Earlier this week, we posed the question of whether the vast number of firms in the digital advertising-technology space would shrink this year. Here are excerpts of some responses:
There are various factors that signal there will likely be near-term consolidation activity in display advertising. Here’s a few: 1. Market growth. By my rough estimate auction-based media buying grew four fold in the last year. The absolute size is attracting interest and the speed of growth is tilting the build vs. buy decision to the later. 2. Technology innovation. We are still in the early days of the resurgence of display advertising. New paradigms (eg. Facebook), new devices (eg. iPad) and other innovations (eg. geo-location, near field communications, gamification, over-the-top video solutions) have created a hyper-dynamic marketplace where even the leaders have to acquire to stay ahead of the curve. 3. Need for integrated solutions. The various point solutions, while great for innovation, need to be consolidated for practical functionality. Advertisers and agencies will demand this, especially in a world of RTB where latency is critical. 4. New entrants. A variety of outer tier potential buyers are looking at the advertising market and will need to buy their way in. Examples include Accenture, Akamai, Cisco, IBM, Oracle and SAP. 5. Color toner. There are so many logos on the Luma landscape chart that I keep running out of color toner when printing. You know how much those things cost?
— Terry Kawaja, CEO, Luma Partners
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There is no question that the advertising technology space will eventually see a massive consolidation. Large incumbent traditional media, advertising, marketing, data, and technology companies simply have to acquire the innovative startups if they are going to be able to compete in the digital world. Will they do it this year? Maybe. Or maybe they will continue to wait and let us build value. I personally hope they keep waiting. The longer they give us to learn, build, and take marketshare from the incumbents, the more valuable our companies become.
— Zach Coelius, CEO, Triggit
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Massive? No, however there are too many players fighting for their piece of the pie. Some will thrive, most will die. Some will be acquired and merged into and onto existing platforms. But there will be no massive consolidation.
— Adam Tuttle, sales director, The Rubicon Project
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Maybe 2011 is the year that spending and investment start to focus on No. 1 and No. 2 in each segment, thus thinning the ranks for inevitable consolidation next year.I question how many real buyers are left who are willing and able to pay for companies that hang on and hold out with the expectation that they’ll realize their unrealistic valuations.
— Bennett Zucker, gm, data solutions, Ziff Davis
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The ad space is in a classic disruptive cycle. When there’s chaos, we see groundbreaking developments: visionary startups, hypergrowth companies with highly innovative technology, and large established incumbents whose business models may not survive. Change will be a theme for 2011. Part of that change will include consolidation. However, I don’t see consolidation being massive or the primary driver of change in the market.
— Bill Demas, CEO, Turn
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