Many have predicted major consolidation in the ad tech space
over the past few years either through positive M&A activity or failures.
And recently, there have been voices pushing back on the concept altogether, with
smaller companies pounding their chest about climbing revenues, profitability
and announcing funding rounds.
Most of the doom and gloom predictions started popping up
after the Lumascape logos got so small that a retina iPad couldn’t even make
them out. I’m writing this on the heel of two major consolidation events, both
Aol’s acquisition of Adap.Tv and Millennial Media's tackle onto JumpTap. These are perfect
examples of consolidation and many will scream that the wave is beginning to
crest. Hooray for simplicity!
However, I’m going to point out another outcome, which I
call perpetual aggregation. Simplicity will never come. Since the dawn of the
web, the number of different formats and monetization methods have exploded,
like the big bang. In the early days it was text links, pop ups, email
newsletters and the jaw dropping page takeovers that would have ad ops people
huddled over a CRT monitors watching the Hulk break through the Yahoo homepage.
Where are those companies today? Some mediums weren’t large
enough to hold a separate set of companies before their model was copied easily,
but a few are around that have evolved, consolidated others or have been
consolidated. Every new opportunity brings more companies that specialize in
each niche. Whether it’s a format like mobile, social, video or trends like
audience data and RTB, each of these innovations have spawned many new
companies. I don’t believe it is going to stop either. What about ads on wearable
computers, or DSPs for digital billboards, taxicab video ads and streaming mobile
audio? As long as there is niche and a slight hurdle to entry, there will be a new
company to jump on the opportunity.
These new companies will continue to pop up as others are
consolidated, or aggregated into larger entities that want to be able to offer
the full stack. They need to be able to “check the box” on these with their
customers, so they acquire as opposed to building. And as long as the larger
players can take them in, the smaller ones will continue to be founded upon new
innovations. Many entrepreneurs in our industry are even multiple repeats,
seeing a trend in their previous company that they bring to a new one. Their
consolidated company spawns a new one.
This has caused an endless trend of aggregation as well, in
an effort to simplify and scale. A new format comes out and if it’s successful,
immediately there is a race to the top level of aggregation. A network, then
exchange, then SSP/DSP. (Yes, even data went this route.)
The recently consolidation wins are great for the entire
industry, not only because it relieves some pressure, but it motivates more
innovation. Don’t get me wrong, there will there be saturation points in every
area that pops up and there will be failures. But when we see breakthroughs and
game changers emerge, it’s exciting and we wouldn’t have any of these
breakthroughs without the cycle above.
