There seems to be a fundamental disconnect between the venture capital community and the brand marketer community. Upon reflection, this makes sense. After all, relatively speaking, tech VCs from Silicon Valley to the Flatiron District are impulsive, calculated, gut-driven risk-takers who typically flood an emerging sector with a wave of money with the hopes of latching onto the next big thing. On the other hand, brand marketers and their agency partners are methodical, analytical and typically risk averse when it comes to all aspects of their businesses, particularly when it comes to new technologies.
The current state of inefficiency and confusion in the ad tech sector pointedly illustrates the challenges wrought when disparate corporate and cultural sensibilities intermix. VCs haven’t been shy about funding a seemingly never-ending potpourri of point solutions, those “shiny new toys” in the marketer digital tool kit that can often do one thing really well with a low cost of market entry. Specialization is fine as a feature, but as a company it’s a roadmap to irrelevance in this highly fluid and evolving space.
What entrepreneurs and the VCs that back them need to realize is that just being a point solution doesn’t deliver on the emerging value proposition that advertisers crave and are now demanding. Right now, for the most part, the marketplace is far from delivering what advertisers need: a value proposition that offers an integrated and simplified technology platform that allows for seamless, cross-channel digital media buying, optimization and management. What’s required is a caliber of platform that can dynamically and efficiently track brands’ users through their journeys from prospects to customers. This requires sophistication, significant resources and scale.
As the numerous digital-technology-landscape slides indicate, the moneymen have not been shy about hitching themselves to one-dimensional ideas with limited shelf lives. This constant infusion of cash into the ad tech ecosystem has created an environment where the ongoing proliferation of point solutions has made it exceedingly difficult for anyone to pivot to a more mature business model. How can a company start to evolve and expand when new and better-funded competitors are attacking it at every turn?
Hence, all of the current rumblings about an imminent reckoning in the ad technology arena — with most point solutions ultimately falling by the wayside — are in my estimation inevitable. A few players in this Darwinian struggle will indeed marry strategic inspiration with financial commitment and emerge as viable, dynamic digital marketing partners for advertisers, but the vast majority of them will become footnotes in history.
The opportunity is immense for startups.
Yes, the Madison Avenue holding companies are increasingly getting more involved in carving out their pieces of the ad tech landscape, most notably by investing in their own in-house trading desks (some of which actually have technology and some of which “wish” they did), but the conflict of interest inherent in that model does not seem tenable long-term. Furthermore, arbitrage to expand margins won’t work because clients won’t want to foot the bill.
With all of the nascent opportunities in audience-based targeting and optimization, tech companies are poised to take advantage if they can re-orient from short-term gain to long-term sustainability.
My hope is that the VC community will stop for a minute and reassess its funding strategies and start scaling its wallets to match the significant level of ambition, resources and strategic smarts required to created full-fledged technology partners who can fill a sorely lacking marketplace need.
Will Margiloff is CEO of IgnitionOne, a digital media firm.
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