While other mobile advertising network transactions are still quite likely, a new complementary M&A theme is beginning to develop, the use of data and the analysis of data to better understand an individual end-user.  This involves capturing and analyzing data associated with how an end-user interacts with a mobile application and importantly integrating any available demographic and behavioral data to better determine the end-users individual characteristics.  The promise is a better application experience for the end user and high quality targeting information to allow advertisers to place appropriate ads where they would be most effective.  The idea is that the more you know about the end user, the better the targeting of the advertising, driving better results for the advertiser, a happier end-user and an advertiser willing to pay more for advertising inventory.  This is of course nothing new, but it’s becoming increasingly sophisticated in mobile marketing and the promise of targeting a very specific individual end-user via their mobile phone is quite intriguing to marketers.  E-marketer recently published a report highlighting the types of targeting that on-line advertisers frequently utilize to target their advertising placement.  While this research is on-line marketing focused, it has direct applicability to mobile efforts as well.

While small, there have been several notable acquisitions in the past couple of months which highlight this trend.  Most recently, Millenial Media, a direct and substantial competitor to AdMob and Quattro Wireless, acquired TapMetrics, a young mobile applications analytics company.  Also in March 2010 private company Mobclix, a mobile advertising network, acquired Heartbeat, a competitor to Tap Metrics.  Finally, in December 2009, private vendors Flurry and Pinch Media, two iPhone application analytic vendors, merged.  While acquisitions will be part of the solutions, business partnerships will also be frequently utilized.  For example, Mobclix recently announced a partnership with Nielsen to refine its targeting abilities by using Nielsen’s demographic data.

We expect to see a continued effort by mobile marketing vendors to integrate mobile application analytics, and very importantly behavioral and demographic data, into their offerings.  In fact, we believe the ability to gather, analyze and package data to advertisers and marketers promises to be the crown jewel of mobile marketing.

On February 25th, 2010, LBi International, a global digital marketing agency, announced plans to merge with Edinburgh-based digital marketing firm Bigmouthmedia (recently renamed Obtineo), creating Europe’s largest digital marketing agency in a complicated financial transaction.

Target Description

Obtineo is the new name of Bigmouthmedia, a search engine marketing specialist in Europe, following the commitment of a €40m private placement (approximately $55mm) of new capital by The Carlyle Group, Cyrte Investments and Janivo Holding to fund the combined companies.  Bigmouthmedia develops marketing campaigns for clients with specialties in search engine optimization, pay per click, banner display and affiliate advertising campaigns.  The company’s clients include over 300 corporate clients, including British Airways, Tesco, Mexx, BT, Cisco, Hotels.com and Topshop. Bigmouthmedia competes with a broad array of digital marketing agencies including Ayima, Greenlight Search, and Razorfish. Founded by Steve Leach in Edinburgh in 1997, Bigmouthmedia currently operates in 30 countries.

Buyer Description

LBi, a public company listed in Stockholm (symbol: LBI) is a global digital marketing and technology agency formed by the merger of LB Icon and Framfab in August 2006. LBi provides digital strategy, branded content, service design, media, CRM, managed hosting and support services for digital marketing. In 1996 Jesper Jos Olsson, Magnus Lindahl, Erik Wickström and Johan Staël von Holstein founded LBI as IconMedialab in Stockholm. LBi is currently headquartered in Stolckholm, and maintains offices in Amsterdam, Atlanta, Berlin, Brussels, London, Milan, Mumbai, New York, and Paris.

For SEC documentation (i.e. original S1 filings, excluding amended S1 filings), please click the following links: Reply!, Gamefly, Vringo, Motricity, ReachLocal, Meru Networks, Telegent, QuinStreet, MaxLinear, and Telenav.

On February 22^nd, 2010 retail giant Walmart Stores, Inc. (NYSE: WMT), announced its planned acquisition of Vudu, Inc. for a reported $100mm.

Target Description

Vudu, Inc. delivers digital content, on-demand, to consumers’ HDTV’s.  Vudu’s technology leverages existing broadband internet connections at home to stream content via either Vudu’s own box (Vudu Box and Vudu XL,) or more recently via capabilities directly integrated into HDTV’s or Blue-ray Players.  Vudu has licensed its technology to many major HDTV/Blue-ray player manufacturers including LG, Samsung, Sharp, Toshiba and VIZIO.  Vudu competes against internet connected streaming services such as Amazon, Blockbuster, Netflix, Apple, Boxee, TiVo, Roku and Hulu as well as the traditional cable and satellite services from Comcast , AT&T Cable, DirecTV and Dish Networks. Vudu has received $36mm in funding, including $21mm in series A funding in June 2005 from Benchmark Capital, Greylock Partners, and individual investors Roger Evans, David Sze, Pejman Nozad, and Bill Gurley. Their series B funding came in April 2007, with an additional $15mm in funding from Benchmark Capital and Greylock Partners.  Vudu was founded in 2004 by Tony Miranz and Alain Rossman and is headquartered in Santa Clara, CA.

Buyer Description

Walmart Stores, Inc. (NYSE: WMT), founded in 1962 by Sam Walton in Bentonville, Arkansas is a global chain of discount department stores.  With over 8,000 retail stores 15 countries, and fiscal year 2009 sales of $401 billion, Walmart has had a fundamental impact on the retail industry and beyond by aggressively lowering prices, which it can afford with an extremely efficient pricing and distribution system. Over the past two years, Walmart has aggressively expanded its consumer electronics efforts including digital cameras, MP3 players, gaming systems, phones, blue-ray DVD players, and HDTVs.

QuinStreet has all the qualifications of a company that ought to be well received by institutional investors as an Initial Public Offering.  Revenue scale, historical and projected revenue and profit growth, attractive industry sector and proven and highly articulate management.  Overall, in our judgment, QuinStreet is a very credible company and a more than worthy IPO candidate.  That’s why its lackluster reception is so troubling.

Despite recent high hopes, it now appears fair to conclude that the IPO market is currently troubled.  Since the turn of the year, we’ve seen 13 completed and 10 canceled or withdrawn IPOs.  As noted on the table below, only 38% of the completed IPOs are trading  above their IPO price.  These facts will undoubtedly result in a pause in IPO activity until tangible signs of renewed institutional investor interest show themselves.

From an M&A perspective, as we highlighted previously, the tone and activity level of the IPO market is one of a number of important factors influencing M&A activity and valuation levels.

On February 11th, 2010, JDS Uniphase (NASDAQ: JDSU) agreed to acquire Agilent’s Network Communication Solutions Test Business for $165mm.  The transaction is expected to close in June.

Target Description

Agilent’s Network Solutions Test business provides network communications test and measurement services for 3G, WiMax, Bluetooth and emerging LTE (4G) networks. Customers include wireless service providers and network equipment manufacturers. The business being acquired includes the following business lines:

1) Service Assurance, which optimizes network deployment, management and operation as well as offers troubleshooting services
2) Network Protocol Test, which provides network protocol analyzers for network interoperability and integration during lab and field testing
3) Wireless Drive Test, which enables network test-drives and measures performance of network coverage

Agilent’s Network Solutions Test will be integrated into JDS Uniphase’s Communications. The company has 700 global employees in the U.S., U.K. and Asia.

Buyer Description

About half of JDSU’s revenue comes from communications test and measurement solutions, mainly focusing on wireline (Ethernet and core) network service capabilities, for telecommunications service providers, cable operators, and network equipment manufacturers. JDSU provides test tools, platforms, and services for broadband network deployment (including DSL, cable network and digital video broadcasts) as well as optical transport and storage networks. In addition, JDSU offers optical transmission products and multilayer security / optical coating technologies that enable protection against data diversion and data counterfeiting. Tom Waechter, CEO, was the key executive sponsor of the transaction. JDSU was founded in 1979 and is headquartered in Milpitas, California.

On February 11th, 2010, Google (NASDAQ: GOOG) agreed to acquire Aardvark for $50mm.

Target Description

Aardvark is a social search engine that allows users to ask questions to their friends or friends of their friends within their social network, via an instant messenger or email or the company’s website. Aardvark analyzes users’ profiles, connections and location, when matching questions with respondents to ensure a good quality answer. According to Aardvark’s research publication, as of October 2009, Aardvark had 90,361 users, of whom 55.9% had created content (i.e. asked or answered a question). The site’s average query volume was 3,167 questions per day. 98.1% of questions asked on Aardvark were unique, compared with between 57% and 63% on traditional search engines. 87.7% of questions submitted were answered, and nearly 60% of them were answered within 10 minutes. Competitors include Wikia, ChaCha and Mahalo.  Aardvark (formerly The Mechanical Zoo) was founded in 2007 by ex-Google employees including Max Ventilla (formerly in charge of Google’s marketing and monetization of AdSense and Web applications), Damon Horowitz, Nathan Stoll (former head of Google News) and Rob Spiro, and is based in San Francisco, CA. Since inception, Aardvark had received $6mm in funding from August Capital (David Hornik), Baseline Ventures and individual investors including Michael Dearing, Sep Kamvar, Marc Andreessen, Deep Nishar, Sean Fanning, Aydin Senkut, Upon acquisition, Aardvark will be incorporated into Google Labs.

Buyer Description

Google offers targeted online and mobile search advertising services to users and advertisers. Over the past several months, Google has made a substantial investment in playing a major role within real time search and social search services. In October 2009, Google announced its partnership with Twitter where Google integrated Twitter’s real-time-search results into Google search, as well as its experimental Google search feature called Social Search. On February 9, 2010, Google launched Google Buzz, a social networking service integrated with Gmail, allowing Gmail users to follow other users via Twitter and to share their Picasa pictures, Google News Feed Readers or YouTube videos. Johanna Wright, Google Search’s Director of Product Management was the key executive sponsor of the acquisition. Google was founded in 1998 and is based in Mountain View, California.

For SEC documentation (i.e. original S1 filings, excluding amended S1 filings), please click the following links: Gamefly, Vringo, Motricity, ReachLocal, Meru Networks, Telegent, QuinStreet, MaxLinear, and Telenav.