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"Every ad tech company that's good at the web has to get good at
mobile," said David Pakman, a partner at VC firm Venrock and
investor in Media6Degrees.
Criteo, Media6Degrees and X+1 in particular
have built businesses on the ability to target people online with
ads based on their browsing behavior. To do so they largely rely on
cookies that can be dropped on a browser and track the kinds of
sites someone visits in order to build an audience profile and
target ads accordingly.
Problem is, cookies don't really work on mobile. That means
these companies may not get a slice of the growing mobile ad pie
and be left fighting over desktop advertising's shrinking
crumbs.
Desktop ad spending is expected to plateau at $35.4 billion next
year then proceed downhill,
according to eMarketer estimates. Mobile display ad spending,
meanwhile, is on a steady upswing. U.S. mobile ad revenues
increased by 111% in 2012 to hit $3.4 billion,
according to the Interactive Advertising Bureau, and eMarketer
expects mobile display ad spending to rise by 100% in 2013 and
54% in 2014.
Mobile advertising remains a nascent business, but mobile ad
tech is beginning to mature. Asher Delug, CEO of mobile ad network
Airpush, looked to mobile ad network Millennial Media's recent stock
turnaround as boosting financial interest in the sector. "While
[Millennial's stock] was so low, it kind of put a freeze on mobile
ad tech IPOs that were in the pipeline as well as mobile ad tech
private funding deals."
The warming interest has enabled an overcrowding of companies
focused on automating mobile ad buying. Mr. Delug said
Media6Degrees' purchase of EveryScreen Media "is indicative of the
fact that a lot of these mobile [ad buying companies] are about to
start consolidating by going out of business or getting
acquired."
Many may fold, but not all as their online counterparts seek to
pick up mobile skills.
"Because big companies have not invested adequately to be the
leaders they all want to be, now is a good time for them to acquire
companies to allow them to catch up, particularly when they don't
have to pay huge numbers to get in the game," said Jeff Green, CEO
of online ad buying company The Trade
Desk.
Yahoo's mobile problem
Yahoo is perhaps the best example of a company in need of better
mobile ad tech. The company attributed its
flagging second-quarter display advertising revenue to
consumers' migration to the portal's less lucrative mobile
properties and ad buyers' adoption of automated ad buying that lets
them place auction-style bids for impressions tied to particular
users in real-time that are typically cheaper than deals worked out
with Yahoo's direct sales team, like booking a hotel room the day
of your stay when the hotelier might be pressured to cut prices so
as to not miss out on money from vacancies.
To help address its two pain points, Yahoo has purchased
AdMovate, a virtually unknown ad tech company that is less than a
year old and specializes in automated mobile ad buying (the company
could have helped itself yesterday by announcing the AdMovate deal
prior to earnings, which the company debated doing, said Yahoo
SVP-display advertising and advertising technology Scott Burke).
Mr. Burke said Admovate's team of five engineers -- a couple of
whom had previously worked at online ad buying firm Turn -- will join
Yahoo's Sunnyvale, CA-based display advertising team to focus on
"how to make programmatic buying work well in mobile."
"They'll be kind of joining the core area where we're building
out programmatic capabilities around [Yahoo's ad exchange] Right
Media.," Mr. Burke said. "We're also looking now at investments for
accessing programmatically all of our inventory, so not just
non-guaranteed but exploring ways to do programmatic guaranteed or
what the industry is calling programmatic premium is a related area
of investment. And the AdMovate guys will extend a lot of that
thinking into mobile."
Buying talent
Mr. Burke acknowledged the mobile ad tech acquisition trend but
described it as another form of hiring. "We would have hired them
individually off the street, but they weren't looking," he said,
adding that Yahoo has hired more than 150 advertising engineers
since Ms. Mayer charged him with rebuilding the display team last
fall. Mr. Burke echoed Mr. Green's claim that mobile ad tech
startups are relatively easy buys these days because of the
pressure on the fledgling companies to scale with limited cash on
hand.
"That's how these guys felt. They knew they'd have to go raise
money, they'd have to invest in a lot of capital infrastructure to
scale up a programmatic [business]. I've already got all that. It's
essentially free for these guys to come in and exercise their
skills at much larger scale," Mr. Burke said.
In particular the AdMovate team's skills center on mobile
targeting, having spent the startup's short existence trying to
figure out how to handle cookies and identify users on mobile
devices without infringing on their privacy. "Especially for Yahoo,
because we're such a big media property, we also have to invest in
how we target users that aren't logged in," Mr. Burke said.
For now Yahoo's mobile focus is as much on mobile web as Yahoo's
mobile apps, but Mr. Burke said the emphasis in the long run is on
mobile apps. That's not surprising given Yahoo's aggression over
the last year in acquiring mobile app companies like Summly and
Stamped as well as the company's plans to develop new mobile ad
products.
Apps eclipse mobile web
Consider how mobile app usage has eclipsed time spent on the mobile
web. Of the more than two-and-a-half hours a day people spend on
their smartphones and tablets, 80% is within apps versus 20% on
web,
according to mobile app advertising and analytics firm
Flurry.
Online ad companies may be able to perform rudimentary ad
targeting on mobile web sites, but "they're totally blind to the
in-app market," said Mr. Delug. In-app ad targeting requires
back-end technology to access an app's first-party data, such as
users' device IDs, in order to recognize what apps someone uses and
show them ads based on that behavioral information. Mr. Delug
pointed to Criteo's acquisition of mobile app tracking company Ad-X
as an example of "the ultimate Trojan Horse data strategy" because
the startup's "data assets could be some of the best ones in the
industry."
Part of the push to figure out mobile targeting may be how it
can benefit companies' online advertising businesses. That is, if
online ad companies are able to figure out how to target ads on
mobile without cookies, they could apply that online and mitigate
the doomsday scenario that looms as desktop browsers like Mozilla's
Firefox seek to prevent the use of third-party cookies
"If you're good at anonymous targeting on mobile, which you kind
of have to be, that technology is transferable back to the
[desktop] web. It's a hedge against uncertainty around cookie-based
targeting on the web," Mr. Pakman said.
A Yahoo DSP?
That could further explain why Mr. Burke sees AdMovate as
strengthening Yahoo's buy-side capabilities. More than a few ears
perked up when Yahoo CEO Marissa Mayer said during yesterday's
earnings webcast that Yahoo has a programmatic buying service, or
demand-side platform, and that the company is looking into "can we
partner with other providers to be their DSP."
Asked about Ms. Mayer's statement, Mr. Burke said Yahoo has
"historically" been providing buy-side capabilities "for key
clients, and so it hasn't been the case where we've launched
anything that we would call a DSP in market," though the size of
Yahoo's ad tech business means the company wouldn't bucket a
product or service as such.
"Nothing to announce as far as an overarching brand and name,
but it's an active area and we're going to market with a more
sophisticated buy-side and pitch it to key agency clients and
trading desk partners," he said.
