Build, Buy or Partner? A Difficult Question For A Rapidly Evolving Industry

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The digital media space has experienced some dramatic paradigm shifts in the last several years, including the emergence of several game-changing technologies. Keeping pace with the sudden and rapid ascent of each new tool or technique puts competitors in the challenging position of feeling they must meet or better the latest thing, or else be seen as irrelevant. While this upward pressure to evolve is truly the identifying characteristic of our still youthful industry, it does present the entrepreneurial minded with an all-too-common dilemma: On our way to developing the next killer app, do we build, buy or partner?

In my 15 years of working to build CPXi into a diverse digital media company, I’ve been faced with this question many times and I have had even more opportunities to watch colleagues and competitors ask themselves it as well. What I have learned is that there is no uniform best answer. The best choice of how to play this strategic gamble will always depend on your specific circumstances, needs and vision. But while there are no simple right answers, there are right questions to ask your self and considerations to be made.

Sure you can build, but that takes a lot of time, resources, and it can take you away from your business’s core competencies. But when you do build it, you have total control of the process. From the eyes of a true entrepreneurial spirit, the high challenge level of building from scratch can also be intoxicating.

Buying of course takes short-term resources, often more resources than a company can spare or raise from investors within the window necessary to take advantage of an opportunity. Acquiring can mean a challenging integration process, whether of technology or people, that runs the risk of derailing a strategy that looked solid on paper. And yet, when an acquisition goes well, you can add a powerful new revenue stream to your business very quickly and can often experience a clear and quick synergy necessary to break through a cluttered landscape.

Partnering provides the least amount of control and requires the most flexibility and statesmanship, but arguably the fastest ramp up and the least amount of risk as a specific partnership can be abandoned or rethought usually without significant setback or costs. This risk/reward consideration, however, can be a stopper for the truly entrepreneurial as the potential upside can be lower with a partner looking for their own piece of any success.

Each option—build, buy or partner—gives a company different levels of control, return and costs (both time and money). The right decision really depends on the specific problem you are trying to solve, what your acceptable timetable is and what your resources are.

In building a digital media company in this competitive environment, I have gone down each path at one time or another, and have seen success down each path. A while back, we spent a year trying to build our own ad server before finally realizing that we were working too far outside of our core competencies. It was a waste of time, money and resources, especially considering our opportunity cost. So we decided to partner with AppNexus to power our bRealTime platform. When we decided to diversify even further and offer a programmatic creative platform, we acquired AdReady, a technology provider that already had a track record of success. Earlier this year, when we decided to launch our own content division, Consumed Media, we built it ourselves from the ground up, leveraging knowledge and resources we had acquired over a decade of doing business. Build, buy or partner—we’ve done all three and each time the decision was made for situation specific reasons.

There was a time, of course, early in the industry’s evolution, when building was all the rage; everyone thought they needed to own each and every platform they provided. But over time, we’ve learned more and more to view other solution providers as potential allies rather than adversaries, and become much more open to discussing ways we can work together that make sense for both sides. And in the past few years we’ve seen a lot more activity in terms of partnerships and M&As in recent years, fueled by the sudden emergence and accelerated growth of mobile and video advertising and programmatic media. In the end, though, the answer is always custom and based on the pushes and pulls faced by a specific business, at a specific time. Each business has its own set of unique circumstances, which are constantly evolving according to internal needs and external trends, much like the bigger picture of the industry landscape into which they fit.

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