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Sito?s $3.7M acquisition of Hipcricket reflects SMS-space pressures

SMS marketing pioneer Hipcricket?s acquisition by Sito Mobile for a mere fraction of the price of its purchase by Augme four years ago points to both the unpredictable speed of shifts in the ad technology field and a challenging environment for companies in the SMS space.

Sito, a mobile engagement platform provider, said it acquired the mobile advertising business from Hipcricket for $3.7 million, including $2.4 million in stock and $1.3 million in cash. In 2011, Augme bought the company for $44.5 million.

?As lines of digital, social and mobile business move beyond the threshold of emerging technologies peak of inflated expectations, there is a shift towards creating business value at scale,? said Tom Edwards of The Marketing Arm, Dallas. ?Some of the issues of the past year have been tied to connecting cross-screen attribution, viewability and offline conversion. 

?Sito is hoping that by expanding their reach and bolstering their ad network they can create more relevance and deliver value at scale to brand marketers,? he said.

Revenue streams
The purchase will enable Sito to tap new revenue streams for its mobile advertising business through Hipcricket?s existing customer relationships with both advertisers and brands, the companies said in a release.  

Hipcricket filed for Chapter 11 bankruptcy early this year.

Hipcricket?s customer base has included Macy?s, MillerCoors, Nestle and KFC among 38 of the Fortune 100 companies.

The deal will also expand Sito?s product lines based on technology from Hipcricket?s adServe platform through which Hipcricket generated nearly $30 million in revenue in the past 30 months.

Hipcricket was founded in 2004 and provides services for marketing to consumers via their mobile devices using SMS, 2D/QR codes, MMS, mobile Web sites, advertising networks, social media and branded applications.

The company also offers a permission-based ad network that targets customers via location and demographic information using SMS, display, rich media and video technologies.

The sale caps off a process that reached a high point early this year when Hipcricket filed for Chapter 11 bankruptcy and had sought court approval to sell assets to Sito for $4.5 million.
 
Hipcricket said at the time that business would be uninterrupted as the company sought authorization to approve the purchase by Sito as the stalking horse bidder chosen by Hipcricket. The news came as SMS marketing faced an increasingly difficult environment, particularly in the United States, for a variety of reasons.

Acquiring Hipcricket will be a major growth catalyst for Sito, CEO Jerry Hug was quoted in the release.

?For Sito, this adds a new layer of services, human capital and a broader network that will integrate with their existing location based offerings,? Mr. Edwards said. ?This could provide a one-stop shop approach that may be appealing to those looking to invest in comprehensive mobile buys across their product offerings.? 

While SMS was one of the early successes in mobile marketing, the companies in this space are under increasing pressure to evolve or be acquired because of limited features, high prices and growing use by consumers of messaging applications and by marketers of other messaging strategies, such as push notifications, beacons and in-app messages.

Rich media
It remains to be seen whether Sito intends to improve on Augme/Hipcricket?s effort to deliver advertising and mobile marketing through mobile rich media across both mobile applications and mobile display. 

Creating a value proposition for advertising partners.

?It is difficult to comment on Sito's intentions, but it would appear that they are looking to bolster their position through Hipcricket's staff and network to create a greater value proposition for its advertising partners,? Mr. Edwards said.

Final Take
Michael Barris is staff reporter on Mobile Marketer, New York