Sizmek and AudienceX Pair Up as Ad-Tech Players Eye the Untapped Middle

Under pressure from the giants of the digital media sector, Sizmek has inked a deal with AudienceX to prize ad spend from midsize marketers in North America, a market segment they believe will increasingly turn to ad tech in the years ahead. Facebook and Google, aka "the duopoly," will collectively account for more than half of all digital ad spend in the U.S. this year, according to eMarketer, leaving the rest of the ad-tech sector to tussle for the rest. As household brands like Amazon, AT&T and Verizon Wireless double down on programmatic advertising in a bid to woo the world’s largest brands, the incumbent digital media behemoths are equally talking up their utility to the mom-and-pop stores of the U.S. Competing in such a pincer movement, hundreds of pure-play ad-tech players are suffering erosion of profit margins and in some cases flat-out capitulation, with many now starting to forage for revenue in untapped market segments. The 2017 IAB Internet Advertising Revenue Report, conducted by PwC, identified "significant advertising investments from small and medium-sized businesses" as fueling the growth of the digital marketplace, helping generate $20 billion in revenue for the first half of 2017. The trade body estimates that this market segment represents approximately 9 million advertiser accounts, with pure-play ad-tech companies apparently taking note. Earlier this week, Sizmek, the self-styled "world’s largest independent buy-side platform," announced an exclusive deal with AudienceX that will see the California-based outfit become the only official mid-market reseller of Sizmek’s ad tech in the U.S. The partnership effectively means AudienceX will license the tech stack and pitch its wares to brands and agencies with revenues typically less than $1 billion a year, leaving Sizmek to focus its energies on bigger accounts such as the industry’s largest advertisers and holding groups. It builds on an earlier partnership in which AudienceX used the Rocket Fuel demand-side platform, which was acquired by Sizmek in late 2017, on a non-exclusive basis, with the updated terms meaning it will now use the entirety of the Sizmek offering which additionally includes ad serving, brand safety and creative optimization capabilities. Mike Caprio, Sizmek’s chief growth officer, said the arrangement means that Sizmek earns a licensing fee for the use of its technology. Meanwhile, AudienceX is able to use it as a means of generating revenue on a managed-services model. Sizmek has previously worked directly with such mid-market advertisers to use its ad server, in some cases earning as little as $50 to $60 per year from individual clients, with AudienceX now able to add an additional service layer that it had been unable to commit to. “We’ve spent a lot of time this year focusing very specifically on holding companies, large independent agencies as well as our non-agency customers, publishers, brands directly and channel partners,” Capiro said. Untapped potential This is not to say Sizmek is dismissing the sector. Caprio acknowledged that the “thousands and thousands of mid-market agencies and brands with a very real need to manage their audiences and run digital outside of Facebook and Google.” “We need to maintain a level of focus on the ad technology side as we compete with Google and hundreds of other point solutions, whether that’s a DSP, DMP [data management platform] or a dynamic creative optimization player, and what’s important to us is that we have our sellers focused on the top 300 hundred advertisers across the Americas,” Caprio said. “You need volume to make up for the lower average spend for those customers and that’s why AudienceX made sense for us, the way they’ve established their sales structure aligns really nicely with us.” Mid-market advertisers have been identified as typically those that spend $1 million per year on digital media buying, with AudienceX CEO Reeve Benaron identifying the sector as an underserved market. AudienceX COO Jason Wulfsohn further added that not all advertisers in this category are necessarily willing to trust the plug-and-play solutions offered by the likes of Facebook and Google. "We believe that together [using Sizmek’s ad stack] we can address the entirety of the market," he said. Ari Paparo, CEO of fellow independent ad tech outfit Beeswax, said there is a potential sweet spot for ad-tech vendors in the mid-market, especially as smaller companies—in particular direct-to-consumer brands—tend to rely 100 percent on Facebook and Google for digital. "Very large marketers utilize ad tech vendors, but the sales cycle can take years and it can be hard to break in," Paparo said. "But between $10 million and $100 million in digital spend a marketer has enough scale to meaningfully invest in ad tech and innovation, and fast enough decision processes to try new things."