Wednesday, December 6th 2023

Electric Guitar PLC

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Companies can offer their customers genuinely useful personalised services with the help of Electric Guitar


“…a rare opportunity for small cap investors in Electric Guitar to gain exposure to a rapidly growing digital marketing sector…”


After raising more than £1m on joining the LSE main market earlier this year, special acquisition venture Electric Guitar (LSE:ELEG) is on the lookout for ambitious enterprises with the imagination to take advantage of a fast changing digital marketing sector.

ELEG was established last year as a ‘SPAC’, a special purpose acquisition company offering a vehicle for growing businesses seeking to join the markets without having to go through a lengthy and costly IPO process. Once an acquisition is made, the SPAC changes its name and listing code, becoming a conventional listed company valued thereafter according to the performance of the business in which it has invested.

ELEG is led by CEO John Regan, a marketing data and digital entrepreneur whose first marketing analysis business, founded in the 1990s, was sold on to Havas where it became part of the EHS Brann Group, creators of  the Tesco Clubcard, one of the UK’s earliest large scale data driven marketing operations. Mr Regan’s subsequent enterprises have included data intelligence and analytics ventures bought out by communications business Communisis, and Mymyne, an advertising technology business providing cookie free digital advertising. Non-executive Director Luke McKeever, a marketing data and technology strategist, has been a CEO and a board member of several AIM-listed and private technology businesses, including Capital ID. Chairman John Hutchinson is both a corporate lawyer and entrepreneur, having also served as Chairman at medical devices company Intavent Limited.

The team want to use ELEG’s capital and their accumulated expertise to supercharge the development of companies with the potential to take advantage of a marketing industry moving through a paradigm shift, as a host of new digital technologies offering novel ways to connect with target audiences reach maturity. Data tracking and metrics software allow advertisers to gather ever more detail information about the preferences of target audiences, and how they use digital platforms, allowing them to continue to refine tailored and personalised messages. Increasingly intelligent chatbots, social media and other modes of conversational marketing are enabling a higher quality of interactions with audiences. New marketing AI is making it easier for customers and companies to sustain meaningful online dialogues that give audiences genuinely useful information: search engines like Google, for example, can already process and respond to verbalised queries. And the evolving metaverse,in which individuals interact with one another as digital avatars in a virtual world, is opening rich new advertising opportunities. Facebook’s decision to rebrand as Meta as it works to open the metaverse to its 3.6 billion users, signals the potential reach of this emerging platform.

These new technologies are reaching a digital market that continues to expand as the internet reaches more and more people across the world through the mass rollout of broadband and smartphones. A new Statista report estimates $356bn was spent on digital advertising in 2020, with spending projected to rise to $460bn by 2024.

The move from third-party to first-party cookies


The shift presents challenges as well as opportunities. Older technologies are becoming obsolete, notably the ‘third-party cookie’ infrastructure digital marketers have relied on since the turn of the millennium. Google’s confirmation that its Chrome browser will no longer support third-party cookies by the end of 2023 threatens a ‘cookie apocalypse’ for those agencies unable to adapt. 

Third-party cookies, tiny parcels of data placed on browsers as users move around the web, have long allowed marketing teams to track customer journeys from site to site, gathering data that can be used to deliver targeted ads, and to measure their effectiveness in converting clicks to sales. Google’s adjustment, following in the footsteps of Apple Safari and Mozilla Firefox, will be the final blow to a 25-year-old technology that has generated increasing privacy concerns. In recent years privacy regulations – such as the EU’s General Data Protection Regulation (GDPR) – have required websites to obtain user consent before cookies can be served. But users still cannot see the advertisers on behalf of which third-party cookies are set, and still don’t know who is viewing and processing their data. Bombarded by slow loading and often irrelevant ads that follow them round the web – even for items they have already purchased – many have taken matters into their own hands and installed ad blockers. When Chrome, which handles around two thirds of all web traffic, blocks third-party cookies, advertisers will no longer be able to use them to track users from site to site and deliver personalised ads.

It’s a big change. But it leaves the field open for enterprising ventures committed to imaginative marketing strategies that use data and technology in new ways to deliver experiences which consumers find valuable. One such technology is the first party cookie framework that facilitates core website functionality like user registration and logins, and interaction with shopping carts. Used in the right way first-party cookies allow marketers to develop transparent relationships with customers prepared to make their data available in return for a service they value, giving advertisers higher quality information about their customers, and giving customers the confidence that their data is being used with respect. User willingness to make personal information available in return for a valued service has been amply demonstrated by the runaway success of the big social media platforms. 

Many companies are still scrambling to prepare for the shift. Nearly half of those who responded to a recent industry survey conceded they are not yet adequately leveraging first-party data sources in their decision-making. Even though nearly two-thirds identify the value of first-party data and analytics platforms in their onboarding processes, only 44pc were investing in first-party data platforms. And less than a third say they had a mature onboarding approach to leverage such information effectively.

Electric Guitar’s opportunity


For ELEG, the turn to first party data and the possibilities opened by new digital marketing technologies is going to electrify the industry just as Les Paul’s new instrument galvanised popular music when it first appeared in the 1950s. The company’s communications speak of a new world of ’360 degree data intelligence’ taking advantage of ‘in store, offline, online, in app, AR (augmented reality) and metaverse’ innovations that will allow the type of ‘tailored, connected experiences  that forward thinking businesses are deploying, to immerse consumers in a brand’. Intelligent and sympathetic use of first-party cookies gives companies access to a host of tools for developing rich customer profiles, including online registrations, subscriptions, purchases, downloads, mailing lists and social media interactions, and offline communications encompassing customer surveys, call centres, and conversations with staff in stores. Equipped with rich customer data, companies can offer their customers genuinely useful personalised services, moving beyond often clumsy and intrusive third-party cookie techniques.

In an interview with TMS last month Mr Regan said ELEG was looking for companies with the imagination to ‘understand and build customer experiences like Tesla and Apple’, prepared to create connected strategies to develop ‘customer journeys’ rather than ‘just firing out disjointed tactical advertising campaigns over a period of time’. Mr Regan believed that a ‘lot of the time what those businesses need is access to the right people … and they need access to capital, and an injection of technology’ – all of which ELEG can provide. The team is looking for ‘a platform business that has the right infrastructure to create what we need to create, and who will probably be doing a lot of these things already. Then we will inject talent into that business, but also buy other businesses to bring in expertise, scale, specific technology and specific talent to supplement that.’ The money raised through ELEG’s IPO will fund the ‘process of identifying those first one or two targets, to pay for the advisers, to pay for the legal fees and everything else, and get us to the point where we will go back to the market, and then raise more capital to inject into those businesses.’ Going public opens the way for the company to pursue ‘a very fast growth curve’, giving access to funds commensurate with the demands of rapid development.

Having gone public ELEG has been able to begin formal conversations with ‘a big long list of businesses’, and establish connections with ‘a virtual team of industry talent who are all waiting to join us when the time is right’. Mr Regan said ELEG’s primary challenge is to set out a compelling case to target companies to join them on the exciting journey to create a market leading data powered advertising business, and to retail investors unfamiliar with the complex dynamics of the digital marketing sector. ‘Data is not interesting to most people, particularly not to people who are creative’, he said. But he believed ‘people are beginning to understand it, particularly as things like the metaverse and cryptocurrencies evolve’.

Electric Guitar has time on its side, LSE rules allowing SPACs 24 months to make a significant acquisition after listing. Indeed, Mr Regan said the company wants to ‘make announcements over hopefully more than one acquisition’ over the next two years. It has several several interesting role models. S4Capital, for example, Sir Martin Sorrell’s new venture after leaving WPP, has grown from a standing start in 2016 to a market cap of $3bn in five years, as it focuses on helping advertisers leverage first-party consumer information to plan, personalise, and optimise their digital media and content. Sir Martin, describes first-party data as ‘the holy grail’, believing Google’s decision underlines ‘the importance of first-party data and how consumer trust and privacy are moving to the forefront of marketing’: from now ‘digital consumer relationships will be earned by customer experience and value exchange.’ Another trailblazer, The Trade Desk, which provides a platform on which companies can build first-party data ad campaigns, has more than doubled in value over the past year, racing to a market capitalisation bigger than Omnicom and WPP – the world’s biggest advertising empires – combined. Mr Regan wants to apply that winning philosophy with smaller caps.

Looking ahead


It’s very early days for ELEG, but this is a new start promising a rare opportunity for small cap investors to gain exposure to a rapidly growing digital marketing sector. The company is ambitious, clear-sighted about the industry’s evolving opportunities, and led by a team with extensive experience and connections. Investors interested in learning more should review the company’s busy Twitter account, which offers a panoramic overview of the digital marketing landscape. Priced just over 3p, Electric Guitar is one to watch over the next two years.