Is Ad Tech Eating the World, or Eating Itself?
Consolidation was supposed to happen a decade ago. It may finally be here.
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Five years ago, I wrote the following post for Business Insider:
'We need a fundamental rethink': MediaMath, long seen as an ad tech takeover target, is instead building a war chest to fix a broken industry
The ad tech company MediaMath has received $225 million in financing from the private equity firm Searchlight Capital Partners.
This past week, MediaMath essentially went poof. Even for crazy, sometimes illogical industry, the speed of this collapse is fairly stunning.
From the sound of it, this was a uniquely dysfunctional situation (Lara O’Reilly of Insider does some tremendous reporting here). Still, I’m wondering if there is a conclusion to draw from the following list of headlines:
Mediamath is going under
Xandr, which was once AppNexus, seems to be pulling back on servicing non-Microsoft brands
Kroger is pulling its retail media network in house
Yahoo dumped its SSP
Google may have to exit the third party programmatic business entirely - which could be for the best, since they’re not so good at it
Everyone says they want to shrink the supply chain, either to save money, gain transparency, or save the earth
Maybe these things all unrelated. But I wonder if we’re seeing the beginning of a shrinking of an industry that was long predicted to implode but has proven enormously resilient.
You might even ask, does Ad Tech, in the long run, actually lend itself to monopolies? And is that bad thing?
After all, if you were a MediaMath client who is suddenly in need of a new partner to execute your digital advertising, what exactly draws you to a Viant or a 9th ranked DSP, over The Trade Desk, which just seems to be getting bigger and stronger?
Of course companies such as Magnite might argue that you don’t even need a DSP, as they can connect you directly to premium inventory (just like the Trade Desk claims).
I had a recent podcast interview with MiQ’s Chief Revenue Officer Charlie Neer. On the subject of consolidation, he sees things very differently.
“One thing we’ve seen in programmatic is that everything becomes more,” he said. “Ten year ago, you could probably name two DSPs. Now everyone is a DSP. I just heard 7-11 is a DSP.”
In his view, every Retail Media entrant isn’t just getting into ad tech, it’s building a DSP of its own - while they may not frame it that way. I think Neer may actually be help make my point. The more that RM grows, the more companies build their own stacks, the less they’ll likely need independent ad tech companies.
Of course the counter argument is that owning your own RM ad tech could be much like brands’ experiences bringing everything in-house. Sounds easy, until you actually try it.
There is also the issue of the non-walled-garden open web, which has already been struggling maintain its small piece of the digital ad pie, and according to The Rebooting, is likely to become a major shit salad thanks to AI. How strategically important is the long tail likely to be going forward for many brands? And how much ad tech will be needed to support a shrinking portion of the online experience?
We’ve already see an example of a smaller ad tech pool in connected TV. Yes, to be sure, by nature the TV ad ecosystem is smaller and more closed, since only about a dozen companies really matter. So naturally, there are fewer ad tech companies who can claim a meaningful slice. A handful of monopolistic firms may be a likely outcome, and if that ends up working just fine for a $70 billion sector, the rest of the web could follow suit.
Especially considering that the future of media buying is likely to be driven by AI technology - not just programmatic pipes, but fully automated buying and optimization and black boxes. How many DSPs and SSPs will have the resources and volume to compete in that world?
If you start doing the media math on that one, does the Lumascape starts looking smaller?