Consolidation: Round 2

It's beginning to feel a lot like... July, 1999 with all the news of consolidations and mergers in the ad industry! What does the new wave of consolidation in our space mean for the industry as a whole? Is this a sign of continued consolidation and the eventual landscape evolution mirroring that of the traditional space or is this an anomaly as companies look to "un-bundle" services?

There are certainly arguments for both, and I must admit that it could go either way. But my guess is that consolidation will likely continue over the next two years. Whenever I attend any of the various industry conferences, I am continuously surprised by the sheer number of small, niche agencies and consultants offering their services to advertisers of all shapes and sizes. There are category-focused agencies (i.e. automotive or entertainment targeted), performance-based agencies (i.e. CPA or CPC focused), and a number of specialized services (i.e. affiliates or search). As the interactive space continues to evolve and mature, there is no shortage of niches within the overall industry that require a special talent or a special expertise to be developed and executed upon, thus there are needs for these types of smaller shops to identify and offer these services. I see their value, and I must admit that I get excited when I realize how many of these agencies and consultancies were started by people whom I used to work with (the "Silicon Alley" pedigree continues to shine). If I see their value, and if the clients see their value, then it's obvious that most of the larger shops see their value as well and will eventually look to offer those same services in one way or another.



This is what leads us to the age-old question of "Buy vs. Build." Is it easier to mirror a set of services and build them out, or is it easier to buy a company that offers those services already? These are the questions being asked by any number of people and companies, and I'm sure that the answers will vary, but I'm sure that many of the answers will revolve around the buy option.

As this new wave of consolidation continues, and we enter into the second renaissance of interactive advertising, the landscape will continue to change and we must beware of the downside to consolidation. We must recognize that the industry is not yet mature and that competition breeds improvement. These smaller shops offer unique ideas and processes and they keep the larger shops on their toes. As consolidation continues, which is inevitable, I hope that we all continue to push the envelope. I hope that the loss of competition will not foster complacency but rather, will foster a feeling of excitement and revitalization of the industry as new ideas are merged with established processes to create a whole that is stronger than the sum of its parts. These smaller companies offer a unique perspective on typical situations. They offer a fresh look at staid old issues. They offer a set of new solutions to established problems.

I offer the industry this idea as a whole. As consolidation continues and the landscape thins, do not stop searching for new ways to answer the old questions. If you are entrepreneurial, do not hesitate to address an old problem with a new solution. There will certainly be fewer options as a result of consolidation, but this does not mean that we cannot still have competition. Competition creates the survival of the fittest and this is what drives evolution.

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