What Compression Means for Ad Tech: A Wake-Up Call to Cut Out Waste

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If you work in digital advertising, there's no escaping the flurry of buzz around the overcrowded number of ad tech vendors. There are too many "specialty" solutions, and advertisers are rightly frustrated about how to navigate this bloated tangle of technologies to get the ROI they are looking for. Waste and duplication are rampant, so much so that it's come down to this: for every media dollar spent, only about $0.45 (on a good day) actually goes to the inventory meant to make a connection. The rest is absorbed by the chaos, diluting the impact of what campaigns are setting out to achieve.

Does this mean that compression of the ad tech landscape is inevitable? No doubt there are a number of vendors at risk of extinction because of their inability to hit venture capitalists' payment schedules. But to truly succeed as an industry, ad tech needs to do a whole lot more than just wait for the shakeout. Houston, we know we have a problem. The question is, what do we do about it?

1. No more "trading on mystery." The reputation of the ad tech industry is being damaged by the players who trade on (and profit from) the current state of chaos and confusion. Overworked media planners tasked with managing "relationships" with an ever-growing list of vendors simply don't have the time or resources to keep tabs on every single buy, and automation was supposed to mean they don't have to, right? There needs to be trust that actual value is being provided before technologies like real-time bidding and dynamic retargeting can truly be leveraged to their fullest potential. There are plenty of innovative technologies that do, in fact, deliver the goods. But vendors must do a better job proving the worth of their solutions with transparent metrics and verifiable case studies, not smoke and mirrors.
2. Less competition, more cooperation. When you order a book on Amazon, you don't have to call another company to purchase the box to ship it in and then conduct yet another transaction to have it picked up and delivered to your home. Amazon does all that for you, but not because it manufactures shipping boxes and owns and operates a fleet of delivery trucks. Amazon has cooperative relationships with UPS, and with the company that makes the packing supplies, and with many, many other partners. This is how it should work in ad tech: a demand-side platform may partner with a data supplier and a retargeter, for instance, and the onus is not on the advertiser to pull all the pieces together. Instead of sharks tearing one another apart for a piece of meat, we should all function more like a school of fish moving and working together to maximize the efficiency of the media buying process.
3. An open ecosystem. Innovation is great, we're all for it. But ad tech needs to start directing its innovation less toward developing questionable bells and whistles, which seem designed solely to snatch a few more pennies of that advertising dollar, and more toward building unified solutions that bring TV-size budgets online that, by their very nature, can't withstand a gazillion steps in between. That's "innovation at scale," and it will only come when the industry is able to operate as an open ecosystem where technologies can integrate seamlessly, where simplicity and ease of use rule the day, and where friction is removed from (rather than added to) the process.

Waste and chaos are eroding the power and credibility of digital advertising. This state of affairs is no longer sustainable, and industry compression is coming. The stakeholders who cultivate duplication and waste will fail. Those who unite have a golden opportunity to deliver real, tangible value where everyone - publishers, advertisers, and the true innovators in the middle - will win and dominate.

Image on home page via Shutterstock.