5 Ad-Tech Insights Learned From Dmexco and the Ad Trading Summit

Media executives gathered last week at the Dmexco exhibition in Cologne, Germany, and Ad Trading Summit (ATS) London for thought leaders’ observations on the notoriously esoteric (yet increasingly ubiquitous) sub-genre of the industry. Here the most tech-savvy of the business on both sides of the Atlantic gather to trade war stories and insights. Below are key lessons from industry grandees, who include Pivotal Research’s senior analyst Brian Wieser, Iponweb’s founder and CEO Dr. Boris Mouzykantskii, DCA’s CEO Jay MacDonald and MediaLink’s CEO Michael Kassan. The death of the agency model has been greatly exaggerated The emergence of ad tech and mar tech are supposedly the driving forces behind the "in-housing movement," thus disrupting the industry’s major agency holding groups. However, Wieser said the rise of such technologies does not indicate the decline of agencies, as mar tech only represents the software layer and agencies are the service layer. “Do services go away? No,” he told ATS attendees. “Can marketers in-source some software functions? Yes, that’s possible. But I adhere to the maxim that agencies are cockroaches, not dinosaurs, and will outlast us all. They find ways to evolve.” [kickout id="1"] Although the impact of the 2016 ANA transparency report, which probed rebates between holding groups and their suppliers, has been costly. This was demonstrated by the majority of publicly traded holding groups posting financial results indicating that they’ve experienced difficult times since the report’s publication. Per Wieser, this is because many marketers are beginning to realize the markup their agencies have charged for services such as programmatic media buying—aka "the ad-tech tax"—only for such fees to then move back-and-forth between vendor and agency. However, the existential threat the ANA report appeared to pose in 2016 has diminished somewhat, albeit a lot of marketers are now engaging in “enhanced contract scrutiny.” Who’s in-market for ad tech, and what are they buying As the ad-tech landscape experiences another phase of merger and acquisition activity, many forecast that private equity and traditional management consultancies will be particularly acquisitive. MacDonald noted the interest of private equity groups, such as Vector Capital and Vista Equity Partners. He pointed to the $122 million purchase of Rocket Fuel, once valued at $2 billion, by Vector Capital-owned Sizmek as typical of the maneuverings of private equity. Such outfits will seek to “add on another couple of pieces,” which Sizmek did through several purchases to build a “full-stack” that it claims can rival Google in terms of utility. “Everybody is talking about and trying to achieve a ‘full-stack’ so if you [are trying to sell your company], find a gap in their stack. And if you can make it better, then you are in a great position [to negotiate a sale],” concluded MacDonald. Management consultancies are making their presence known Kassan noted the enhanced presence of management consultancies on the Dmexco exhibition floor as a harbinger of things to come. “Looking around, I’ve never seen as large an Accenture Interactive sign, and I’ve been coming here a long time,” he told Adweek. Echoing this from the ATS stage, MacDonald noted that “the consultants have entered the advertising world" and are “frightening” a lot of players due to their sphere of influence beyond clients' marketing departments. Such outfits are likely to acquire assets to further their competitive edge in the near future. “Not only on the agency/service side but on the technology side as well,” he added. Consultants have traditionally “been hired by the CEO and the board of directors” as opposed to a CMO, which can mean their input is deemed cost-saving and not just marketing spend. Therefore, they enter the media business with “a very high-end level of trust.” [kickout id="2"] Apple’s "pro-privacy" claims questioned Apple is keen to position itself as pro-consumer rights in the ongoing privacy debate. This was evidenced by the introduction of limitations on ad tracking to the Safari web browser with software called intelligent tracking prevention (ITP). However, not all believe Apple’s professed idealism. For instance, those with long memories will recall how Steve Jobs et al. tried to fix mobile advertising—because it “sucked”—with its ill-fated iAd venture that attempted to sell media within iOS apps. ATS presenter Dr. Mouzykantskii, a man who is regularly referred to as “the godfather of ad tech,” proposed an alternate theory for ITP’s introduction. ITP was more likely a move to protect Apple’s share of ad spend by making mobile web traffic more difficult to track than in-app traffic. “Apple spent significant resources trying to block intelligent tracking. Now, allegedly, that is done for privacy reasons, but what I found intriguing was that they could have improved privacy significantly if they stopped distributing the device ID with in-app [data transfers to third parties],” he said. “It would just take a couple of tweaks to the operating system, which controls 40 percent of all in-app traffic,”added Mouzykantskii. “If this was about privacy, they could have taken device IDs out of in-app. Because they didn’t do it, my gut feeling is [saying] it's more about market share.” One ID to rule them all The digital advertising market is dominated by two companies, with Google and Facebook generating more than $60 billion of the $107 billion U.S. digital ad spend in 2018. This is because they offer advertisers huge reach and scale via an end-to-end ad-tech stack often referred to as “walled gardens,” which use unique identifiers to construct datasets that buyers cannot export out of the respective ecosystems. The rest of the media landscape is left to compete for what’s left on the table. However, for the last 12 months, ad-tech companies have been working toward a universal ID via an outfit called the Advertising ID Consortium. Backers hope this “universal ID” can create measurement standards to better compete for media budgets by offering advertisers scaled solutions without the restrictions of these walled gardens. Speaking from the ATS stage, Ari Lewine, CSO of TripleLift, said, “Identity is one of the biggest things the walled gardens have held over us, and now we’re within arm’s length of actually solving it.” The Advertising ID Consortium is poised to “take off” in the next year, and independent ad-tech companies are now “well-aligned to be competitive against Facebook and Google.”