Describing the online display ad technology marketplace as "overcrowded," an investment banker said vendor consolidation is inevitable.
Terence Kawaja, managing director at GCA Savvian Advisors, identified 192 companies in 24 categories, such as agency media-buying platforms (Havas' adnetik, Publicis' Vivaki, Razorfish's Atom Systems, WPP's B3), data exchanges (BlueKai, eXelate); publisher yield optimization tools (fatTail, YieldEx, YieldBuild), media verification tools (DoubleVerify, Mpire), plus ad networks, exchanges, and data aggregators. These companies, he said, have obtained $2.5 billion in capital over the past four years. Yet, "this channel has a lousy $8 billion spend," he said, contrasting the annual amount spent on online display advertising compared to the much larger amount spent on TV advertising.
Kawaja dissected the ad technology sector during the Interactive Advertising Bureau's Networks & Exchanges forum in New York City, a gathering of advertisers, publishers, ad networks, ad exchanges, and other ad technology companies. "We predict that consolidation is coming and will come in waves. We anticipate the activity will start in 2010," he said in a follow up e-mail.
Kawaja offered up his theory about the proliferation of ad tech companies. "VCs [venture capitalists] like their portfolio companies to focus on one thing and do it really well," he said.
The online display ad marketplace, he said, needs a company that will integrate demand-side capabilities, including data optimization and creative optimization, under one roof. Demand-side platforms, as defined by the IAB, offer centralized media buying from multiple sources and differ from ad networks in that they do not provide for direct publisher relationships.
Kawaja also predicted that "life gets tougher" for ad agencies that rely on third-party demand-side technologies - and don't have in-house capabilities. "It will be tenuous for agencies to not own the optimization technology when that is such a critical component of their client value add," he said in the e-mail.
Other speakers debated the value of having such a large number of ad technologies to consider. "The market won't see more dollars migrating online until this gets sorted out. If you want to see a doubling of the display [ad] market, you cannot have this kind of fragmentation," said Todd Teresi, chief revenue officer of Quantcast, a company that provides audience data for advertisers and publishers.
"As a buyer or seller, having a vibrant marketplace is not bad," said Michael Barrett, CEO of AdMeld, a company that works with publishers to help them get more money from their remnant inventory. "It's a good [time] to be in the display area. It's hot again."
At the forum, the IAB released a primer that outlines best practices for the use and control of publisher, advertiser, and audience data for ad targeting. It also spells out how ad optimization, site optimization, and targeting work.
"These guidelines will go a long way toward getting [ad networks] the respect we deserve. We are going above and beyond what the average premium site provides to advertisers and agencies," said David Moore, chairman of 24/7 Real Media.
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Anna Maria Virzi, ClickZ's executive editor from 2007 until 2012, covered Internet business and technology since 1996. She was on the launch team for Ziff Davis Media's Baseline and also worked at Forbes.com, Web Week, Internet World, and the Connecticut Post.
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