What Will Ad Tech Consolidation Look Like?

"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Pete Kim, CEO at MightyHive.

We have all been saying for years that the ad tech ecosystem is a mess that needs to be cleaned up. But few have offered concrete predictions regarding what this much-needed consolidation will look like.

I believe that the future of ad tech will be controlled by companies that can assemble four critical pieces: 1) a full stack, 2) an identity graph, 3) an enterprise software sales force and 4) a services ecosystem.

The full stack: Marketers need turnkey solutions

As a product manager at Yahoo, I learned the acronym FNAC, short for “feature not a company.”

Features are useful improvements to existing technology, but they often are introduced to the market as standalone point solutions. Taken to the extreme, the proliferation of FNACs results in an ecosystem that is littered with a seemingly endless number of point solutions. Sound familiar?

To demonstrate how ridiculous our current situation is, imagine what the automotive industry would look like if structured like ad tech. Rather than buying a car, a customer would buy thousands of individual parts and assemble it themselves. After countless errors and delays, consumers might end up with vehicles that get from point A to point B, but with safety, efficiency and design flaws. Extreme flexibility might be a worthwhile tradeoff for serious gearheads, but in truth, most people just want to put the key in the ignition and drive.

As full stack options begin to emerge, FNACs will have two choices: be acquired by one of the larger platforms or struggle for years to survive in a world that has simply moved on. Though sad in some ways, I believe that this is an overall positive and necessary trend. We need fewer, simpler and more powerful solutions that just work.

The identity graph: The foundation of data-driven marketing

Of the four ingredients needed for ad tech success, the hardest to build, by far, is the identity graph, which unlocks critical use cases such as first-party data activation, statistically relevant attribution and cross-screen integration, among many others.

Google, Facebook and Amazon, with their vast user bases, are best positioned to provide this insight. All three pass my litmus test for world-class identity graphs: When anyone buys a connected device, they will undoubtedly log in to these services within 24 hours, if not immediately.

As a result, each of these companies has data tied to a logged-in user – not a fallible cookie – and can provide insight into behavior across devices and channels, not just discrete browser sessions. While perhaps an unpopular view because of the dominance of the so-called walled gardens, it’s one or all of these three that marketers will want to engage with more in the future. And even now new entrants are coming to the fore – AT&T’s formidable assets may well merit a spot on this very short list.

A recent column posited that the rise of AT&T, Verizon and others may force Facebook and Google to bring down some of the walls around their data and increase the importance of data portability for marketers.

The article was right to highlight AT&T, Oath and others, and yes, data portability will be important for marketers. But the emphasis should be the portability of enterprise and first-party data, not walled garden data. The identity graph owners are more likely to set up clean rooms than bring their walls down. Marketers with the infrastructure and processes to port their data into and out of these secure and privacy-safe clean rooms for their own purposes will win.

Enterprise software sales force: A more specialized type of sale

There is a huge difference between a media salesperson and someone who can sell enterprise ad tech software.

Make no mistake: The ad tech sale is not – or, at least, shouldn’t be – a media sale. You cannot take a network media salesperson, versed in pitching the value of content and aligning a brand with an editor’s or producer’s point of view, and expect them to make a complex enterprise software sale. While the currency of both sales forces may be relationships, enterprise sellers must be experts in the consultative sale, with command of topics such as systems integration, privacy and total cost of ownership.

This is expressly why companies that sell both media and ad tech software – Google, Amazon, et al. – often end up with two (or more) separate teams. Under no circumstances should the surface similarities – you have to know advertising! – be allowed to confuse the fundamental truth that these are two very different jobs.

Services ecosystem: The catalyst for adoption and change

The final ingredient is a certified services ecosystem. Simply put, if there is going to be a robust market for advertising software, there is one obvious ingredient: skilled users. The scarcity of truly skilled programmatic practitioners is an oft-bemoaned fact of life in our industry.

The reality is that advertisers or agencies seeking to hire skilled practitioners will likely have to overpay for mediocre talent – if they can find any people at all. For the ad tech platforms, it means that the limiting factor for sales growth is not the feature set and scalability of their software, but instead creating and nurturing an ecosystem of services and users.

It is yet to be determined whether the consultancies or the agencies will form the services ecosystems of the newly consolidated platforms, but one thing is for sure: The competition will be fierce.

How this all plays out

Now that we’ve established a general framework, let’s apply it to what’s going on in the world right now and see if it provides insight.

As with any competitive situation, it can be helpful to analyze the market from the viewpoint of the scarcest resource – in this case, the identity graphs.

For now, let’s focus on the “megagraphs” and a few others: Google, Facebook, Amazon, Microsoft/LinkedIn, Verizon/Oath, AT&T and Apple. (I will limit this analysis to North America. For many reasons, the situation is very different in Europe and Asia, particularly in China.)

Marketers and agencies need to take control and learn to separate the wheat from the chaff. The future of the industry could end up being three to four platforms, surrounded by consultancies and agencies that know how to operate the platforms and create integrations with other elements of the marketer’s stack. In fact, this is an accurate description of more mature sections of the enterprise software market.

In my opinion, leading FNACs should focus on aligning themselves with one of the above. It’s time to get rid of the ad tech logo soup that requires a magnifying glass to read. The future is far clearer than that.

Follow MightyHive (@mightyhive) and AdExchanger (@adexchanger) on Twitter.

 

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