Venture capital and M&A activity is heating up in the digital advertising space. Money is flowing in at a faster pace than last year... by far. Here are some relevant stats from January 2011:

There were 196 marketing / digital commerce deals in January totaling $8.5B
- (This compares to 70 deals and $3.3B a year earlier)
82 of the deals were growth / investment capital with the balance being M&A
Digital advertising (which includes ad networks, exchanges and online lead generation) was the most active subset with 18 deals totaling $316M in investment capital
- $200M of this however, went to Adknowledge at a reported valuation of $900M
The average investment (excluding Adknowledge) was $6.8M
The weighted average multiples are amazing... 2.7X revenue and 13.3X EDITDA

I see a good deal of consolidation and money flowing in to expand the "white space" below Google, Yahoo! and Bing. Adknowledge is a great example, now the number 4 digital advertising network. After doubling revenue to $300M in 2010, Adknowledge is using the funding for acquisitions. They have a narrow focus, putting advertisers together with sites considered the "remainder of the internet".

This is a bigger market than people might think. The investment into this space shows that the growth and consolodation opportunity is significant. If you are in this space, now is the time to move. The tipping point has arrived. I would be interested in your perspective, feel free to post a comment or contact me with your thoughts.

Tom Cuthbert