Ad tech is commoditized, says Pivotal
Research Group’s Brian Wieser, and outsourced to the point that many ad tech providers out there share the same blood.
“For much of the industry involved in selling real-time ad trading products (including companies which compete with each other) Iponweb and AppNexus provide the critical ingredient of technology,” writes Wieser in a research report.
He likens the ad tech industry to beer and chocolate manufacturing: “Virtually every brewer in the United States -- whether a micro-brewer of Anheuser-Busch -- relies upon one of two producers of yeast for this core ingredient."
Iponweb apparently powers about 20% of the ad tech market in Europe and Japan, while AppNexus is the lifeblood of big-named players such as Microsoft, Millennial Media and Responsys.
“Ad tech” carries with it a certain charm, but Wieser points out “that technology is less likely to be a material differentiator between companies involved in ad tech” than people may expect.
However, there are clearly enough variables and ways to tinker with offerings that Company A and Company B can distinguish
themselves, even if Company C is the tech provider for both. If there weren't, we wouldn't have so many players. Plus, there are plenty of companies out there with proprietary technology.
Scott Neville, chief strategy and marketing officer of Iponweb, points out that Iponweb doesn't simply hand its customers technology and call it a day. "It's important to say that our clients do also contribute significantly to the innovation and product roadmap for how these platforms are designed, customized and perform," he said. "They are very much responsible for creating the unique proposition that each platform brings forward and driving driving the innovation we see across the industry. We are more enablers to help give them that ability to move quickly.
"In general, we are more than happy to sit in the background," he added.
Even with each platform putting a personal touch on the underlying tech, there will still be similarities between platforms that share providers. Looking at this in the long-term, isn’t “getting technologies to integrate with one another” one of the more daunting tasks of consolidation? One would think companies that drink from the same well would find it easier to mesh, and perhaps that will be a key factor should we see more consolidation moving forward.