ADOTAS – There are two things you can always count on in ad tech: First, there will be somebody who says that next year will be the year of ad tech consolidation. Second, that person will be wrong. This year will not be the industry’s year of consolidation. With technologies like mobile, dynamic creative and programmatic buying continuing to proliferate and grow more sophisticated (and more complex), specialized vendors will continue to emerge and find their place within the ad tech ecosystem. If anything, we will see companies that have historically stayed on the periphery of the ad tech landscape begin to expand their offerings in an attempt to make more aggressive plays for marketing dollars.
We are already seeing the first of these new entrants in the guise of the major consulting firms. In 2009, Accenture, in a bid to capture a slice of the ever-growing digital advertising pie, launched Accenture Interactive, following that with a series of strategic acquisitions, most notably its purchase of the digital production company avVenta Worldwide in October 2012 and of marketing giant Acquity Group in July of this year. At the time, Acquity Group was the second-largest independent digital marketing company in the U.S.
Deloitte followed suit, acquiring Ubermind, a mobile agency, in 2012 and launching that same year Deloitte Digital, a full-service digital marketing group, offering creative, strategic and executional services. Deloitte has had considerable success growing out its digital marketing business, even gracing Ad Age’s list of the fifty largest U.S. digital agencies in 2012.
Big Data stalwart IBM has gotten into the game, too, acquiring companies like Unica and Coremetrics and launching a series of marketing-related initiatives, like its Digital Marketing Network and its Digital Data Exchange. Even the white shoe strategic consulting shops have made forays into the marketing space. Bain and Boston Consulting Group, for example, have each begun to offer metrics that cater to the marketer.
This growing interest of consulting firms, and others, in marketing dollars reflects the new reality we are living in. Traditionally, a company’s digital dollars were primarily funneled to things like IT strategy and system integrations. These “operational” expenditures were the purview of CIOs and CTOs. CMOs were largely ignored by the big consulting companies as their budgets were spent on creative, production and media.
The digital revolution, however, has changed all that. Big data and analytics have become more powerful and now touch all aspects of a company’s operations, marketing being no exception. And as marketing has become increasingly suffuse with technology, the traditional lines between marketing, strategy, data and IT have begun to blur.
Data is now central to the marketing process and the need to surface detailed customer information to the marketing channel is greater than ever. The CMO’s role, therefore, has become intertwined with that of the CIO, and, indeed, the CMO now exerts considerable influence over integration dollars. To consulting firms, the writing on the wall is clear: Leverage their traditional strengths to go after high-margin marketing dollars.
The arrival of these nouveaux marketers has not gone unnoticed by the traditional ad agencies, nor will it go unchallenged. As companies like Accenture and Deloitte try to further build out their marketing stacks, the ad holding companies are formulating strategies of their own, with an eye to both defend their turf and expand their horizons.
Agencies are beginning to offer strategic advisory work in addition to their executional expertise. Witness Olson’s acquisition of the digital strategy consultancy PulsePoint Group. Such moves make perfect sense. The agency world is notoriously competitive—brands often switch agencies and margins are slim. Horizontal expansion offers little benefit by way of economies of scale. Moving up, and controlling more of, the value chain will help agencies achieve greater stickiness and capture bigger profits.
Other agency folks, reading the tealeaves, are venturing out for themselves in an attempt to have a more strategic impact on client results. Take, for example, Brendan Moorcroft and Quentin George, executives who helped build Cadreon, IPG’s agency trading desk. Looking to tap into strategic dollars, they have launched Unbound, a strategy-oriented services group that is already gaining significant early traction. Or Giant Spoon, founded by Alan Cohen, former OMD U.S. head, the startup agency is taking a holistic approach media buying, combining strategic counsel with traditional transactional work.
The dollars are there, and agencies are the incumbents—they are well versed in the marketing space and know how to piece all the elements together. The consulting firms, on the other hand, sit on a wealth of intellectual capital and strategic knowhow. Each is trying to play the role of quarterback. What happens when these worlds collide?
2014 is already shaping up to be an exciting year for the ad tech industry, with competitors, old and new, jostling for a slice of the lucrative marketing pie. And who knows: Come 2015, we may actually see some consolidation.