Electric Guitar (LSE: ELEG) is a fund newly launched on the London Stock Exchange to create a company that delivers content-based digital advertising to global advertisers.
It’s an unusual investment proposition, because cash funds – also known as Special Purpose Acquisition Companies (SPACs) – are still relatively uncommon in Europe, but also because of Egypt’s focus on digital advertising. The industry, although largely a niche investment proposition, has experienced exponential growth over the past decade: a report by GroupM, part of WPP Plc, says global digital revenue for 2020 was $343 billion, while from 2021 revenue is expected to be $397. billion, an increase of nearly 16%.
This sector is experiencing rapid growth, but it is also being held back by privacy laws, such as the European Union’s General Data Protection Regulation (GDPR), which have forced advertisers to change the way they manage and store customer data.
To cut a long story, the online advertising industry is moving away from using third-party data, where ads are personalized to a consumer based on their web browsing history, toward first-party data, which is data that is intentionally presented to advertisers by a consumer when they use their app or purchase items. or online services.
The winds of change are blowing through online advertising
The change is being driven by the web browser giants. According to Electric Guitar, Safari and Firefox, which in 2019 accounted for nearly 24% of the web browser market, have already blocked third-party data. Google Chrome, which in April 2021 made up more than 64% of the web browser market, announced plans in January last year to phase out support for third-party cookies in Chrome within three years.
That’s not good news for traditional media agencies, which over the past five years have seen the value of their business model erode by companies like Stagwell and S4Capital, which produce “original digital content” designed for a range of digital media. Not all traditional media agencies can easily adapt to the new digital ecosystem, while newcomers are looking for venture capital. For Egypt, this has opened up an investment opportunity.
The importance of first-party data is that it is “customised”, that is, it consists of data that identifies the consumer. According to privacy laws, personal data cannot be sold, which requires advertisers to delete the customer data they have obtained, thus placing more emphasis on building a relationship with the consumer.
If the allocation is not done correctly, consumers may not participate. Not surprisingly, then, management consultant Winterberry says 60% of advertisers plan to spend more on first-party data acquisition.
How to take advantage of the rising tide of digital media
As EG says: “For this to happen, advertisers will need to maintain an effective data relationship with their customers. This will be determined by transparency, control, and value among other measures. Key to this will be data science, on-demand content development, and mastering digital media skills.” “
This is where electric guitars think they have the advantage. As the presentation says: “The electric guitar specializes in digital data and data, and data drives personalization. Therefore, we will take advantage of the rising tide driving ratings for newcomers, and that is not going to stop any time soon.”
CEO and Founder John Reagan “There are many examples of personalized websites, from Amazon to Netflix,” he says, “in fact, most online retailers offer some level of customization. But there are very few examples of personalized advertising. Personalized advertising is the entirety of the personalized brand experience. The next stage in the evolution of digital marketing.
With the right price and the right targeting, personalized advertising will provide consumers with the products they are looking for, rather than the ones they just bought, the ads that follow them online.
Electric Guitar believes they have identified an opportunity to invest in smaller advertising agencies in the advertising sector that have been unable to obtain the investment funding needed for rapid growth. Electric Guitar says: “Since it can be difficult to access capital for such companies, managers believe there is an opportunity for these capital suppliers to offer viable financing solutions to these companies in order to allow them to expand rapidly.”
What is the electric guitar striving for?
Electric Guitar will make acquisitions with a project value of between £5 million and £20 million, but will take into account any other investment opportunities that could generate additional value for shareholders. The company aims to make an acquisition within two years of its launch, via a reverse takeover, which will then be operational. Directors will look to acquire 100% of any potential acquisition target, to get the full benefit of its growth prospects, although taking into account equity of less than 100%.
Board members believe that target companies will be “attracted by the opportunity to gain an interest in an officially listed company, through cash, access to capital markets and knowledge to develop the business.”
For private companies, the advantage of selling to SPAC is that it speeds up its way to listing without having to go through the costly and time-consuming initial public offering process, since it merges with an already existing public entity. Electric Guitar says the goal is to create a business, not an investment entity.
electric guitar team
The critical component of the monetary serendipity is the team of managers, with their skills, experience and network of industry contacts.
The Electric Guitar team is led by John Reagan, founder of five companies (including Electric Guitar) that specialize in improving data-driven marketing. Other directors are corporate attorney John Hutchinson, an experienced entrepreneur and non-executive director with innovative, growth-oriented technology companies, and Luke McIver, who has extensive international experience in senior management positions in data and marketing technology companies, who has become a respected thought leader in the industry.