The Necessary Growing Pains of Programmatic Are Evident in Latest Cutbacks

Programmatic has been an ad industry buzzword for a number of years, but the rapid growth of the sector is not without its pain points for the workforce involved amid brewing fears of recession and concentration of spend in the hands of the few. This was on full effect earlier this week when according to sources with knowledge, leading ad-tech company MediaMath laid off an unspecified number of employees, as it pursues a greater share of the $57 billion U.S. programmatic market. UPDATE: 12/14: Earlier this week, MediaMath, a demand-side platform that raised $225 million earlier this year, sent an internal communication detailing a realignment of its leadership structure, including the exit of its general manager of supply Lewis Rothkopf. In our initial coverage, Adweek reported from multiple sources that several jobs were lost in the realignment. After publishing the article, the company's co-founder Erich Wasserman said the following in an email: "The internal communication did not discuss job losses. It discussed one and only one exit of one and only one person. So: this statement is a) inaccurate on its face and b) goes on to imply that MediaMath communicated 'a number of job losses.' We did no such thing, and the communication did no such thing. Instead, as discussed, we grew our employee base this year. Please fix this." According to sources with familiar with the company, the majority of the job losses have occurred due to the merger of its product and engineering teams with the new unit to be led by Wil Schobeiri, who will take on the dual title and responsibility of chief product officer and chief technology officer. Meanwhile, Franklin Rios, MediaMath’s global head of corporate development, will assume the role of chief commercial officer in addition to his current duties, while MediaMath’s sitting chief product officer Jacob Ross is transitioning to the newly-created role chief business officer. In addition, another newly created role of chief services officer has been handed to Anna Grodecka-Grad, formerly MediaMath’s svp, head of professional services. News of the shake-up also comes just weeks after it emerged that MediaMath's former president and chief commercial officer Michael Lamb exited the firm. In a statement sent to Adweek, Joe Zawadzki, MediaMath CEO, said, “The changes we have made in our organizational structure will enable us to develop products for and with our clients in order to ensure that we are best equipped to serve and mobilize the ecosystem as a whole.” Widespread belt-tightening in ad tech The juxtaposition of MediaMath's reorganization echoes similar belt-tightening measures implemented at fellow ad-tech outfits OpenX and GroundTruth, with industry observers forecasting the concentration of digital ad spend into the pockets of the industry’s largest names, i.e. “the walled gardens.” In the case of OpenX, the company confirmed with Adweek that it recently implemented a multifaceted overhaul of its operations resulting in the reduction of its headcount as well as the closure of one of its offices. An OpenX spokesperson confirmed that the ad exchange is combining two teams that previously had separate heads—its demand business development and demand account management teams–under the leadership of recent arrival Michael Martin, OpenX’s vp of DSP partnerships. In addition, it has also closed its office in Santa Clara, Calif., as part of an effort to better align its product and engineering resources with the team formerly based in that location now working out of its existing San Francisco branch. Neither of the above measures materially impacted its headcount according to an OpenX spokesperson but the combination of roles in its partner services team did result in a number of departures—“fewer than 10 people"—from the ad exchange. Meanwhile, in Europe—where GDPR has had a significant impact on the ad-tech sector—GroundTruth recently implemented a restructure that again resulted in the loss of more jobs. Speaking with Adweek, Theo Theodoru, GroundTruth’s general manager, EMEA, declined to confirm the number of layoffs but characterized the move as a “small restructure in the business like most companies in this space do every year." Why is all this happening now? All three companies are quick to voice a positive outlook for 2019 as programmatic spend continues to soar, albeit sources contacted by Adweek noted the risk factors for independent ad tech. The widespread belt-tightening exercises indicate a climate where such companies are maneuvering to become break-even–after years of VC-funded rapid growth efforts—as sources of investment are now drying up and early financial backers seek an exit. These moves also come as media buyers are scaling down their earlier spending forecasts and macroeconomic developments stoke speculation over a potential recession. Jay MacDonald, managing partner at investment bank Digital Capital Advisors, said focusing on profitability was a “smart move” given the appetite for an ROI among VCs that were early to invest in ad tech. “There’s three things driving M&A in the space: scale, synergies and profitability,” he said. “We’re at a time in the market when everybody is for sale for the right price and if you’re not profitable you’ll get to a place where investors tell you to go and find a home [by way of a fire-sale].” Meanwhile, Brian Wieser, senior analyst at Pivotal Research, added, “It would be worth noting that if there were to be a recession sometime soon, businesses would need to be better positioned for that event.” Chris Kane, CEO of consultancy Jounce Media, noted how there is a well-documented shift in advertisers’ spending patterns in favor of walled gardens such as Facebook and Google. He also noted how DSPs, such as MediaMath, are largely fixed cost businesses and their economics improve significantly with scale. “A bidding platform that manages $1 billion has a similar cost base to one that manages $100 million, but of course it has 10-times the revenue,” he added. Some ad-tech players are starting to achieve such scale, which frees up resource to invest in product development, sales and service, according to Kane. “And while these companies consolidate market share, their sub-scale competitors are attempting to cut their way to profitability,” he said. Meanwhile, Matt Prohaska, CEO of Prohaska Consulting, notes how the measures were indicative of how a lot of ad-tech companies were originally formed in a display-only world and as advertisers are now increasingly asking for omni-channel capabilities from their ad-tech providers this now requires a lot of changes in product, strategy and personnel. “When you also factor the shift from managed-service to self-service, a lot of these companies—many of which were formed under a managed-service model out of necessity requested by their original customers—have to accommodate and not everyone on every team can make the transition,” he concluded.