Gartner’s Marty Kihn recently made an argument that ad tech and mar tech would not come together, contrary to what he had predicted a few years ago. When Marty speaks about ad tech, people listen.
Like many people, when I read the headline, I thought to myself, “That makes no sense!” But those who read the article more closely understand that the disciplines of ad tech and mar tech will certainly be bound closer together as systems align – but the business models are totally incompatible.
Advertising technology and the ecosystem that supports it, both from a commercial business model perspective (percentage of media spend billed in arrears) and the strong influence of agencies in the execution process, has meant that the alignment with software-as-a-service (SaaS) marketing technology is not just an engineering problem to solve.
Marketing leaders and brands need to change the way they do their P&L and budgeting and reevaluate business process flows both internally and with outside entities such as agencies to ensure that even if the technology may be right, the execution needs to be optimal to achieve the desired results.
There are also plenty of technical hurdles to overcome to truly integrate mar tech and ad tech – most notably, finding a way to let personally identifiable information and anonymous data flow from system to system securely. While those technical problems may be overcome through great software engineering, the business model challenge is a more significant hurdle.
I remember getting some advice from AdExchanger contributor Eric Picard when we worked together some years ago. I was working at a company that had a booming ad tech business with lots of customers and a great run rate, operating on the typical ad network/agency percentage-of-spend model.
At the time, we were facing competition from every angle and getting disrupted quickly. Eric’s suggestion was to transform the company to a platform business, license our technology for a fixed monthly fee and begin to build more predictable revenues and a dedicated customer base. That would have meant parting ways with our customers who would not want to pay us licensing fees and rebuilding the business from scratch.
Not an easy decision, but one we should have taken at the time. Eric was 100% right, but transforming a “run rate” revenue ad tech business into a SaaS business takes a lot of guts, and most investors and management didn’t sign up for that in the first place.
This is a long way of saying that Marty is right. There are tons of ad tech businesses that simply cannot transform themselves into marketing software stacks, simply because it requires complete change – from a structural financial perspective (different business model) and a people perspective (different sales skills required).
[This post appeared in AdExchanger on 5/9/2017]