Barry Frey: Please tell us a bit about LUMA Partners.
Terry Kawaja: LUMA Partners is a boutique investment bank focused on the digital media and marketing sectors. I started LUMA in 2010 as I recognized the coming changes and saw the need for deeply knowledge-based strategic advice for a complex and dynamic sector. The challenge was to build a global brand and franchise on an earned basis without outside capital. Eight years later we are enjoying a leadership position in the market. I chalk this up to our differentiated go-to-market approach of intermediating transactions that is the opposite approach taken by most banks. (We don’t sell companies but rather help them get bought.) So, you could say we zagged when the others were zigging.
Frey: You were quoted this summer in a New York Times story about the rapid consolidation of ad tech companies, saying that this is a necessary process because so many of these companies were not profitable. Do you see this continuing in the near-term future, and where is it all heading?
Kawaja: We have been calling for consolidation (a fancy word for M&A) and rationalization (a fancy word for failure) of the sector for some time. The current fragmented ecosystem of over 5,000 companies in MadTech (Ad Tech and MarTech) is clearly not sustainable and now that we are reaching a maturity in the sector where the winners are clearly delineated, it is time for the also-rans to be bought or die. While that may sound harsh, it’s reality. This culminating phase has been catalyzed by the shut off of VC funding to the sector that up until recently was continuously funding the loss-making startups. There are subsectors where we see a lot of opportunity and activity in areas like identity, Convergent TV and In-App Performance Mobile.
Frey: What level of activity do you foresee for M&As in the digital media and marketing sector for 2019?
Kawaja: We are experiencing a significant uptick in M&A activity that followed a lull due to pending large media deals and uncertainty from GDPR. Based on our own backlog, we predict significant deal activity in the year to come.
Frey: Is there a particular individual you would consider to be your mentor? What lessons has this person imparted to you?
Kawaja: I have learned from many people ranging from Gary Vaynerchuk (hustle) to Rishad Tobaccowala (take bigger picture view) to Rob Norman (comedy) to my first Wall Street boss, Eduardo Mestre (work hard, aim high).
Frey: What media do you consume on a daily basis?
Kawaja: I start the morning with Axios followed by trade pubs that range from AdExchanger to Digiday, Recode and BI. Usually broader stories from Wall Street Journal to The New York Times and The Washington Post find their way to me via Twitter. I use Facebook and Instagram as largely broadcast channels and YouTube for entertainment. Interestingly, I cut the cord last year when I moved apartments. My limited TV diet consists of Sling, Amazon and Netflix. (I’m not much of a spectator sports person.)
Frey: Tell us a bit about your upcoming speaking appearance at the Video Everywhere Summit.
Kawaja: When I speak at conferences I am often addressing ecosystem trends and lately that has included a lot of supply chain challenges. This year at the Video Everywhere Summit I will look at the relatively recent success of Direct-to-Consumer brands. D2C brands are experiencing explosive growth. In vertical after vertical, these startup brands have, in a relatively short amount of time, successfully taken double-digit share away from incumbents, many of which have built their brand equity for decades. It’s a modern day version of David and Goliath!
My talk examines why this phenomenon occurred, how D2C brands are achieving such incredible results and what can be learned by other marketers to re-invigorate growth. It starts with a mindset that puts the consumer first and from there includes front-end elements like product design and enhanced storytelling as well as back-end elements like customer identity solutions and performance marketing. Any time you see such a disparity of outcomes, it behooves one to look at the root cause and seek out ways for improvement. I promise not to pull any punches with a presentation that is designed to inform, motivate and entertain.
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