Time To Prune The Adtech Bush

You don’t need to gaze too long at that Lumascape chart to know that the online advertising marketplace is an extremely complicated one. Hundreds of companies have emerged in the past few years selling various technologies and solutions they promise will help marketers boost the efficiency of their advertising and reduce their costs. The majority have good intentions -- if a poor business plan -- while some make snake oil salesmen look like pillars of the business community

Meanwhile, the major established Web players including Google and Facebook have rather unhelpfully invested heavily in solutions of their own. The problem that creates is putting further pressure on the smaller players, which are being forced to grow as quickly as possible to remain relevant to the industry. But how to grow? 

I’m sitting in Soho with an old industry buddy and he doesn’t seem happy. I won’t name him, as I don’t want to get him into trouble -- as he works for a well-known player in this space. The industry he loved has changed -- and not, he thinks, for the better. “The problem is that there are just too many companies in this sector. Too many companies doing the same thing. It’s become a ‘me too’ culture. Everybody promises the world and then many disappoint with delivery.” My friend blames the VC money that flooded into the market. “They looked at who was doing well and then said, 'I want one of those'." He’s right, of course. The market has not exactly been flooded with organic growth either. A vast majority of adtech firms in London have U.S. ownership.

And this has created another problem, according to my friend. “The standard of senior management in this space is shocking. Too many companies means you don’t have to be that senior to get a decent MD job. And even then, it’s not a proper MD role as you still get controlled from the U.S. These new guys aren’t managers -- they are pretty much just figureheads who think that management means speaking at conferences and racking up air miles. They hop from job to job, meaning that very few companies build up a decent team and a defined culture. They just all look the same. Get the office in Charlotte Street, bang in the table tennis table, go for lunch in Roka and do the same old deals with the same old mates whilst telling everybody else you have a unique technology.”

My pal isn’t the only one saying and this, and I would say many online ad companies face an uncertain future. There simply aren’t enough ad pounds around available to sustain all of the businesses competing for them, so surely it’s inevitable that some will fall by the wayside. The problem is working out which ones.

“People in the industry can’t figure out the winners and the losers, so how the hell are public investors supposed to figure it out?,” said Terry Kawaja, CEO of LUMA Partners and the producer of those slides.

This might sound like a rant over one too many beers -- and I should add this chat was over coffee, honest -- but my friend has a point that needs to be addressed. In the same way you cut back the offshoots of a rose bush to ensure that the plant as a whole continues to bloom over the longer term, for the industry to grow as a whole, perhaps we need to lose some of these companies.

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