On Middlemen: MDC Partners And Varick Media's Herman And Hills Discuss The Online Advertising Value Chain

Middlemen ReactionAdExchanger.com recently asked several members of the advertising ecosystem about "Middlemen" and, specifically:

  • "Are there too many parties trying to insert themselves into the online advertising value chain? How do you see this playing out?"

The following contribution is an agency perspective from MDC Partners' Darren Herman, founder Varick Media Management & Chief Digital Media Officer of The Media Kitchen, and Greg Hills, Platform Analyst, Varick Media Management.

There has been a staggering rate of innovation in the digital media space, with many new companies helping advertisers to reach their goals. We're not just seeing new companies pop up. We've seeing fully-fledged new categories of digital ad companies. Some categories, like ad verification and pub optimizers, are responding to old problems. Other categories, like data exchanges and and behavioral data banks, are meeting needs that have only surfaced in the past year.

If you're a company in the ad tech space that has a proven successful revenue model, you're probably not happy to see new companies providing new types of value. In the short-term, there is a limited amount of digital advertising dollars, and these new companies are shaving pennies off the dollar that used to be yours.

Varick Media represents the true demand side and from this perspective, we view this disruption as a huge opportunity for ourselves and our clients. Admittedly, there is probably some short term inefficiency in the way that an advertising dollar must pass through so many firms to take advantage of all these worthy technologies. And its going to take time to perform the rigorous testing that differentiates marketing hype from true enduring value. Companies with products that don't provide actual uplift for advertisers will go the way of the dinosaur. But many of these products will endure the inevitable flattening of the value chain. Those products which do provide actual value will likely be rolled up through acquisitions, becoming features in the much richer tools that will emerge in the year to come.

In the same way that agencies have dealt with media fragmentation, we're now dealing with technology fragmentation. But, the fact technology innovation is dispersed among numerous firms does not diminish the value of these technologies. The new technologies that solve important marketer problems are here to stay, even if the firms themselves aren't.

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