Oracle Acquires Datalogix, Strengthens Presence in Cloud Advertising Business
Oracle Corp. (NYSE: ORCL) announced just before the holidays that it has signed an agreement to purchase Datalogix, a company that provides data on offline consumer spending to digital marketers. Datalogix is a leading player in the cloud advertising market and has over 650 customers ranging from Ford to Facebook. Upon completion of the acquisition, it will become part of Oracle’s Data-as-a-Service (DaaS) offering, the Oracle Data Cloud. Terms of the transaction were not disclosed.
In this article, we will provide a brief overview of Datalogix, and delve into how its purchase will help Oracle catch up to its rivals in the cloud business.
We have a price estimate of approximately $47 for Oracle, which is a little under 10% higher than its current market price.
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Marketing Cloud: Tracking Offline Spending Data for Targeted Online Advertising
Datalogix tracks offline consumer spending and provides insights therefrom to digital marketers. Such insights allow marketers to optimize their customer identification, mode of advertising as well as spending allocation. This treasure trove of data insights is highly valuable to marketers, who use it to track the impact of their advertisements on consumers and ascertain what works best.
Datalogix facilitates such targeted advertising by aggregating and providing insights on over $2 trillion in consumer spending from 1,500 data partners. Its 650 customers include 82 of the top 100 US advertisers (such as Ford and Kraft) and 7 of the 8 top media publishers (including Facebook and Twitter). [1] It is estimated to have revenues of about $125 million in 2014. [2]
Other major players in the cloud advertising market are Adobe’s (Nasdaq: ADBE) Media Optimizer, Salesforce’s (NYSE: CRM) ExactTarget Marketing Cloud and Oracle’s BlueKai.
Acquisition Will Augment Oracle’s Position in Cloud Advertising Market
Cloud advertising is the largest segment of the cloud services market. In 2012, it comprised 48% of the $111 billion total cloud services market in 2012. Gartner estimates that the cloud advertising segment will grow at 55% through 2016 to reach $310 billion. [3]
Oracle, whose strength historically lay in on-premise database software, was a late entrant to the lucrative cloud business. However, it began its transition to cloud two years ago by an aggressive acquisitions strategy. Even then, until its acquisition of BlueKai in 2014, cloud advertising was not a focal point in Oracle’s portfolio. Datalogix will now be lumped together with BlueKai and Oracle’s older acquisitions, of Responsys and Eloqua, under Oracle’s marketing cloud business.
While BlueKai was a relatively small acquisition, Datalogix is a behemoth by existing marketing cloud standards. Therefore, with its formidable client list, it will provide Oracle with considerable firepower in fending off rising competition from the likes of Salesforce.com. Over the long term, the company intends to transform Software-as-a-Service (SaaS) business applications and processes by integrating data within these applications.
The completion of the acquisition will provide an additional boost to Oracle’s revenues from the cloud business, which is fast becoming a key factor in driving overall revenue growth. Indeed, Oracle beat expectations in its second quarter mostly due to the outperformance of its cloud business (Read: Oracle Q2’15 Earnings Review: Cloud’s Success Helps Beat All Expectations).
Deal Draws Demand for Regulatory Scrutiny
The deal has caught the attention of the Center for Digital Democracy, a US-based consumer protection and privacy watchdog. The CDD has called for the Federal Trade Commission to look over the proposed acquisition over concerns that Oracle’s acquisition spree may place too much consumer data in its hands. [4] Previously in August 2014, the organization had asked the FTC to look into the practices of data brokers like Datalogix as well as marketing software companies like Salesforce.com, over similar concerns.
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Notes:- Oracle Buys Datalogix, Oracle Press Release, December 22, 2014 [↩]
- VC-backed Datalogix is on the block, PE Hub, December 15, 2014 [↩]
- Gartner Says Worldwide Public Cloud Services Market to Total $131 Billion, Gartner Press Release, February 28, 2013 [↩]
- Watchdog group urges FTC to scrutinize latest Oracle deal, Gigaom, December 22, 2014 [↩]