continues. As for tech companies, it’s a matter of which can deliver the most efficient, quantifiable results in a timely manner and at the lowest cost. Those that can deliver on that model are in a position to make the most of the industry opportunity.