Innovation is changing the digital advertising business and creating new opportunities for distruption…
There’s no question that consumers are increasing the amout of time they spend consuming digital media, while advertisers are increasing their ad budgets into digital channels. What may come as a surprise, however, is the complexity of the interconnected web of companies involved in the process of delivering digital advertisements to end users. Collectively, these companies are known as “advertising technology,” or “ad tech” for short.
Ad tech companies are intermediaries between advertisers and publishers, and add value to the ad delivery process by consolidating inventory, automating workflows, and offering precise targeting capabilities at scale. The automation of ad buying is also known as “programmatic advertising” – that is, using technology and software to buy digital ads. Programmatic ad spend in the US is quickly ramping up: It will top $20 billion this year and reach $38.5 billion by year-end 2020.
But ad tech’s ascendancy isn’t without its drawbacks. The advertising industry in the US is dominated by two main players: Facebook and Google. As a result, ad tech players are fighting for a pretty small piece of revenue pie, one of the many drivers of increased consolidation in the space.
- By 2020, mobile will be the biggest online advertising market, and video the fastest growing
- So-called “walled gardens” Google and Facebook lead a relatively small group of players that attract the vast majority of digital-ad spending in the US today.
- Growth can be challenging for players outside the walled-garden duopoly, and many companies are reaching a level of maturity that may prompt investors to push for an exit.
- Ad tech is poised for consolidation, and the number of companies in the industry will decline significantly over the next few years.Ad tech is poised for consolidation, and the number of companies in the industry will decline significantly over the next few years.
- Artificial intelligence, augmented and virtual reality, and sponsored content will help propel further digital ad growth in the next decade.