In a Crowded Field, How Can You Tell the Real Winners in Ad-Tech?
The technology landscape is more complex and crowded than ever in the history of digital marketing. Strangely, the industry seems to revel in just how complicated digital marketing can be. It's a self-congratulatory pat on the back, as if to say to clients, "Few people can figure this out, so you're fortunate to be working with me."
Ad tech will continue to be a fluid and crowded landscape for the foreseeable future. And that's ok. In fact, it's a good thing. History shows that innovation in ad tech comes from challengers, not incumbents. The pattern has been oft-repeated: innovation, then acquisition. Smaller, focused companies frequently serve as a type of outsourced R&D arm for industry giants.
Look at the first two decades of acquisition in digital advertising. Third-party ad serving: DoubleClick (acquired by Google) and Atlas (Microsoft then Facebook); Rich media: Mediamind (DG) and Pointroll (Gannett); Search tools: Performics (Google then Publicis) and Efficient Frontier (Adobe); Exchanges: Right Media (Yahoo), Invite Media (Google), Adap.TV (AOL) and MoPub (Twitter); Mobile advertising: Ad Mob (Google) and Quattro (Apple; Social marketing: Buddy Media (Salesforce) and Vitrue (Oracle).
A host of other companies have pursued public offerings. Millennial, Criteo and Rocketfuel have taken that route, while AppNexus, BrightRoll, Rubicon Project, Pubmatic, MediaMath and others are at various stages of heading down the same path. We can expect to see the story of innovative ad-tech upstarts rising above the fray repeated in video, interactive TV and other growth channels for years to come. The industry moves too fast to be simplified.
So how do we separate the wheat from the chaff?
Marketers: Your job will continue to get harder, and the industry more complicated. Your challenge is to understand what's a commodity and what's an innovation. Hint: it won't look like a better version of something you already have, and the solution won't sound more complex than the problem.
Ad-tech companies: You won't challenge the industry by providing a commoditized solution to a known problem. Be open and brave enough to make clear comparisons to your competitors … no smoke and mirrors. Your clients should partner with you because your product helps them navigate the market more efficiently, not because "it's a really complex industry and we understand it better than you do." If your clients get better results with your product, their competitors will race to catch up.
Investors: Do not let short-term sales numbers become a predictor for long-term success. Many ad-tech features are easily duplicated, and when they are, customer interest can dry up overnight. It's the companies building solutions for new markets that will succeed, even if they are ahead of customer demand in the short term. Those winners will also be the ones who are focused on the simplicity of their solutions, rather than the complexity of the market.
Dave Morgan, an industry veteran who founded RealMedia (the predecessor to 24/7, acquired by WPP) and then Tacoda (acquired by AOL), is nearing an entrepreneurial three-peat with the success of his current company, Simulmedia. According to Morgan, "You must deliver a product that is creating a new market. There isn't a need for a different flavor of established solutions. There is a need for breakthrough software that truly makes marketing more effective and efficient."
The ad-tech industry should continue to embrace challengers and disruptors, as we've done for 20+ years. The onus is on marketers and media companies to recognize innovation when they see it and on tech companies to prioritize "client-product-fit" over quick sales. There is still plenty of breakthrough success to be had before the well dries up, as long as both sides are thoughtful about where we dig.