Consolidation Or Liquidation?

  • by , Featured Contributor, November 30, 2023
For years, folks in our business have talked of the “coming consolidation” of the ad-tech industry. Except for a few years after the dotcom wipeout of late 2000 and 2001, our industry has always had more purveyors of advertising technology than it was likely to be able to sustain long-term.

We’ve almost always been in oversupply of transaction-enabling intermediaries, buying services, data companies, targeting services, measurement services, serving platforms, resellers, consultants and pundits. Of course, with annual digital ad spend growing from almost nothing in 1993 to more than $250 billion today, a growing, multidecade abundance of purveyors of all types is not surprising. After all, rising tides raise all boats.

Is change upon us? Cheap money, high public market valuations and unending capacity to keep paying more for talent have already become yesterday’s memories. Increasingly, investors today want profitability, free cash flow, and no debt service; not just revenue growth, and certainly not just ARR (annualized recurring revenue) growth.



A lot of boats got floated (both execs and companies) over the past decade or so that never would have in normal times. They weren’t seaworthy. And they are not likely to make it in today’s conditions, with its intense focus on productivity, profits, cash flow, higher performance expectations, expensive capital, few public exits, low/modest public valuations and low M&A outcomes on limited demand.

The industry is ripe for consolidation, right?

Maybe not. Maybe the industry is most ripe for a bunch of liquidations. Here is why:

Ad-tech buyers are few. Most public ad-tech companies trade today at a fraction of their former valuations. All believe they can get their historical stock prices back and don’t want to buy something today, which they view will be a super expensive expenditure of stock and probably hurt their listing even more. Most have limited cash. None want to take on new debt.

Ad-tech sellers are many. There are many hundreds of companies in ad tech today that are losing money or barely breaking even and living day to day on transaction arbitrage. Operating that way could work when venture capital was plentiful and working capital debt was plentiful, cheap and forgiving. Those days are over.

Cash is king -- so why buy now what you can get for very little very soon? In this world, companies are bought, not sold. So, why should the few buyers spend money on things that are losing money and/or won’t drive increased profitability and cash flow?

If you want assets or employees from money-losing companies, you can just hire the people away and buy the assets once the companies fold. Videology, Sizmek and MediaMath are some recent examples.

For sure, over the next two years, we’ll see some consolidation in ad tech, but probably only among the best companies and most precious and valuable assets. I suspect instead we’ll see a bunch of companies just go away, most of them pretty quietly. I feel for those that won’t make it, but that’s just part of what it means to build businesses and industries. Not everything goes up and to the right.

What do you think?

2 comments about "Consolidation Or Liquidation?".
Check to receive email when comments are posted.
  1. Ed Papazian from Media Dynamics Inc, November 30, 2023 at 12:36 p.m.

    Have to agree, Dave. Too many middlemen entrepeneurs trying to jump on a bandwagon that is only so large and can only accomodate a certain number of players on a profitable basis. Also, whats coming probably includes heavy doses of outside---federal--- regulation and the likely breakup of certain "monopolies"---supposedly in the public's interest. It should be a wild ride in the next three or five years. Stay tuned folks. 

  2. Jacqueline Corbelli from BrightLine, December 1, 2023 at 1:16 p.m.

    Great insight Dave, I completely agree with your perspective. We've likely entered a final, or near final stage in adtech's maturation. The screens have converged, the digital ad equation and role of data is clear, and ai is now being injected into both. The market needs to integrate more seamlessly now, and that does require investments in end-to-end delivery strategies, but there are far more players than needed realistically. The shakeout is underway, and probably started during the pandemic, but there is much more to come. Will be tough for the low/no rev, unprofitable and cash strapped. Sad but natural, and ultimately what's best for the market. 

Next story loading loading..