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Consolidation Threatens Online Ad Cos.

  • Reuters, Monday, October 31, 2011 12:07 PM

Ready or not, consolidation is coming to the supersaturated ad technology sector, reports Reuters. According to consultant and investment banker Luma Partners, the space is bursting with over 150 companies.  “There are simply too many competitors seeking too much of a return on capital,” Reuters writes. “Add in a drop-off in potential buyers and a declining appetite for public offerings, and the online advertising sector is due to stall, industry players and backers say.”

As Will Margiloff, CEO of Ignition One, puts it: "It's just not a big enough market for all the money invested.” Adds the digital marketing tech head: "That is a real challenge -- VCs and private equity guys are trying to figure out how to jump on the ad tech bandwagon and are really grasping. There can't be six or seven category leaders."

Making matters worse, potential buyers are busy dealing with their own issues, according to Reuters. “For instance, AOL and Yahoo, both of which would be obvious buyers for online advertising start-ups, are in the midst of turnaround efforts that have left them with leadership vacuums and takeover vulnerability.”

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