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For the past few years, marketers have been buying a growing number of point solutions to fulfill their needs. Look no further than the number of martech startups that have emerged for confirmation. In 2012, there were just 350 marketing technology companies. Today, there are nearly 4,000.

But that’s about to change. Next year, there will be a massive consolidation across both adtech and martech. We saw hints of this last year, with $6.5 billion in martech mergers and acquisitions (M&A) in the first half of 2016 alone. The rise of APIs allows companies to integrate their datasets more easily, naturally paving the way for more M&A activity.

Companies are growing tired of relying on so many vendors to fulfill their advertising and marketing needs. The average marketing stack has around 17 siloed, underused applications. At the same time, with so many martech companies to choose from, it has become increasingly difficult to stand out, making it harder for startups to break away from their competitors.

We’re also hitting a time of economic uncertainty. No one is sure how President Trump will impact the economy. Lowering corporate taxes, one of Trump’s campaign promises, could spur tech companies to repatriate their cash and invest in acquisitions. While many have predicted a consolidation for a few years, the funding environment has been favorable. Martech startups raised $134 billion from 2010 to 2015, allowing many to emerge and others to stay afloat. Since then, VC funding has reached a two-year low. Investors are taking a more cautious approach and prioritizing sustainable growth. In 2017, dozens of martech startups unable to raise their next round will face a daunting prospect: sell to a competitor, go out of business, or take a private equity buyout. So, who’s buying?

The acquirers

The largest players in digital advertising — Google, Facebook, Microsoft, and Verizon/AOL — are prime candidates to scoop up martech companies next year. They have the cash to spend and see the benefits of integrating technologies they don’t yet own. Traditional media companies will also be on the lookout for M&A opportunities. While companies like Disney, Viacom, and Time Inc. have been spending heavily on content, they’re now turning to technology to maximize their content investments. Disney’s accelerator is investing in a number of companies that help marketers and advertisers increase viewer engagement.

Advertising agencies are another contender. They’ve realized that — at least from a business perspective — they need to infuse their creativity with technology. Agencies will acquire martech companies in order to attract new business and retain their current clients. The agency universe is also grappling with a new competitor: consulting firms. The Accentures and PwCs of the world have the ear of the C-suite, and the sophistication to tackle complex technology challenges that advertisers and marketers are grappling with today. Ad agencies can still leverage their creative expertise but will be looking to make acquisitions to better compete with those consulting giants.

Who’s getting acquired

Content companies will find a suitor in publishers as they adapt to the mobile-first world. Verizon and Hearst, for example, jointly acquired digital publisher Complex Media in 2016. NBCUniversal doubled down on their BuzzFeed investment this year. Media companies will continue to invest in the most relevant content channels for their audiences.

Data and analytics companies will continue playing a large role in martech M&A, as they did in 2016. Of the many data platforms on the market, only the best will survive the funding crunch. The cream of the crop will get acquired, as companies look for ways to improve and innovate on the customer journey. Finally, measurement companies will be on the trading block. This is already happening, as ComScore acquired Rentrak earlier this year. Measurement solutions that focus on user engagement will be particularly appealing to potential buyers.

2017 will be a pivotal year for martech. The abundance of industry funding has led to a proliferation of startups that might not offer enough differentiation. Plenty of companies will survive the coming shakeup. Whether they remain independent is an entirely different question.

Penry Price_200Penry Price is the vice president of global sales for LinkedIn’s Marketing Solutions business. His deep knowledge and passion for the advertising ecosystem plays a significant role in the transformation of LinkedIn’s advertising business as it evolves into a content marketing platform for brands.

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