Market Insight

Beijing-based Spearhead acquired ad tech company, Smaato to aid overseas expansion

June 15, 2016  | Subscribers Only

Kia Ling Teoh Kia Ling Teoh Senior Research Analyst, Advertising and Television Media
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Mobile ad tech company, Smaato was acquired by Beijing-based Spearhead Integrated Marketing Communication Group (Spearhead) for $148 million. The deal is subject to final agreement signing and regulatory approval.

Our analysis

To Spearhead, the acquisition is strategic for two reasons: 1) domestic improvement of technology and 2) international expansion. There are a few domestic mobile ad tech firms in China including Avazu Mobile and Mobvista, but foreign start-ups are more attractive to big Chinese (marketing) companies. This is because in addition to improving their technology, cash-rich Chinese marketing companies are also looking to expand their businesses abroad, beyond China. Smaato brings to the table mobile ad technology (its SPX Publisher Platform) as well as global reach to 1 billion monthly unique mobile users outside of China. With the technology and reach, Spearhead hopes to be in a strong position to help Chinese brands to run their international ad campaigns more effectively as more of them expand their business abroad. This is only the beginning of Chinese marketing firms expanding their international business, serving both global Chinese firms and foreign clients.   

To Smaato, becoming part of Spearhead will help to accelerate its reach to the Chinese mobile ad market and provide greater resources for continuous development. According to IHS, mobile advertising revenue in China totalled to ¥31 billion ($5 billion) in 2015. In March 2016, Smaato identified China as the fastest growing spender on mobile advertising. The Smaato platform has already been working with Chinese mobile internet companies like Cheetah Mobile and hopes the local expertise from Spearhead will help expand its Chinese client base.

Spearhead is listed on the Shenzhen Stock Exchange which will translate to more funding for a start-up like Smaato. This may not make Smaato a competitor to the larger international mobile advertising market players like Google and Facebook, but it will make it serious contender in the second-tier mobile ad tech space (with companies like OpenX, PubMatic, Millennial Media’s Nexage, etc.). 

With seven years of experience in the region, APAC is critical to Smaato’s mobile ad business. In 2009, before most ad tech companies, it established its first office in Singapore. In 2014, it partnered with telco Indosat to sell mobile ad inventory in Indonesia. In March 2015, in cooperation with Indosat, Smaato launched a mobile real-time bidding ad exchange Indonesia Mobile Exchange (IMX). In India, it partnered with data analytics company Flytxt to offer ad monetization solutions to communication service providers. With an established extensive business presence in Singapore, Indonesia, India and China, IHS expects the expansion of Smaato to continue to other parts of Southeast Asia.

In order to export China abroad as recommended by the current Chinese government policy, Chinese media companies continue to seek foreign capabilities in the form of ad tech, analytics, artificial intelligence and video.

The nature of the firms being targeted reflects the insufficient technologies/digital infrastructure in China - a challenge faced particularly by mobile ad market players in China. We expect the shopping spree to continue.


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