A lot has been said about the bloated nature of the ad-tech ecosystem, the vast number of middle-men that add questionable value, and the opaque nature of digital media buying.
However, the biggest problem is the way that digital advertising technology companies make their money. In our current phase of digital advertising, brands have allowed agencies to manage IT for them using their media budget, treating companies as diverse as video ad servers, viewability vendors and data management platforms as “inventory” providers.
Everyone involved uses volume-based pricing and has an incentive to spend the advertiser’s money inefficiently across many small players. Digital advertising today is lucrative for agencies and vendors, but costly and damaging for advertisers. This won’t last.
Verizon’s recent series of digital media acquisitions including AOL, Microsoft and now Millennial Media, sheds light onto the potential future of media buying. As technologies and publishers consolidate under a few large players, their business models will change to work objectively for advertisers and publishers using a much more transparent and profitable (for advertisers and publishers) model.
In this future, giant publisher conglomerates will work directly with advertisers and agencies, which will no longer rely on a sea of overpriced opaque point solutions that profit from volume rather than value. Instead, they’ll select one or two key platforms that operate like any other SaaS market.
The Rise of the Uber Ad Platform
The brand and the publisher benefit when media transactions are consolidated, letting them optimize objectively and transparently. For example, MediaOcean is a platform that many brands and agencies rely on to process the lion’s share of their media planning and buying.
It’s easy to imagine a day when MediaOcean is also plugged directly into publisher conglomerates like Verizon to facilitate media buys across channels, having either absorbed or replaced DSPs.
While they recently announced a partnership with MOAT, a viewability vendor, it’s likely that viewability will be a built-in feature of such a platform. Similarly, there is no reason why a third-party vendor like Ad-Slot should manage, say, automated guaranteed media buying separately from direct buys or programmatic buys. This, too, could be facilitated by a platform like MediaOcean, which would be plugged directly into the big publisher systems.
Plus, if the technology companies charge brands a license fee instead of a volume-based tax, buyers no longer have an incentive to drive volume to low quality inventory across thousands of no-name websites and premium publishers no longer have an incentive to access that inventory to make an extra buck.
And as publisher tech and content consolidates, vendors that cater to the buy side have already started to change their business models. AudienceScience is a DSP/DMP that works like a traditional SaaS platform rather than sucking margin from media budgets. Similarly, AdYapper, a viewability solution, has removed itself from the ad-tech ecosystem and charges a flat fee direct to brands only.
Data Consolidation Benefits Advertisers and Publishers
Companies as diverse as Adobe, ComScore and Comcast have acquired DMPs and other data providers, preferring to work directly with brands and publishers to consolidate audience data at the source.
As TV, digital and mobile converge, there will be yet more consolidation of the data technology that brands use, for example with internal CRM systems. This is the ultimate status quo, where brands rely on only a few large external data technologies and preside over a huge database of first, second and third party data in-house.
When marketers are back to managing their own data with in-house technology, the currently corrupt pricing structure of that entire part of the industry will be changed for the better.
Consolidation is the Path to Convergence
In a recent panel about cross channel media, Irwin Gotleib, Global Chairman of Group M, said that “the next seven years is all about systems integration.” In other words, for advertisers to actually be able to reach the right audience on any screen, at any time with the right message, a lot of very disparate technologies need to work together.
By far the easiest way for this to happen is if several large players on both the buy and sell side consolidate the most valuable point solutions across display, video, mobile and TV. Just like with ERP and CRM before it, true Ad-Tech platforms will then offer comparable, comprehensive solutions that can be managed by traditional IT channels rather than stuffed wastefully into the media budget.