Adtech has always been a dynamic, evolving industry that is constantly changing. As we move into 2018, here are 5 top trends that we think will be seen in the adtech market this year.
1. Consolidation and a challenger
As an ever-increasing percentage share of digital advertising dollars go to Google and Facebook, conditions remain challenging for smaller players looking to differentiate themselves. Tech talent remains difficult to lure away from the big players. This year we expect consolidation to continue within the sector. We predict that you will see larger adtech providers acquiring smaller, niche players to enhance tech stacks, source engineering talent and to create a more compelling, fully featured offering. We’ll also see activity from outside the sector – we expect telcos and ISPs to continue to spend on purchasing adtech companies and for more traditional, blue chip organisations to join the party, particularly as data becomes increasingly important.
One key rival to Google and Facebook that could actually start to shake up the market is Amazon. Having quietly taken the wraps off its DSP platform last year, it is already being very favourably discussed in CMO circles. Self-serve, transparent and low-cost; three features brands are particularly talking up. With Amazon’s unparalleled riches of extremely valuable shopping data, and with an ever improving technical platform, Google and Facebook may need to keep an eye over their shoulder in 2018.
2. Data remains king
Data will continue to be a vital asset to all within the adtech stack. Even with GDPR and the associated changes in Europe, data will remain a key asset both demand side and supply side. There will be some challenges as regulations tighten – particularly given the increasing disparity between the European regulatory environment and the far less controlled US market. We expect to see a shift towards European clients wanting to use European-based adtech providers and for European clients to materially increase their due dilignce on new suppliers. Adtech providers should expect to have answers to a much broader and more detailed set of data-related questions.
Of potentially greater impact to adtech in Europe, the new PEC regulations are currently still draft legislation. Their final form and the extent of the challenge for the adtech industry as a whole remains to be seen – however, with the delay in implementation meaning these will not come into force until 2019, there should be little impact this year.
In addition to adtech providers looking to increase the size and scope of their data pools, clients are increasingly looking to create their own centralised ‘insight’ platforms, tightly integrating advertising data into their broader ecosystems. The key focus this year will be not just on collecting ever more data but instead on connecting data silos – using the vast troves of data already held by adtech providers and clients more efficiently by connecting the dots between different data sets to identify new opportunities and insight.
3. Here comes the blockchain
Every advertising event currently seems to feature at least one talk on blockchain. Although much of this to date has been speculative rather than concrete products, in 2018 we expect to start seeing full scale deployment of blockchain technologies in the adtech ecosystem, particularly for ad verification. How widely adopted these will be remains to be seen but given the ever-increasing pressures from clients when it comes to verification, viewability and ad fraud, there is certainly enough momentum in the market to support the deployment of these new solutions.
It’s unlikely that widespread adoption will happen this year but certainly many brands will be likely to dabble with the new technology to explore its potential.
4. One agency or many?
Clients use of agencies tends to be cyclical – first clients wanted everything under one roof and mega-agencies offering a one-stop-shop were created to service this demand. Then clients wanted to adopt “best-of-breed” and split out different services between market-leading agencies – benefitting niche players who could win specialist commissions from bigger clients that they would otherwise not be considered for.
2017 saw the pendulum start to swing back to the consolidated approach. Although some clients started to move much of the agency management function back in-house and to directly contract with ad tech platforms, many others looked for a one-stop shop which can offer a full-service model. This approach seems to be driven from a desire to reduce overheads and prevent duplication of roles across different agencies. Some clients also feel that they can gain increased transparency if everything is serviced from a single agency. Certainly, the overriding view is that consolidating spend allows for greater efficiencies being available.
Of course, it is not all roses – clients are well aware of the risks of putting all their eggs into one basket. The same drivers as previously caused brands to move away from this approach are still valid – brands need to monitor their agencies carefully to ensure that complacency is not introduced into the account due to a lack of competition. Effective pricing mechanisms can help to maintain motivation.
5. Rise of China
In 2017, the Chinese adtech market continued to grow. Still in its relative infancy given the size of the potential market, adtech companies are looking to China as a huge growth opportunity. With a different set of dominant companies in the space, such as Baidu, Tencent and Alibaba, and lacking any meaningful presence from the US powerhouses of Google and Facebook, there is still much opportunity for smaller providers to thrive.
This opportunity is mutual, however. With a huge domestic market, Chinese tech players have funds readily available for acquisitions. We’ve already seen multiple US adtech and media companies being purchased by Chinese entities and this is a trend that will likely continue. Sale to Chinese investors is now becoming a real exit option for adtech companies, particularly as more traditional routes (such as IPOs) remain tricky.
As the world’s number one market for smartphone use, China is a true mobile-first market. This means that the technologies that are being developed as a necessity for success in the Chinese market are often more developed than the equivalent solutions elsewhere. As a result, there is huge opportunity for Chinese ad tech providers to offer and deploy these solutions outside of China and become real market leaders in the mobile arena. To date, movement from China outwards has definitely been more limited than to China, inwards, but we expect this momentum to start to shift this year. This also means that brands need to redesign campaigns to effectively make use of mobile platforms – recycling the same campaigns from desktop to mobile just won’t work, no matter how much budget is thrown at it.