Ad Tech Warning -- Is This The Sound Of A Bubble Bursting?

There's an elephant in the room -- make no mistake. As we talk about the minutia of digital marketing and focus on formulas for data-driven success and picking the right channel for each particular audience, we are increasingly having to crane our necks to talk around the grey mammal that nobody seems too keen to talk about. Is it just me, or has anyone else noticed that the ad-tech industry is facing a year of collapse? Or at least serious revision?

The news was in the mail for much of last year as investment in ad tech was widely reported as having fallen to a record low after years of excitement. You could argue that this was over-excitement -- and like any ball that gets pumped up too much, air is inevitably going to leak out. The question is, is it a ball that will release air and go a little flat in the garden waiting to be kicked back in to life again in the summer, or is it a balloon that will properly pop?

Audience Science confirming today that it is to reduce head count significantly is a sure sign that things are looking pretty ominous in ad tech right now. Some reports are suggesting as many in one in four jobs may be shed. The thing is that the company isn't exactly a start-up with a pipe dream. It's a serious firm speaking at nearly every conference you will ever attend and with what appeared to be an enviable client list. The news comes just a week after Telemetry shut its doors. The anti-fraud company was once tipped to be worth near half a billion dollars but has now closed its London and US offices.

It's timely because I was talking with a couple of industry insiders who advise big brands, and I mean very big high street brands, on digital transformation. They have a really good finger on the pulse of ad tech, and the conversation turned to the observation that predictions were flying around for 2017, as you'd expect, but nobody was flagging up what they felt was not only obvious, but inevitable. A major "correction" or "burst bubble" -- call it what you like -- is being visited upon ad tech and we're only at the start of the process. 

Their insider expert views chimed with my own, more amateur observation that there were all the ingredients there for a clear out. Namely, there are just far too many ad tech businesses out there bamboozling marketers and agencies with their tech. Go to any conference, any marketing event of any type, and there is stall after stall of ad-tech company claiming they can do more snazzy things for less budget than the start-up giving away sweets and pens next door.

If this weren't enough, the insider views is that just as agencies used to commission Web design companies to build sites and Millennial hipsters to perform content and SEO operations, nearly everything of any value eventually gets pulled into the agency. In most cases a purchase is made, so there is no reinvention of the wheel and some clever start-up CEO gets to buy a holiday home and yacht. The point is that their one piece of tech now covers many sub agencies and multiple brands. The one purchase means the capability is spread among many users, who then don't need to buy their own separate tech or put a variety of tech companies on retainers.

So ad tech is going in-house. We are going to see a year of IAB certification to help guide agencies to a handful of providers rather than the scores who are currently daily cold-calling any marketing executive who will pick up the phone. Some will continue as independents and some may well be bought by agencies or even brands deciding to bring capabilities in-house. What is certain, the handful of players the industry needs will become evident this year.

The harsh reality, then, is that it will be a very tough year for ad tech. Investment is down and the industry is completely over-supplied at the same time as many capabilities are beginning to go in-house. There will be winners in this, of course, but expect a lot of losers too. 

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