[Column] Eric Visser: Ad-tech's Wild West sees companies consolidate at exponential rate
The past couple of years have provided the ad tech industry with a huge amount of growth. With the population forced to go digital during the pandemic, investors began to understand the value of adtech leading to this boom in investment.
Over the same period, the advertising industry has been working hard to find solutions to continue targeting consumers with relevant ads in the privacy-centric world we now live in.
As a result of all this money floating around and the need to find solutions, we're currently experiencing a mergers and acquisitions boom within the industry – and the consolidation looks set to continue for the foreseeable future.
Bringing everything together
Despite the pandemic, this industry, in particular, has seen substantial growth. That growth, combined with economic recovery in many nations, has helped to drive up the valuations of ad tech companies. Because of this we've seen more and more ad tech companies going public via IPO or SPAC, and more private equity firms investing heavily in the sector.
Companies go public or receive a big investment, then start acquiring other companies. This creates competition, resulting in the large volume of mergers and acquisitions currently occurring.
Beyond the financial incentive for businesses to consolidate, we also have to take into account the state of the programmatic advertising ecosystem.
We've seen programmatic grow from nothing to where it is today. But, in a world where the likes of Google, Facebook, and Amazon are picking up the majority of revenue spent on media it is leaving the remaining companies with a relatively small piece of the pie.
This is exacerbated as, within that minority share of the market, there are thousands of companies globally involved in something of a "Wild West" as they showcase their value proposition to solidify their spot as an industry leader. And despite many of these companies claiming to be unique, they often have the exact same offering.
Any business that fails to provide a truly unique value proposition, is simply not going to survive. And, as it stands, it's becoming clearer to many smaller ad tech companies that they need to become sustainable in order to not get left behind.
Creating a better ecosystem
Much of the need for individual companies to align with others ties to the fact that the industry is changing for the better. It's not just chan
ges to privacy and identity that are transforming digital advertising, but also a focus on supply path optimisation, demand path optimisation, mounting a challenge to the 'Triopoly', and the attention economy. Simplifying the programmatic supply chain and bringing systems, technologies, and platforms together is the way to address all of those things.
There's no need for thousands of companies to exist within the chain. Only a handful of DSPs and SSPs that connect to each other are required to create an ecosystem. Between them, there can still be a few special interest players, all bringing something unique into the space.
As it stands, there are a lot of companies just taking money between the advertiser and publisher without offering any value. If you count how many ad tech platforms are being added to each dollar being invested, you see that the amount of money being taken out of that money before it ends up with the publisher is insane and it's not sustainable.
As the cookieless world starts to become a reality, every company needs to have their value proposition sorted out. This will put us in a far better place, and I'm looking forward to playing a role in it as part of a larger corporation that is better equipped to grow the market and emphasise its value proposition.
Though lots of smaller companies will disappear and merge into larger companies offering true value, we'll see startups with disruptive technologies and new innovations popping up in areas that the bigger businesses haven't thought of. These smaller companies will then be built to drive innovation, and not just be around to grab a piece of the dollar.Ad buyers will also love the consolidation, as reducing the number of vendors means they can focus on driving value and delivering great campaigns.
So, the ongoing consolidation boom can only benefit the industry as a whole. Roll on 2022.