Why Sorrell bought MightyHive

•Martin Sorrell’s S4 Capital pays $150 million for programmatic ad specialists MightyHive

•The San Francisco ad firm, known for in-housing programmatic ad buying, reported revenues of $40.7 million last year

•It opened a Toronto office in September, with Home Depot as a client

Sir Martin Sorrell’s plan to create a “new age/new era” ad company took another big step Tuesday, with the $150 million acquisition of MightyHive.

MightyHive describes itself as a “digital transformation partner”—a hybrid digital media consultancy/agency. Why did Sorrell want it? Because it’s really good at in-housing programmatic ad buying.

A growing number of marketers regard programmatic buying as the future of digital advertising, but dislike the system—and how their media agencies serve them within it—in its current iteration. Which is where MightyHive comes in.

The agency is Sorrell’s second major acquisition with S4, coming just three months after he outbid his former firm, WPP, for the Dutch digital creative house MediaMonks. Both deals underscore Sorrell’s intent to create a new kind of marketing operation, one focused on digital content and media buying fuelled by first-party data.

The always colourful Sorrell issued this quote about his latest deal after earlier saying S4 was a peanut compared to WPP: “The merger with MightyHive marks an important second strategic step for S4 Capital. The peanut has now morphed into a coconut, and is growing and ripening.”  

Well, okay.

The S4 announcement also explained the rationale for the MightyHive deal: “Brands are increasingly considering moving away from traditional agency relationships and considering instead either in-housing capabilities or engaging with creative production and technology services companies directly. The directors and the proposed directors believe the shift to decoupling and in-housing may be driven, in part, by a lack of transparency in the legacy agency model.”

After launching in 2012, MightyHive has grown quickly in recent years, garnering recognition for helping marketers take their programmatic buying in-house. Despite its early promise of delivering the right ad to the right person at the right time, programmatic advertising has recently become something of a pain point for many brands.

A growing number of marketers have expressed concern about how much of their budget is being lost to outright fraud and intermediary ad tech firms (the so-called “tech tax”) in the increasingly complex programmatic ecosystem.  In response, interest in taking the programmatic process in-house has been on the rise.

MightyHive’s revenue for the year ended Oct. 31 was just under $41 million, with adjusted EBITDA of $11.1 million. The company employs about 200 people with offices in New York, London, Singapore, Sydney and, as of September, Toronto.

“MightyHive has ambitious plans for the programmatic market in Canada focused on consulting, in-housing and enterprise data, which are huge opportunities,” said Pete Kim, CEO MightyHive, in a release announcing the Toronto office, which has Home Depot as a client.

The Toronto office is led by Tessa Ohlendorf, a programmatic pioneer in Canada. “Bringing digital capabilities in-house can be not only efficient but also incredibly enlightening, when done correctly, by providing clients with the utmost transparency and access to their data, assets, and campaigns,” she said. -David Brown

David Brown