By Don Kennedy, Managing Partner.
My experience in the advertising technology world dates back to late 1999 when I was first getting to know the founding team at Advertising.com. Since those early days, I have had the privilege to work with thousands of clients and partners across various industry sectors. I’ve had the privilege to attend countless industry events (and some pure boondoggles) around the globe and learn from some transformative business leaders. I’ve also had the privilege to go head to head (yes I consider that a privilege) with competitors big and small, many of whom I greatly admire, and many that frankly left me scratching my head as to how they would stay in business (editor’s note – many did not). The ad tech space is messy and complicated, and these dynamics have been a double-edged sword for companies big and small. Chaos can certainly create opportunity, but it can also create an industry that can collapse unto itself.
Over the past couple of years, there have been countless “The Death of Ad Tech” articles written. They aren’t particularly difficult pieces to craft, as the industry has provided more than enough background material, but how different is Ad Tech from any other industry sector? As I spend my days now working with venture backed companies, investors, and Fortune 500 companies to help build their senior level leadership teams, I keep coming back to four simple questions that I wrote down about fifteen years ago as the ad tech world started to get exponentially more crowded and complicated. At times when we would debate new product offerings, entertain potential acquisition targets, or even look at organizational structures, these questions were my guidepost and personal sanity check.
These questions are very simple, but it’s striking how difficult it is for entities and individuals to provide succinct and specific answers that address the questions. I saw it everyday as an operator, and I see it everyday at GM Ryan as we work with companies and candidates.
1) Does it WORK?
Could there be a simpler question? You’re probably thinking, “Of course it works, how do you think we got here? An investor even gave us money!” Not so fast. What are the SPECIFIC and CLEAR proof points that define success? Middling ad tech companies trade on taking a cut out of the ecosystem while providing murky value propositions for their clients. Strong companies provide straightforward benefits (not just features) for their client base and manage their internal business with the same simplistic rigor. The best companies in the space can clearly answer whether something “works”. Seems simple, but it’s far from it. I met with a start-up recently and after hearing a word salad of a value proposition, I asked “How do you know if it worked and what are the metrics to define success for the client and for you?” After a pregnant pause, I was told, “Well, we have a lot of data that we look at.” Continuing my line of questioning, it was clear that they had not yet delivered a knock out proof point externally, nor a set of defined metrics internally that really drive strategy and measurement. “Does it WORK?” may seem very simple, but I challenge you to ask it of yourself and of your partners, and write down the proof points. You may be surprised by what you see.
2) Can it SCALE?
For anyone in the ecosystem that created something that “works”, one of the natural next questions needs to be “Does it SCALE”. The Ad Tech space is littered with companies with good technology and smart teams that failed because they couldn’t scale their offering with the same proof points they were able to provide on a smaller sampling. One of the main challenges for early stage companies in the ad tech space is simply getting the attention and time of an agency or client partner. There are only so many hours in the day or lines on the plan. It’s a lot harder to get the meeting, and even harder to get the buy if you can’t show that you are not only solving a problem, but you can do it at a material enough level to move the needle for a customer. A product offering that delivers phenomenal ROI on a small scale may get you a “test”, but lack of a ramp will immediately put you in a category that just isn’t as compelling for clients (and potentially future investors or acquirers). Most companies and/or products don’t launch delivering massive scale, but they certainly have scale at the top of the list as they determine their product roadmap and future strategy.
3) Can I REPLICATE it?
Assuming you’ve built something that works and can scale, it’s now time to talk about how to deliver consistently over the long haul and look at applications across industries and audiences. Your solution just killed it during the holidays for your retail client. Now it’s Q1, and the consumer landscape is very different. Can you drive relative results at scale for your client in this new environment? How do you repurpose your offering for other industries? Can you perform at a high level with scale month in and month out while the needs and expectations of your customers continue to increase? Your product works really well domestically. Is there a global play here? If so, how do you do it, and is there scale? There have surely been success stories in the ad tech space born out of seasonally, industry specific or niche audience focused offerings, but the majority of the winners have been able to replicate their results from a consistency and broader application standpoint.
4) Will it EVOLVE?
This question is at times tougher to answer, as it takes a keen sense of conviction when it comes to trends, and the ability to pivot and adapt (often in real time). Once again, the industry is full of former high market cap darlings that were about to answer the previous three questions in the affirmative only to collapse due to their inability to adapt to changing market dynamics. Think about companies that were riding high while advertisers place heavy value on last view attribution metrics. Based on those point-in- time metrics, these companies were wildly successful. However, it didn’t take long for advertisers to start to redefine those metrics, and the manner in which they were valued. This caused a massive change in the industry and “thinned the herd”. Companies that could pivot and adapt their product suite to this new reality flourished. Those that couldn’t entered a death spiral from which they couldn’t escape. There are countless examples of companies that built successful desktop based offerings only to see things implode when they didn’t fully anticipate or execute against such a rapid shift to mobile devices.
These four questions don’t delve deep into complex financial dynamics or utilize Harvard MBA case studies (I like things simple sometimes). They are also not specific to ad tech per se. “The Death of Ad Tech” is an easy story, but isn’t that what an industry deserves if the bulk of their entrants can’t answer these questions in the affirmative? Are things any different for any other industry? Think about a company, product (or person) you admire and ask these four questions. It’s less about the sector and more about common sense accountability and transparency. The Ad Tech sector is still very young in terms of being an industry, and digital marketing will continue to grow. What’s happening now is a lot of “Lumascape” entrants are being forced to look in themirror and answer a few simple questions. Can’t be that hard….right?