Diversification is the fuel for digital advertising success
The constantly changing nature of the ad tech ecosystem will continue to fuel its vibrancy and longevity, writes Pixability's Chris Bennett.
One look at the ever-expanding Display LUMAscape is all it takes to understand mounting concern about the scale of our ecosystem. It is undeniably crowded and even its creator, Terence Kawaja, feels the industry is becoming too fragmented.
The barriers to marketplace entry have diminished, leaving the door open for newcomers. Where once funding was hard to come by, a recent surge in investment from UK Venture Capitalists (VCs) is driving the number of fresh, young advertising technology companies entering the space. In 2015 alone, UK technology businesses raised a record-breaking $3.6 billion in VC funding - a 70% increase on the investment received in 2014.
Development of ad tech itself has also progressed at unprecedented speed, enabling companies to boost the efficiency of campaigns by automating ad trading, while making it easier to gather in-depth audience insight - producing data that facilitates real-time accuracy and better measurement. When combined, these factors have created a highly fertile climate, which continues to attract a constant flood of new and varied ad tech providers.
But it does not necessarily follow that the burgeoning size of the industry will impede its success. In fact, the rising number of players will serve to increase the diversity and flexibility of ad tech, which in turn will fuel its future prosperity.
Consolidation will not halt innovation
There is no doubt that as the volume of new, independent ad tech companies has increased, so too has the rate of industry consolidation. Large media companies have quickly seized the opportunity to not only streamline the industry landscape, but also boost the value of their existing tech stack by acquiring new talent.
Google and Facebook have significantly enhanced their tech capability by buying rather than building. Facebook's acquisition of Atlas gave the social media giant access to an ad server platform, while Google's purchase of Spider.io provided the company with a viable anti-ad fraud offering.
I forecast that the frequency of acquisitions is set to maintain momentum this year on both the buy and sell side, but as long as the environment remains congenial, new players will continue to appear with fresh and unique solutions to existing industry problems. And that is no bad thing.
Why agility and ambition are core problem-solvers
In 2015 the industry was beset by three central challenges: viewability, transparency, and ad fraud, which will remain at the top of the agenda over the next 12 months.
To meet these challenges - and others - the industry needs to stop relying on the same tried-and-tested methods. It must adopt a multi-faceted approach that deploys a mixture of tech to achieve long-term solutions. This means it must harness the capabilities of both established providers and agile start-ups to combat the efforts of digital fraudsters, and ensure ads engage with ever-changing audiences.
Young companies bring new perspective to long-standing problems. Their ambition and independence motivates them to push boundaries, and find new ways of addressing challenges. With a grasp of cutting-edge technology, their insight is vital to ensure the industry looks at each issue from every possible angle.
Who are the trailblazers taking on industry challenges?
As each challenge evolves beyond the abilities of existing providers, start-up companies have risen to take up the mantle. Leading the charge are several technology companies which have built effective solutions that may just have the power to overcome the terrible trio in 2016.
For example, innovators such as Rezonence are tackling the challenge of transparency by improving the consumer experience through software that embeds native ads seamlessly into editorial digital content, minimising disruption and presenting ad content openly. Sourcepoint, the first publisher compensation platform, has responded to the industry's ad blocker crisis by encouraging transparent discussions between publishers and consumers to clearly communicate the cost of high-quality content.
Online video specialists like Pixability are securing maximum reach and brand safety by focusing technology solutions around advertising on premium platforms like Facebook, Instagram, and YouTube, guaranteeing high-quality placements and accurate audience targeting.
Other video industry players like Unruly utilise emotional audience data and user-friendly video formats to drive viewer engagement, while Teads, has developed a range of native video ad formats for publishers and advertisers.
Industry pioneers such as these have driven video to the forefront of ad tech investment - fuelling predictions that it will lead the $26bn ecosystem in the coming years.
The constantly changing nature of the ad tech ecosystem is what powers its vibrancy and longevity - new challenges will appear alongside fresh opportunities, which makes young talent crucial to ensure the industry has the means to manage both.
Start-up companies drive innovation in ad tech, developing advanced tools that enable advertisers to boost efficiency, reach, and revenue. Emerging start-ups should be seen as an asset - not a burden - for the existing ecosystem. Their unique abilities will be essential to safeguard the industry's future in 2016 and beyond.
Equally for Terry and his team, the Digital LUMAscape is unlikely to get any smaller any time soon.
Chris Bennett is EMEA MD at Pixability