NetworkNewsWire
Editorial Coverage: Brands are faced with myriad challenges to
stay at the top of their game to capture share in their respective
markets. Simple fact is that technology advances so rapidly in
today’s world that it takes devoting considerable resources and
deliberate strategy to effectively reach target demographics. The
worldwide outset of the COVID-19 pandemic last March turned the
marketing/advertising industry on its head, forcing brands to
immediately adopt the latest digital technologies, colloquially
known as adtech and martech, which gave a few small companies a big
jumpstart to capitalize on the opportunity. A perfect example of
this is DGTL Holdings Inc. (TSX.V: DGTL) (OTCQB: DGTHF)
(Profile). Major
international brands turned to the company for its proprietary
artificial intelligence-driven marketing platform to reach
potential consumers from an integrated platform. What COVID-19 did
to accelerate everyday use of adtech and martech will not be undone
as targeted digital is now the preferred solution. The trend is
benefitting others active in the space, such as Perion
Network (NASDAQ: PERI), the
Trade Desk (TSX: TTD) (NASDAQ: TTD), Acuity
Ads Holdings Inc. (TSX: AT) and Kubient
(NASDAQ: KBNT).
- DGTL on track to reach cashflow breakeven in just 12 months
post-acquisition of Hashoff.
- More than 6 out of every 10 Americans spend more time shopping
online due to the COVID-19 pandemic.
- Latest on list of growing international clients is Suntory, the
third-largest producer of premium distilled product brands
worldwide.
- Similar companies in the adtech space are trading at up to 50x
P/E ratio, while DGTL is trading at a mere 3-4x.
Click here to view
the custom infographic of the DGTL Holdings Inc.
editorial.
Welcome to the New World of Advertising
For more than a year now, businesses around the world have been
shuttered and people told to stay home in a bid to shunt viral
contagion. In a strange way, it may have been a blessing in
disguise for many brands that were forced to take a forensic look
at operating expenses to get the most bang for their buck. This was
especially true for advertising and marketing budgets, the
lifeblood to sales that keep a brand in business. With consumer
spending making up the majority of economies, governments
aggressively provided financial stimulus to households. To that
point, advertisers needed to be more targeted than ever to get into
the wallets of consumers, most of which were sheltering, working
and shopping at home.
In order to stay in business, savvy brands recognized the need
ditch traditional ad methods and transition to digital outreach.
With fewer people traveling and out and about, billboards and
in-store marketing were nearly moot points as spending habits
changed. In a Bazaarvoice
survey of more than 5,000 consumers across different countries,
49% of respondents reported that they shop more online now than
pre-COVID, including 62% of Americans, 59% in Canada and 70% in
Mexico. Companies are getting the point as evidenced in a Criteo
study showing 70% of businesses surveyed concurring that marketing
practices covering the complete customer journey became even more
important since the outset of the coronavirus pandemic.
DGTL Holdings
Inc. (TSX.V: DGTL) (OTCQB: DGTHF) is building a portfolio of
B2B enterprise Software-as-a-Service (SaaS) in the digital media,
martech, e-commerce and adtech sectors. Last year, the company put
its growth strategy in motion with the acquisition of Hashoff,
signaling management’s commitment to get on the leading edge of
influencer marketing, a practice where people with large social
media followings or “experts” in certain niches are hired to
endorse products to their audience. As noted in an Influencer
Marketing Hub presentation, this emerging market is a top
priority for brands, with nearly 8 out of 10 companies allocating a
budget for influencer marketing in 2021.
DGTL’s market entrance aligns with the nascent industry starting
to hit its stride, climbing from just $1.7 billion in 2016 to $9.7
billion in 2020 with Statista
forecasting influencer ad spending reaching $13.8 billion this
year. Hashoff’s proprietary technology is in the thick of this
market, providing clients unfettered access to more than 150
million content creators of various scale in all-encompassing
regions.
The Hashoff platform is turnkey, using machine learning ("ML")
and artificial intelligence ("AI") to allow client companies to
comprehensively search and identify freelance content creators that
best reach the target demographic, albeit at worldwide or a highly
refined group, a service called CaaS (content-as-a-service) in ad
nomenclature. Clients have their choice of Hashoff’s self-serve
SaaS platform or leveraging the managed services offered by the
company.
As Sales Spike, Cash Flow Breakeven
Approaches
Leaning on management’s experience that includes leadership
positions at Hearst, Google, Yahoo, LinkedIn, AOL Time Warner, RBC,
Microsoft, RocketFuel and Facebook, DGTL is hitting its key
performance indicators since the Hashoff acquisition. This pattern
of success has again been put on display with the company releasing
results from the latest quarter and nine months, ended February 28,
2021. DGTL
reported revenue of $1.25 million for the quarter, up from
$744,984 in the year prior quarter, a 68% improvement. For the nine
months, revenue climbed 71% to $3.67 million from $2.14
million.
Even with a conservative estimate of no quarter-over-quarter
growth for the final quarter of fiscal year 2021 (which ends May
31, 2021), revenue at Hashoff would extrapolate to $4.92 million in
the first 12 months post-acquisition by DGTL. Importantly, DGTL
management sees the potential to reach cashflow breakeven within
the first year of Hashoff being part of its family. Cashflow
breakeven, a point where operations are self-sustainable at the
current level of incoming and outgoing cash, is a milestone that
most upstarts in the adtech space never claim, much less only a
year into executing the business model.
An Enviable Client List
Cash flow neutrality in 12 months is an impressive
accomplishment for any young company. The milestone begs the
question of what is next for the portfolio. Market participants
have taken notice of both the DGTL team and its accomplishments,
which has shone through in shares of DGTL increasing more than 200%
since going public in August.
As investors look to DGTL, brands have shown an affinity to the
Hashoff platform. Companies from a wide array of sectors have
turned to Hashoff, including its key categories of consumer
packaged goods ("CPG"), health care and retail — a trio of
lucrative markets that should continue heating up as economies
re-opening throughout the year. DGTL has made it a habit of
providing investors with a steady news reel of activating campaigns
for some of the best-known brands in the world. The DGTL client
portfolio includes DraftKings, Door Dash, Vertone, Anheuser
Busch-InBev, PepsiCo, Nestle, Post Holdings, Danone and Keurig-Dr.
Pepper, Dunkin Brands, The Container Store, Ulta Beauty, Pizza Hut,
Live Nation, The CW, Scribd, Syneos Health, Novartis and Quaker
Oats to name a few.
Bourbon Giant on Board
Late in April, Hashoff added yet
another global juggernaut to its client roster. Japan-based
Suntory Holdings, the owner of Jim Beam, Maker's Mark, Knob Creek
and Basil Hayden, and third-largest producer of premium distilled
product brands worldwide behind Diageo and Pernod Ricard, signed a
SaaS agreement centered on video-based influencer content for a
global market. A sign of its prescient decision making, video-based
influencers are an upcoming component of influencer marketing and
an alternative strategy the Hashoff has implemented effectively in
other recent campaigns for global brand customers, such as
PepsiCo.
A company like Suntory Holdings with its bevy of brands spanning
food & beverage, beer, wine, spirits and health food speaks to
the opportunity at hand for Hashoff to grow exponentially within
one client. DGTL leadership is presently reviewing requests for
more SaaS proposals. The demonstrated growth and speculative future
expansion don’t seem to be reflected in the valuation of the young
company yet. As management succinctly details in its
presentation, industry comparables are trading at much higher
multiples, particularly as a measure of enterprise value to revenue
and price-to-sales ratio. Others in the asset class are trading 10
to 15x and even as high as 50x on price-to-sales, meanwhile DGTL is
trading at approximately 3 to 4x sales.
Plenty of Pie to Go Around
With global advertising spend nearing $600 billion, there is
ample opportunity for many companies to carve out market share.
This is particularly true against the backdrop of a worldwide
pandemic that caused a huge spike in demand for cutting-edge
platforms while simultaneously completely reshaping the new norm
for advertising and marketing.
Perion
Network (NASDAQ: PERI) is a global advertising
technology company that delivers holistic solutions across three
pillars of digital advertising: ad search, social media and
display/video/CTV advertising. CTV is skippable online advertising
targeted to relevant content channels and/or audience groups.
Perion cited CTV as a key factor for new customer acquisition and
primary contributor to 11% increase in average deal size during the
first quarter. Perion further proved the point that consumer trends
are sticking, as average daily searches ballooned 45% to
a record 17.7 million in Q1.
The
Trade Desk (TSX: TTD) (NASDAQ: TTD) is a technology
company that empowers buyers of advertising, while also championing
the next-generation tech to phase out reliance on cookies. In
addition to its comprehensive portfolio of products for
self-service digital ad campaigns for publishing partners and
enterprise APIs, the Trade Desk is always on the leading edge of
market research. For instance, studies this
year by TTD showed the rapid acceleration of American
cord-cutting, celebraters of Ramadan in Indonesia will be shopping
and eating from home this year, and 81% of Australians don’t feel
in control of their online personal data.
Acuity
Ads Holdings Inc. (TSX: AT) provides marketers a
one-stop solution for omnichannel digital advertising. Its journey
automation technology, illumin(TM), offers planning, buying and
real-time intelligence from one platform, an integrated ecosystem
of privacy-protected data, inventory, brand safety and fraud
prevention partners. Acuity recently teamed up
with the Interactive Advertising Bureau, a move that got the
illumin brand front and center for the more than 650 leading media
companies, brands and technology firms that are IAB members.
Kubient
(NASDAQ: KBNT) is on a mission to transform the
digital advertising industry to audience-based marketing via its
next generation cloud-based infrastructure that enables efficient
marketplace liquidity for buyers and sellers of digital
advertising. Kubient went public in August in an upsized IPO
selling 2.5 million shares at $5 each. Shortly after, the
company said it engaged investment bank Lake Street Capital Markets
to cull the adtech ecosystem for strategic investments or potential
M&A options to grow its footprint.
In more than one way, COVID-19 blindsided the world. One result
is an idiosyncratic market moment in which small tech firms were on
a level playing field with much bigger ad companies, establishing
their brands in a hurry and landing global corporations as clients.
These are now true growth stocks instead of speculative plays. What
happens next may be equally interesting as these smaller companies
now have a foothold that incumbents have to figure out how to
compete with.
For more information about DGTL Holdings Inc. (TSX.V:
DGTL) (OTCQB: DGTHF), please visit DGTL Holdings
Inc.
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