Ad Tech’s Dirty Little Secret

Written on
Feb 21, 2014 
Michael Zacharski  |

ADOTAS – Last year was marked by an influx of acquisitions in the ad tech world, a trend that can be largely attributed to the not-always-true notion that a new technology must be offering something innovative and unique to the marketplace, so it must be acquired to serve as a competitive differentiator. Investments and acquisitions are made based on the assumption that the company or its technology is uniquely suited to answer a specific market need and will deliver a significant return on the investment.

However, the dirty little secret in the ad tech business is that the bulk of these technology stacks, which comprises the layers of components or services that are used to provide a software solution or application, are all built with essentially the same tools; and all the major power players are powered by the same handful of companies. So, while from the outside, the industry may look like it offers hundreds of differentiated stacks, most of them are clones built by the same company. In fact, many companies are just selling the same service with a different white label. This is misleading to investors and clients because all of the companies in the space claim to have distinguished tool sets and unprecedented technologies, but they are really just different flavors of the same technology.

These trading infrastructure companies are the secret arms dealers of our industry. They built parts of two of the three largest exchanges that operate today, and they offered to sell CPXi the same code bases. They will build a media trading desk, demand-side platforms, supply-side platforms and even entire data management platforms (DMPs), all with your name on it.

There is nothing wrong with working alongside partners, but the reality is that our industry may not be as differentiated as it claims to be. After all, how distinctive can these technologies really be, if the same provider builds them? More importantly, how does this consolidation in the industry impact actual technological innovation?

The truth is that it hurts both investors and clients. On the one hand, a wave of acquisition and investment does encourage innovation as a way of standing out from the crowd and catching the attention of the people writing the checks. But on the other hand, because the different colored wrappers in which these companies package themselves could easily fool an investor who may not live and breathe ad tech, companies that don’t actually offer anything new to the space take up valuable financial resources that could be used to advance companies with a truly unique value proposition.

It is a challenge to accurately determine whether a company is really a good investment and how unique they truly are. The fact is, this is a vast industry with numerous disciplines and sub-disciplines, all highly technical, and it can be prohibitive if not impossible to gain access to an expert assessment for each of these individual channels and categories, especially considering that new channels and categories are emerging constantly. However, it is not only beneficial for investors to dig as deep as possible into prospective portfolio companies or acquisitions, it is also the most effective way of driving true innovation in the industry overall and directing resources where they will be best put to use.

From the client’s point of view, there is a serious lack of transparency. Clients sign up with vendor partners to serve specific needs and if these services are all built on top of the same engine, then what are clients really buying? Marketers may be signing up for much more than they really need under the guise that this tool will help enhance their media buying efforts. However, in the end, it might not matter so long as brands are getting the tools that they need. But the fact remains that the industry is not being forthright.

The reality is that if brands and investors start to wake up to the fact that all platforms are built on the same stacks, the ad tech buzz could start to wear off.

Michael Zacharski has been a key driver of growth and innovation during his tenure at CPXi. He is a passionate leader, entrepreneurial thinker and practical problem solver. He has played a pivotal role across the organization since 2006, with specific contributions across global sales, media optimization, product vision and technical development as well as brand, agency, direct response and internal strategy.

As COO of CPXi, Michael provides senior leadership across all areas of the business with a focus on efficiency, structure and orientation of the company’s, teams, systems, products and technology, with the goal of guiding the growth of RTB, Mobile, Video, Display Media and Consumer Product offerings. Previously, Michael led the company in the growth of its publisher base from 90 billion impressions in 2006 to over 850 billion impressions in 2012. He also developed data analysis and measurement platforms to automate and facilitate interdepartmental and media management.

Reader Comments.

Well, Mike.. If you are going to sling mud in such an indiscriminate way, you should be more specific! Yes.. You could argue that much of the industry is re-skinning AppNexus and IP onWeb.. And /or running on amazon Web services. But not all… All of [x+1] is proprietary.. The optimization engine is patented.. and we run our own privat cloud. Differentiated capabilities based on differentiated architecture and proprietary IP.

Posted by John nardone | 3:37 pm on February 21, 2014.

I don’t disagree with your premise that a large part of the industry is built on the back of one or two companies. I noticed that you declined to name those companies. Is there a reason for that?

Posted by Ben Pashman | 4:24 pm on February 21, 2014.

Where does that leave cox then? You are built on appnexus.

Posted by Alex rigger | 8:32 pm on February 21, 2014.

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