The economic impact of the coronavirus crisis on the advertising industry has laid bare the ugly truth of ad tech: that many in the ad-tech ecosystem were media resellers, despite positioning themselves as tech companies. We all know why this is: Tech is bankable—media not so much.
The fragility of this wishful thinking was exposed when Teads literally cited an “act of god” (or, rather, its business equivalent force majeure) upon reneging on earlier payment guarantees to publishers; same with GumGum proposing extended payment terms. (That said, credit to them for being upfront.)
The metaphorical act of god that happened, however, was the opening of Pandora’s Box, revealing all the shortcomings of the ad-tech world.
The majority of companies in the sector are/have been attempting to pivot to tech or SaaS-based revenues. Adara is a recent example of this. Although weaning off chunky I/O margins is tough—the company has since joined the slew of firms in the sector making significant cutbacks—marketers (still eager for actual ad tech) are growing increasingly wise as to how their ad spend was allocated in the salad days of programmatic.
These problems, of course, had been anticipated. Last year’s bankruptcy of Sizmek (which had attempted to position itself as an alternative to Google’s ad stack) was a harbinger of all of this. And as fellow significant players in the media payments chain also make cutbacks amid the current crisis, some sources are privately whispering about a “house of cards.”
Prior to the global pandemic and subsequent economic contraction, ad tech’s biggest problem was the phasing out of the third-party cookie, the cornerstone of online audience targeting and automated media trading.
A few key players—those with consumer-facing products such as Apple (with Safari and the App Store) and Google (with its Chrome offering and various other properties)—will decide the fate of many companies. Operating under the halo of protecting privacy, their vice-like control of the sector will only squeeze tighter.
Certain parties are asking for clemency, such as a delay to Google’s planned third-party cookie prohibition in Chrome by 2022 (though Apple has already banned them in Safari), as well as more lenient payment terms given the current liquidity disruption. This week, a source said that Facebook and Google have (quietly and off the record) given a soft OK to some breathing room on payments. Since this is not official policy, it will provide small comfort for some.
Similarly, last week Google temporarily rolled back its SameSite cookie changes in Chrome, citing the COVIOD-19 crisis, which had made it more difficult to share third-party cookies across websites. But relying on the kindness of your overlords is no strategy. Companies that have positioned themselves as tech, but have simply been resellers, will fade—and fade fast. Pandora’s Box has well and truly been opened.
However, this is not to say the sector is bereft of hope and that the fate of independent ad tech rests entirely with Big Tech, or the Walled Gardens.
An industry source recently outlined a scenario where advertisers could build walled gardens of their own through shipping their first-party data more directly to publishers in a way that would be independent of browsers’ cookie policies.
This is the hope that remains in Pandora’s Box: All of this would have to rely on alternate technologies to comply with the rising tide of privacy legislation cropping up across the globe such as CCPA and GDPR. Examples include InfoSum, a company that AT&T recently invested in via Xandr, and Safe Haven from LiveRamp—though both outfits have their detractors.
And while such modes of operation may bring principals in the ecosystem closer together, they will still require third parties—those with actual ad tech, not the resellers of yore.
Is that really such a bad thing?