The news that Sizmek has entered into a definitive acquisition agreement to buy Rocket Fuel at a $145 million valuation is more evidence of how overcrowded the ad-tech market has become.
As more players entered the market, each claiming to better serve a different aspect of the ad tech ecosystem, the strength and staying power of the Facebook-Google duopoly became increasingly clear. Small players that may have entered the market on a high -- like Rocket Fuel -- have fallen behind, with acquisition the only answer to survival.
Industry executives who offered commentary on the Rocket Fuel acquisition told Digital News Daily to expect further consolidation of ad-tech firms going forward.
Matthew Fanelli, senior vice president of digital at MNI Targeted Media, a subsidiary of Time Inc. was one: ““The landscape is constantly shifting and changing, with multiple players looking to gain new market share while reducing complexity,” he said. "It is becoming clearly evident that it makes more financial sense to acquire an existing tech stack versus creating one from scratch. It also increases speed to market, which is of the utmost importance. It is the key to survival.”
A similar trend was evident overseas, Last week, global holding company ISPDigital acquired a majority stake in Antevenio, which has a strong presence in Southern Europe and Latin America.
“Many ad-tech companies started out believing profitability could be attained at a certain scale,” explained Mike Seiman, CEO of Digital Remedy. “With margin compression happening globally, that scale has exponentially increased, forcing many companies to operate unprofitably at the same scale in terms of topline revenue. Where once we were talking about a billion in topline revenue to achieve profitability, it now could take double digit billions to get there. At that scale, what is required to provide a quality service to a multitude of clients is tremendous.”
Let’s see what comes next. There's undoubtedly more consolidation to come.