Consolidation, ideas and technology
Technology holds the promise to solve the allocation of capital across media in the way that it has done for financial services, making markets more efficient and fostering economic growth by better allocation of capital - in this case marketing budgets.
In recent years there’s been a large proliferation in the number of automated ad trading or ‘programmatic’ platforms servicing different media disciplines. The issue is that there are too many of these ‘me too’ venture capital-backed tech businesses. The majority won’t deliver the value to achieve the scale required to win the race - which is more of a marathon than a sprint. Also, the fact that much of ad tech ecosystem is seen as layering a tax on trade suggests that the shelf life of many players is limited.
In most markets the infrastructure winners are typically limited to a select few. In the same way, consolidation of ad platforms will inevitably take place over the next ten years. The small number of winners will be those platforms which deliver a much more meritocratic media marketplace where money flows to the most deserving places, rather than where protectionism instructs it to go - bringing much more efficiency and fluidity to the sector.
These platforms will offer media owners access to the widest range of buyers, limiting transaction costs and enhancing yields; and for buyers, a single access point to engage with the vast scale of media, incorporating key first and third party data with real-time dynamic pricing, as well as transparency and accountability.
To be a valuable part of the consolidation process, scale is critical and if you are not a large-scale business you had better be doing something that no other company is capable of, which is rare. Everything else will gradually be competed out of existence.
Local scale or category scale will be ok for a time; for example, we at Bitposter have set out to be the dominant infrastructure provider for the outdoor media market.
In terms of the contenders, organisations with market valuations that are multiples of those of the major media holding companies, from Amazon to SAP and Oracle to Facebook, are all engaged either centrally or peripherally in this race.
Recently, Accenture, a global consulting firm with a market value four times that of WPP, has made some moves. Their day-to-day existence involves CRM implementations within the world’s largest brands. This gives them access to a significant amount of valuable first party consumer data from around the world, from which real time insight can be gleaned and applied to advertising spend on behalf of the same customers. The small step to competing directly against the large holding companies is to incorporate this data into a scale ad trading platform. With their size they could create one via acquiring or integrating the right component technologies across media channels. This is precisely what’s in their sights.
It’s too early to say who will dominate and win the race in the automated ad platform market. Those who are most likely to win will be those who can deliver right time decisioning of consumer data and have access to inventory on a global scale, powered by open, transparent and meritocratic platforms that drive efficiency and real return on investment.
While the component parts needed to achieve this exist, they are currently fragmented. This will change, with the big players establishing early battle lines.