Ad industry insiders say one of Facebook’s oldest and biggest marketing partners is selling its social business, and it’s a warning sign for other ad-tech firms

FILE - In this April 30, 2019, file photo, Facebook CEO Mark Zuckerberg makes the keynote speech at F8, Facebook's developer conference in San Jose, Calif. A Wall Street Journal report says that the FTC has voted this week to approve a fine of about $5 billion for Facebook over privacy violations. The report Friday, July 12, 2019, cites an unnamed person familiar with the matter. (AP Photo/Tony Avelar, File)

  • Boston-based Nanigans is looking to sell its social-buying arm, according to ad-tech executives and an ad-tech investor.
  • One of Facebook’s larger and earliest marketing partners, the tech firm helps advertisers buy and measure ad campaigns on Facebook and Twitter.
  • Sources said that Nanigans has struggled to compete with Facebook’s own ad-buying tools.
  • Facebook has also cut back on the amount of access ad-tech companies have to its platform.
  • Nanigans’ headcount has declined 30% to 102 employees since August 2017, according to LinkedIn.
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Marketing-tech company Nanigans is shopping its social ad business to advertising and marketing companies, according to industry sources.

The 9-year-old firm is one of Facebook’s oldest marketing partners. The firm has raised $32.9 million from investors including Avalon Ventures and Cheetah Mobile and primarily works with brands that manage their marketing and analytics in-house. Its site lists clients including Wayfair and Rue La La.

There are two sides to Nanigans’ business: An ad-buying arm that buys social media ads for brands and an ad retargeting side that competes with companies like Criteo and AdRoll. According to a former sales employee, more than 90% of Nanigans’ revenue comes from its work with Facebook.

Rumors have circled for at least two years that Nanigans is up for sale. However, an investor and two ad-tech execs — one with direct knowledge of the talks — told Business Insider that Nanigans is trying to sell the social arm of its business.

Business Insider also spoke with two former Nanigans employees, one who worked in sales and the other who worked in marketing in the past two years.

"The social part is where they have existing customers and where the loyalty was," said the former marketing employee. "They’ve had a hard time keeping longer-tenured employees there — it’s definitely accelerated over the past year."

Business Insider could not confirm if Nanigans has hired a banker or how far along the sale process is. Nanigans and Facebook declined to comment for this story.

According to data from LinkedIn, Nanigans’ staff has shrunk 30% to 102 employees over the past two years. The data also shows that the number of sales roles has decreased 33% while the number of business development jobs has increased 8% in the past year. Among the higher-ups who have left recently are long-time head of client services Suzanne Wong and marketing VP Ryan Kelly. 

Matt Prohaska, CEO and principal of Prohaska Consulting, said he didn’t know if Nanigans was for sale but that likely buyers would be social publishers, and ad-tech companies that help advertisers and publishers buy and sell programmatic ads.

The investor speculated that the company would use the sale proceeds to build a business that helps marketers organize their data similar to LiveRamp.

Nanigans rode the Facebook wave until it dried up

Nanigans was one of the earliest third-party companies to pipe ads into the social platform. Nanigans was one of 16 firms that Facebook picked in 2012 to be part of its FBX ad network that shut down in 2016. Nanigans and other Facebook marketing partners build custom products for advertisers on top of Facebook’s API. Gaming company I Got Games, for example, worked with Nanigans to target app-install ads at specific audiences.

Read more: Industry insiders identified 4 headwinds that could dent Facebook’s $55 billion ads business

Advertisers typically spend an additional 3% to 5% of their ad budget to work with a marketing partner like Nanigans who knows the Facebook ropes, according to ad-tech and former employee sources. For example, an advertiser spending $1 million on a Facebook campaign would pay Nanigans an additional $30,000 to $50,000.

But with mounting data concerns, privacy scandals like Cambridge Analytica, and growing regulatory scrutiny, Facebook has pivoted to privacy and cut back on the amount of access ad-tech companies have to its platform.

Last year, it shut down a program called Partner Categories that allowed firms like Acxiom and Epsilon to create targeting audiences for big brands. More recently, Business Insider reported that marketing firm Hyp3r was kicked off of Facebook’s platform for scraping and storing data from Facebook-owned Instagram. Hyp3r contended that its practices did not violate Facebook’s rules because it used public data.

Facebook built its own free software that competed with Nanigans

In the past couple years, Facebook also beefed up its own free, ad-buying software called Ads Manager, which put it in competition with Nanigans and other ad-tech companies like SocialCode, Kenshoo, and Adaptly that manage Facebook ad spend, sources said.

"Everyone wanted to get in bed with Facebook because Facebook was growing," said the same former Nanigans sales employee. "The market got very crowded, and I don’t think anyone realized how fast Facebook was going to develop their own free platform … everyone started fighting for scraps."

In particular, it became difficult for Nanigans to keep smaller advertisers on board, and both former Nanigans execs noticed an uptick in churn with clients.

"There was a realization that a social-only [business] — especially Facebook — wasn’t going to be realistic," said the former marketing employee.

Nanigans has tried to diversify its business to platforms like Twitter and retargeting software, although Twitter is better situated for branding campaigns than the performance campaigns that Facebook advertisers are accustomed to. 

Nanigans’ competitors are also scrambling

Nanigans’ competitors have also scrambled to diversify their revenue.

In December, Accenture Interactive acquired Nanigans’ competitor Adaptly, which helps brands buy ads across platforms like Facebook, Amazon, and Google. Adaptly is handling programmatic buying for some of Accenture’s clients like Sprint and Mazda.

SocialCode, meanwhile, has made inroads with Amazon. SocialCode is owned by The Graham Holdings Company, which also owns digital publisher Slate and educational service Kaplan. A year ago, SocialCode acquired Marketplace Strategy, an Amazon-focused marketing firm.

Read more: Facebook’s Carolyn Everson says that advertisers should focus on its massive reach instead of narrowly targeting consumers

Today, Facebook is heavily pitching advertisers on using its first-party data and in some cases encouraging advertisers to target less. 

"Any company that sat on Facebook has been at risk," the ad-tech investor said of Nanigans’ Facebook-heavy business.

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