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Why ad tech consolidation is good for CIOs

Matt Kapko | Dec. 9, 2014
There is simply not enough room for the flurry of ad tech companies emerging today. Consolidation is inevitable, and these mergers and acquisitions will represent both a challenge and an opportunity for CIOs.

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In just a few short years, advertising technology has become one of the fastest growing areas in the tech world. There are now hundreds, maybe even thousands, of ad tech companies vying for a piece of the digital marketing pie, but few are self-sustaining businesses.

The crowded space of startups building tools and solutions for ad management, analytics, targeting and optimization is ripe for consolidation. As companies run out of capital or drag on without appropriately evolving in this opportunistic but complex field, acquisitions are likely.

"There are a lot more ad tech [mergers and acquisitions] coming," says David Berkowitz, CMO at creative and technology agency MRY. "There are so many companies out there trying to solve marketers' challenges, and challenges keep getting more complex with more money going into digital."

An Opportunity for CIOs -- and a Challenge
Complexity and uncertainty about ad tech are leading companies to make decisions -- sometimes based on nothing more than gut instinct -- that directly impact the CIO. Framing this challenge as an opportunity for the CIO is critical.

"The CIO will have no shortage of technologies to vet in the years ahead," Berkowitz says. "Marketers may keep commanding larger tech budgets, but that doesn't mean marketers understand the ins and outs of tech."

Berkowitz says marketers will need support from their CIOs in coming years, as they face steep technology learning curves. "CIOs can also prove to be indispensable by helping marketers understand what to watch out for, and whether threats or opportunities involving technologies are being utilized."

Healthy relationships between CIOs, CMOs and their legal teams will be essential in the future, according to Berkowitz. 

Ad tech consolidation won't resolve all the complexity over night, but comprehensive technology suites are emerging as large companies cobble various pieces together from within or via acquisition. 

"We will see content marketing technology stacks begin to emerge," says Rebecca Lieb, a digital advertising and media analyst with Altimeter Group. "These are end-to-end software solutions that will integrate all aspects of content marketing: planning, production, analytics, targeting, optimization, governance, legal, compliance, etc.," 

The Irony of Ad Tech 
Adding to the complexity is a bevy of new buzzwords, according to Berkowitz. It's all about "programmatic," "native advertising," big data or some other catchy term.

"The more people use these terms, the less they mean," Berkowitz says. "Programmatic and native are almost entirely at odds with each other, and yet you see some ad tech companies talking about 'programmatic native' without appreciating that it's an oxymoron."

A select few ad tech companies recently went public, but many others were acquired and even more will likely flame out over time. The opportunity for independent success is on the decline, while the group of potential suitors grows. Ad tech startups used to hope for companies such as Google, Microsoft or AOL to come knocking, but today's buyers also include social networks, publishers, ad agency holding companies and major brands.

 

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