Advertising technology professionals seem to be a dime a dozen in New York, with more than 8,000 of them in town for a recent conference. This is a sector that’s booming – but what can we on this side of the pond learn from the state of ad tech in New York?
1. Confusion in the ad tech stampede
Pity the ad buyer. There are literally hundreds of startups in this space – 225 exhibitors filled the hall of New York’s Javits Centre at the recent ad:tech NY conference to pitch their own – so many, in fact, that sorting the wheat from the chaff is becoming an up-hill task.
It doesn’t help that so many players are offering a near-identical blend of services. In an effort to elevate themselves above peers that offer specific individual services within the advertising chain, so many now claim to be “full-stack” or “end-to-end”, it’s hard to tell an ad network or exchange apart from a data management platform or demand-side platform. The ecosystem is becoming confused as silos merge, and you could forgive a customer for being equally so.
The sector certainly has its success stories – RocketFuel and Criteo recently went public and the likes of Adap.tv and Mopub have made big exits to AOL and Twitter. But, for many others in this crowded throng, failing to differentiate means failing to impress investors, and makes achieving a similar pay day challenging.
2. Data is the new battleground
Against this backdrop, every vendor you talk to is claiming their service has the perfect mix of data with which to serve the right ad to the right person at the right time and place.
Whether DSPs, real-time bidding platforms or affiliate marketing providers, ad tech outfits are right to pick data as their differentiator. And advertisers should play close attention, making their choice of service as much about data as about functionality. The question for vendors is becoming: “How is your data different?”. And the best answer should be that it’s due to proprietary data sets, whether that’s using the advertiser’s own customer data or third party proprietary data. That is one source of competitive advantage that cannot be easily replaced by the next piece of technology.
3. Ad tech firms are still competing for advertising spend not IT budget
Cloud-based advertising technology providers often wear their “software-as-a-service” (SaaS) badge with pride. But the revenue model for most of those I met at ad:tech NY doesn’t mirror what an investor in Salesforce or Workday would call SaaS.
By taking a percentage of the ad spend flowing through their system, rather than charging clients a licence-based subscription fee on multi-year contracts, the operators’ have more volatile and unpredictable revenue streams than their enterprise SaaS companies. It is however more scalable than an agency project-based model, and potentially more profitable. For now there is little evidence of ad tech companies moving to a more Salesforce type model, which sells access to its software on a per seat basis, giving it greater revenue visibility.
4. Programmatic must work harder to persuade premium publishers
So-called “programmatic” buying of online ad inventory using automated, targeting bidding initially entered the market in the bargain basement, spooking publishers who feared such techniques will drive down the price of their ad space.
This year, publishers have shown willingness to learn. News Corp and The New York Times launched their own programmatic desks, The Guardian launched an initiative with Project Rubicon. And certain large brands put most if not all of their performance-based display advertising through programmatic platforms. But this has been little more than the dipping of toes in water. Programmatic vendors must work much harder to convince premium publishers that their technology doesn’t devalue their inventory – after all, there should be more value, not less, in an ad that’s super-targeted and highly effective.
5. Mobile M&A is lagging opportunity
After years of promise, mobile has made it. Everyone is talking about mobile advertising, and many ad:tech NY delegates I met believed Twitter, following its recent IPO, will make a huge success of the opportunity. No other operator has the user data to target mobile ads like Twitter. The firm’s flotation has seriously refocused marketers’ minds on mobile advertising.
But you wouldn’t know it from looking at the ad tech M&A space. Whilst we continue to see investment and acquisition in the video, ecommerce and social advertising spaces, barring a couple of high profile exceptions (Twitter’s acquisition of Mopub for a reported $350 million being one) most deals in the mobile ad tech sector have been ‘acqui-hire’ type transactions, often with a location-based advertising angle. Talk as well has changed from mobile as a “channel” to talk of devices, specifically smartphones and tablets. M&A activity in the “mobile” sector is likely to accelerate as other ad tech platforms bring “mobile” in house.
Written by Julie Langley, Results International