An Ad Tech Temperature Check

tenmpcheckClayton Christensen, the father of “disruptive innovation,” would love the ad technology industry.

With more than 2,500 Lumascape companies across various verticals chasing an exit, venture funding drying up for companies that haven’t made an aggressive SAAS revenue case and the rapid convergence of marketing and ad technology, the next few years will see some dramatic shifts.

The coming tsunami of powerful megatrends is driving ad technology relentlessly forward at a time when data is king and the companies that best package and integrate it into multichannel inventory procurement will be the rulers.

In a world where scale matters most, the big are getter bigger and smaller players are getting forced out, which is not necessarily good for innovation.

Data: Powering The Next Decade Of Ad Tech

Data, especially as it relates to “people data,” is and will be the dominant theme for ad technology going forward.

Monolithic companies with access to a people-based identity graph are leaning in heavily to identity management, trying to own the phone book of the connected device era. Facebook’s connection to Atlas leverages powerful and deeply personal deterministic data, continually volunteered on a daily basis by its users, to drive targeting. Google is attaching its massive PII data set garnered through Gmail, search and other platforms to its execution platforms with its new DMP, DoubleClick Audience Manager.

Both platforms prefer to keep information on audience reach safely within their domains, leaving marketers wondering how smart it really to tie the keys of user identity in a “walled garden” with media execution.

Will large marketers embrace these platforms for their consumer identity management needs, or will they continue to leverage them for media and keep their data eggs in another basket?

While some run into the arms of powerful cloud solutions that combine data management with media execution, many are choosing to take a “church and state” approach to data and media, keeping them separate. Marketers have to decide whether the risk of tying first-party data together with someone’s media business is worth having an all-in-one approach.

Agencies Must Adapt Or Die As Consultancies Edge Into Programmatic

Media agencies have also been challenged to provide more transparency around the way they procure inventory, the various incentive schemes they have with publishers and their overall methodology for finding audiences. With cross-device proliferation, agencies must be able to identify users to achieve one-to-one marketing programs, and they need novel ways to reach those users at scale.

That means a commitment to automation, albeit one that may come at the expense of revenue models derived through percentage of spend and arbitrage. Agencies will need new ways to add value in a world where demand-side players are finding closer connections to the supply side.

As media margins collapse, agencies need to act as data-driven marketing consultants to lift margins and stay relevant. They face increasing competition from large consultancies whose bread and butter has been technology integration. It’s a tough spot but opportunities abound for smart agencies that can differentiate themselves.

Zombie Companies Die Off But Edge-Case Innovation Continues

We’ve been talking about “zombie ad tech” for years now, but we are finally starting to see the end of the road for many point solution companies that have yet to be integrated into larger mar tech “stacks.”

Data-management platforms with native tag-management capabilities are displacing standalone tag-management companies. Retargeting is a tactic, not a standalone business, which is now a status quo part of many execution platforms. Fraud detection systems are slowly being dragged into existing platforms as add-on functionality. Individual data providers are being sucked into distribution platforms and data exchanges that offer customer exposure at scale. The list goes on and on.

This is an incredibly positive thing for marketers and publishers, but it is also a challenge. Cutting-edge technologies that give a competitive advantage are rarely so advantageous after they’ve moved into a larger “cloud.” Smart tech buyers must strike a balance between finding the next shiny objects that confer differentiating value, while building a stable “stack” that can scale as they grow.

That said, the big marketing technology “clouds” offered by Adobe, Oracle and Salesforce continue to grow, as they gobble up interesting pieces of the digital marketing “stack.”

Will marketers go all-in on someone’s cloud, build their own “cloud” or leverage services offerings that bring a unified capability together through outsourcing?

Right now, the jury is out, mostly because licensing your own cloud takes more than just money, but also the right personnel and company resources to make it work. Yet, marketers are starting to understand that the capability to build automated efficiency is no longer just a function of marketing, but a way to leverage people data to drive value across the entire company.

Today’s media targeting will quickly give way to tomorrow’s data-driven enterprise strategy. It’s happening now, and quickly

New Procurement Models Explode Exchanges, Drive Direct Deals

I think the most exciting things happening in ad technology are happening in inventory procurement.

Programmatic direct technologies are evolving, adding real audience enablement. Version 1.0 of programmatic direct was the ability to access a futures marketplace of premium blocks of inventory. Most buyers, used to transacting on audience, not inventory, rejected the idea.

Version 2.0 brings an audience layer to premium, well-lit inventory, while changing the procurement methodology. I think most private marketplaces within ad exchanges are placeholders for a while, as big marketers and publishers start connecting real people data pipes together and start to buy directly. It’s happening now – quickly.

I also can see really innovative companies leaning into creating a whole new API-driven way of media planning and buying across channels that makes sense. In the near future, the future-driven approaches of companies like MassExchange will bring to cross-channel inventory procurement a methodology that is more regulated, transparent and reminiscent of financial markets. It’s a fun space to watch.

Who will begin adding algorithmic, data-science driven automation and proficiency to the planning process, not just execution and optimization in the programmatic space?

Many of those in the ad technology and media game are here for the challenge, the rapid pace of innovation and the opportunity to change the status quo. We are all getting way more than we imagined lately, in a fun, exciting and fast-moving environment that punishes failure harshly, but rewards true market innovation. Stay safe out there.

[This post was originally published in AdExchanger on 6.16.15]

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