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In the ad tech and martech spaces, the shifts and themes that are driving consolidation right now are incredibly telling about where modern ad tech companies are headed. After all, M&A activity is all about shaping tomorrow’s businesses today.
The ad tech and martech spaces have been riding a rollercoaster — and the rises and dips are going to continue throughout 2023. According to LUMA Partners, ad tech and martech M&A slowed considerably during 2022, following a particularly robust 2021. The causes were predictable: rising inflation, looming recession, global market uncertainty. But despite continued economic and marketplace strain, LUMA expects a rebound in activity — and given the reality of our industry, that’s a reasonable assumption.
With the required elements of a modern ad tech company in mind, let’s take a look at the forces that will guide consolidation in 2023 and beyond.
The data-safe programmatic era
The 2021 wave of consolidation didn’t happen in spite of the ongoing privacy and identity upheavals that were reshaping the digital advertising landscape — it happened because of it. And those forces aren’t just still at play in the market. They’re accelerating.
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The need to develop full-stack, omnichannel solutions for marketers and publishers will drive additional industry evolution throughout 2023, and this activity is going to occur with an eye toward future-proofing solutions so that companies can remain relevant in a privacy-first advertising environment. That means structuring companies (and our industry at large) in such a way that less data is shared with fewer partners.
This desire to lock down access to consumer data is evident in the continued rise of walled gardens, but it’s also at the forefront of how ad tech companies operating across the open web are charting their paths forward, in terms of both M&A and internal development. From clean rooms to compliant targeting solutions, we’re going to see greater focus across the board on technology that enhances and respects privacy.
Regionality in ad tech and martech
The overall trend toward industry consolidation is often cast as a monolithic process — the idea that a few industry players are trying to become the end-all-be-all for an industry in a global capacity. But when it comes to ad tech, there’s going to be a lot of disparity in how technologies are acquired, packaged and positioned in different markets around the world.
Simply put, not every market is ready for every product. For example, there are global markets in which prestitial ads are an accepted standard format, whereas such ads tend to be abhorred by U.S. audiences. This is a relatively small geographic distinction in the grand scheme, but it’s indicative of a larger strategic truth: Companies with global ambitions are still going to be thinking regionally when it comes to filling the gaps in their offerings. As marketers assess the implications of the deals they see making headlines over the coming year, they need to do so with an understanding that consolidated offerings will still vary greatly from market to market.
Regionality also plays an important role when it comes to publisher partnerships. Both global and local supply are important, so the presence of local publisher partnerships will also be a key factor in acquisitions.
Above all, we should keep in mind that M&A in the ad tech and martech spaces isn’t just about Silicon Valley buying Silicon Valley. There’s great tech everywhere today, and the most successful acquirers will be the ones that broaden their views within the global marketplace. The maturity of technology around the globe means companies can acquire better tech at a lower cost by looking to the EU, APAC, LATAM, Israel and other regions outside the traditional tech corridors.
Automation and service
While the trend toward programmatic buying will continue, the industry is navigating this shift with the full knowledge that people, not just technology, drive the best results. Furthermore, there’s not a one-size-fits-all approach that’s going to deliver for companies across the board. As such, M&A going forward is going to be as much about the talent as it is about the tech.
Ad tech players will have to be able to meet brands, agencies and publishers where they are with their capabilities. Those that have emphasized simple self-serve tools in the past will be looking to balance those with highly capable, higher-touch service offerings — and vice versa. From the human capital standpoint, companies will be looking to build and acquire highly flexible workforces with the right training and expertise, as well as the ability to pivot into new spaces as marketplace forces shift around them. Balancing AI capabilities with real human talent, and ensuring both are being equipped to play to their strengths, poses a conundrum in our industry right now, and it’s a challenge that must be tackled in a deliberate way.
Owning the pipes
At present, there’s still simply too much waste in ad tech. That simple fact is going to drive the consolidation of layers in a way that’s laser-focused on improving performance. The era of point solutions is over. Today’s M&A activity is all about uniting compliant solutions that can deliver omnichannel offerings in a highly transparent and efficient way.
It’s messy work, but it’s well underway. As marketers watch this process unfold, they should pay attention to acquirers’ plans for each piece of their growing puzzles to understand how and when they’ll gain access to new capabilities and connections. As an industry, we know where we need to go — but some will get there faster than others.
Sameer Sondhi is co-CEO at Verve Group.
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