Why The Merger Of Adtech & Martech Is Inevitable (& Will Change Everything)
In this investigative piece, Andrew Birmingham, editor of Which-50.com and B&T’s resident tech-head argues marketing technology (martech) and advertising technology (adtech) are being drawn together after two decades of parallel evolution. What is driving the trend and what are the implications?
The number was as terrible as it was stunning. Earlier this year, Morgan Stanley analysts predicted that in the first quarter of 2016, 85 per cent of all new digital advertising dollars in the United States would flow into the swollen coffers of just two companies: Google and Facebook.
The rounding errors — by which we mean everyone else in the market — immediately tried to discredit the suggestion. However, an analysis by the CEO of DCN, Jason Klint, based on publicly available data, suggested that if anything the actual figure was closer to 90 per cent.
That’s bad news for other publishers of all varieties, but it is also an existential concern for the adtech world as these two behemoths extend the utility of their platforms. The last thing any tech business wants to be is the tasty bucket of blood inhabiting the kill zone between Mountain View and Menlo Park.
The Morgan Stanley analysis also validates the market assessment of Marketo CEO Phil Fernandez. We caught up with him in May at the company’s annual user conference. Fernandez was negotiating to sell the business to a private equity firm, although that wasn’t clear at the time. Shortly afterwards, the $US1.7 billion deal with Vista Equity Partners was revealed.
Fernandez told Which-50, “I believe that the [adtech] industry is rapidly consolidating into Google and Facebook. And globally also around the Chinese versions of these two and a handful of others.”
This consolidation will completely disrupt the adtech sector due to the asymmetry of these two giants possessing almost infinite data about their customers, he said.
(Marketo CEO Phil Fernandez. Image source: YouTube)
There is a growing consensus about the gathering power and adtech utility of Google and Facebook. But the other theme that emerges is the shift of marketing technology companies into advertising solutions. Marketo competitors like Adobe, Oracle and Salesforce are leading the push.
Fernandez is a little more skeptical on the timing of this than his industry peers. He says there is a deep structural impediment to the rapid merger of martech and adtech. “I was in an investor meeting with my biggest investors about a year and a half ago and said to them that maybe we would dip a toe into some adtech waters.”
The idea freaked them out a little, he joked. “They told me, ‘We would not know how to value you because a dollar of license revenue and a dollar of ad revenue aren’t the same thing’. Basically they wouldn’t know how to add the two together.” (Presumably Vista had no such qualms).
Over the long term, however, he is more sanguine. “We saw Google make some moves recently with Google Analytics up against Adobe. So I think there’s some chance that those giants in future will become martech companies as much as advertising companies.”
Winter is coming
“I think there’s vast consolidation that still has to happen [in adtech]. There’s going to be fewer tools. My crystal ball would say by 2020 Facebook and Google own this market.”
Rather than trying to build or buy Marketo into such a market, Fernandez sees a more collaborative strategy. “We’ve been very explicit that we’re not crossing the bridge into doing adtech, but that we are going to build a bridge that we can leverage into adtech.”
Fernandez’s view about consolidation is commonly held.
JJ Eastwood is the managing director of Rocket Fuel’s Australian and New Zealand operation. He says the failure of many adtech businesses to get their IPOs away in the last year suggests the market is catching on to the likelihood of consolidation.
“I think that party is coming to an end,” he said. Eastwood believes too many of the current adtech businesses are still anchored around manual workflows, despite claims to the contrary. Instead, technology such as AI and machine learning will overwhelm them, he argues.
Software giant Oracle — which in recent years has written large cheques for martech companies like Responsys and Eloqua — is also keeping a watchful eye on developments in the adtech sector. And it has been getting more deeply involved through acquisitions like Blue Kai, a data management platform (DMP). Through the DMP, Oracle wants to enable brands to more easily marry their first-party data to third-party data generated in the advertising world.
“Ads are becoming customer engagement channels. They’re not just ads any more,” says Kevin Akeroyd. He heads up Oracle’s Marketing Cloud business globally and he spoke to us at his company’s Customer Experience event, also in Las Vegas earlier this year.
According to Akeroyd, the buyers understand that while a line clearly separates adtech and martech right now, it’s a line that’s going to blur.
(Kevin Akeroyd Oracle Marketing Cloud)
Instead, he says, customers will own (or rent) data pipes that provide the signals, preferences and behaviours to help brands learn more about their customers.
“We’re not going to be talking about this hard bright line between marketing tech and adtech any more. It’s really blurred. The fact that it’s coming together already at the omnichannel execution end of the data layer means that the rest is just going to follow.”
He said this trend is already impacting on the structure of the tech service industry. “The systems integrators who have traditionally operated in the marketing technology space are now playing against the agencies. You look at the agencies, what are they buying? They’re buying martech companies! They aren’t just media any more, they’re the whole thing.”
To appreciate Akeroyd’s point, take a look at a company like Publicis, the global Paris-based advertising and public relations business. It owns Sapient and Razorfish — the Mayfair and Park Lane of digital agencies. As such, it competes head to head with traditional Big Four systems integrators like KPMG, Accenture and Deloitte.
And to understand who is winning, simply note that the latter group are trying to ape the practices of the former, and not the other way around. Or, as one senior KPMG executive described it wistfully to Which-50 last year, “If you’re a kid looking for a fun career, what would you rather do, catch an elevator or ride the slide?”
Consumer lead
Derek Laney, Salesforce’s head of product marketing, Asia Pacific, told Which-50, “When we think of where we spend our time as consumers, 54 per cent of digital is on mobile and 90 per cent of that is in mobile apps. That represents a huge change for the digital ad space (from where is started).
“When you look in Australia, for instance, one in three mobile minutes in is either on Facebook or in Instagram.”
(Derek Laney, Saleforce)
Laney also referenced the Morgan Stanley figures, and said the reality is that there has been a mass simplification in how brands reach their audiences via digital and mobile. “That is as true in Australia as everywhere else.”
For a company like Salesforce, this presents a huge opportunity to consolidate development resources. “This simplification allows us to be more focused in the way we think about our investments. That is why we have focused on these platforms (Google and Facebook) as the primary way that both ad marketers and direct marketers are looking to engage.”
For example, Salesforce has worked on integrating its Social.com solution with platforms like Facebook, Instagram, Twitter, LinkedIn and the Facebook Audience Network. And it recently announced an expansion to include the Google network as well, giving its clients reach into services like Gmail, search and YouTube.
Merging elements of martech and adtech delivers powerful results to brands, according to Laney. “We did a study with Facebook last year and we tested over 925,000 targets. We were testing direct marketing in terms of combining email marketing with the same message in advertising.”
The results were overwhelmingly positive. “We found that the combination of email with the SEO extended the reach of the campaign by 77 per cent.”
According to Laney, “When those two tactics were combined — so that when people who opened the email also viewed content through advertising — they were 22 per cent more likely to purchase.”
And it is not just direct marketers who see easy wins from the merger of martech and adtech. “From the perspective of the ad buyers they want access to first-party data to improve their conversion rates. They also want to reduce their waste.”
He cites cosmetic company L’Oreal as an example of a business which is using Salesforce’s Active Audiences to utilise their CRM data base and combine it with their online advertising. “When they target the CRM database they see a 68 per cent increase in click-through rates.”
Interestingly, the benefits are just as strong when they target lookalikes — “They still see a 62 per cent increase in click-through rates.”
He said this ability to utilise third-party data to inform online advertising is firing the desire for ad buyers and direct marketers to come together.
“Marketing is moving away from the focus on acquisition. It is becoming focused on life cycle marketing and talking to customers throughout their entire customer journey,” he said.
Please login with linkedin to comment
adapt Advertising Standards Bureau Big Merino Choice Hotels competitive pitch Creative Appointment einsights Exclusive Nestle Online ads PRIA Rob Creekmore SBS Social MediaLatest News
TV Ratings (18/04/2024): I’m A Celebrity Wins Prime Time And Key Demos
Aussie viewers can be a harsh lot at times. Only days after Ellie Cole bled her heart out, she has been sent packing.
Effie&co Launches New ConnectAsia Division To Help Aussie Brands Market To Asian Consumers Overseas & At Home
Not provided is advice on using chopsticks and not spilling ramen down your shirt.
Cashrewards Sets Out Stall For New CMO
Thinking of applying for the Cashrewards CMO gig? Here are some insider tips that, yes, are tantamount to cheating.
‘I Ask For The TV Industry To Stand Up And Defend Itself’ – Seven Boss James Warburton Steps Down
The Seven supremo heads for the exits after five years. Here's hoping the Spotlight team organised the farewell bash.
Poh! Jamie! Adriano! Paramount ANZ reveals its tasty plans for this year’s MasterChef
It's your fan's guide to this year's MasterChef! Although no tips on how to pronounce crudités or use a un fait-tout.
Dentsu’s iProspect Partners With MOOD Tea Ahead Of May Campaign Launch
We love a Mood Tea here at B&T. Although we do store old screws and nails in the International Roast caterer's tin.
Opinion: When Culture Starts Eating Itself: Navigating The Age Of Self-eating Nostalgia
Born boss David Coupland asks is adland going through a nostalgia period? But please, no repeats of Best Of Red Faces.
Who’s Going To Cannes?! The TikTok Young Lions Winners!
It's Aussie adland's next gen! They're off to Cannes with high hopes of bringing back a Lion & a foot-long Toblerone.
Adobe Launches Express Mobile App With Firefly AI
Want to be the coolest kid at Friday staff drinks but forgot your retro Nikes? This new Adobe wizardry may do the trick.
ThinkNewsBrands & IMAA Extend News Publishing Education In Brisbane
Industry duo takes its publishing roadshow to Brisbane. Was disappointed no male attendees were wearing walk socks.
B&T Chats With Wavemaker’s Provocative Pioneers On Their Cross-Pacific Sojourn
B&T TV heads to Wavemaker's Sydney digs to interview two staffers from its New York & LA digs. If that makes sense?
HoMie & Champion Launch “Give One. Get One” Campaign Supporting Youth Homelessness Via Town Square
Much like the fête's prized chutney wears a blue winners sash, so too should this top initiative from HoMie & Champion.
Thinkerbell Takes Us Back To Summer In Latest Work For XXXX
This beer ad wants to take you back to summer! Just minus any chance of a shark attack on your morning bus commute.
Cannes Lions Unveils 2024 Programme Featuring Queen Latifah, Jay Shetty & P&G’s Mark Pritchard
Are you one of the lucky ducks heading to Cannes in June? Check out the headliner acts you'll be queueing hours to see.
Scroll Media Recruits Costa Panagos From Twitch
Costa Panagos set to bring South American flair to the Scroll offices. Assuming that he is, indeed, South American.
Year13, Microsoft & KPMG Australia Launch AI Course For Gen Zs
Born around the 2000s? Need to amp up your AI creds? This guide's for you (although it's not really that age specific).
General Motors Snares Heath Walker From Scania
Do you rage about oversized American cars on our roads? You need to bail up Heath Walker at parties & industry events.
VML Launches New “Envoyage” Brand For Flight Centre
VML unveils new brand for travel operator Flight Centre. Alas, no sign of those paid actors pretending to be pilots.
Subaru Places Media Account Up For Review
Subaru puts media up for review, as adland journos get set for mandatory "agency drives off with..." headline.
TV Ratings (17/04/2024): Contestants Faced With Harsh Realities As Alone Australia Heats Up (Or Cools Down)
Alone still doing the business for SBS. Overly long train journeys not doing the business, but they persist anyway.
Ben Fordham Loses Number One Spot As Ray Hadley Celebrates 156th Ratings Win
The radio numbers are in! Discover who's off for a boozy lunch today & who's waiting for the dreaded HR death knock.
Gourmet Ice Cream Brand Connoisseur Launches New “Thrill Your Senses” Iteration, Via SICKDOGWOLFMAN
Rattling the old "truth in advertising" adage comes this ice-cream spot full of noticeably thin people.
Paramount’s Global Sales Boss: ‘Australia’s Converged Model Is A Blueprint For How I’d Like All Of Our Markets To Be’
Paramount's global sales boss gives local sales ops the thumbs up. Didn't weigh-in on the Lisa Wilkinson debacle.
TikTok Starts Testing Its Instagram Rival In Australia
In exciting news for piano playing cats & brattish pranks in shopping centres, TikTok unveils its Insta rival plans.
Man Wrongly Named By Seven As Bondi Killer Hires Lawyers
Struggling to save for a house deposit? Why not get wrongly identified by Sunrise!
Smartsheet Appoints Indie Agency Sandbox Media To Its Media Account
Can't stand your colleagues? Like to dob them in when they miss a deadline? These work management platforms are ideal.
Boss Not Letting You Come To Cannes In Cairns? Use This Business Case To Convince Them!
Stingy boss won't spring for a ticket to Cairns? Add this to your persuasive argument repertoire. Or grovel.
Alt/shift/ Brisbane Builds Portfolio With Ausbuild Creative, PR, Content & Social Account Win
The Brisbane comms/PR agency lands constructor Ausbuild. Also hoping for a discount on its new glass conservatory.
Young Guns Versus The Old Guard: Who Adds More Value to Our Industry?
Cannes In Cairns poking this hornet's nest in a lively debate. Just so long as the oldies can get up the stairs.
70% Of Aussies Don’t Have Green Power Plans ENGIE Says In Major Brand Campaign Via HERO
Are you the notorious "light leaver on-er" in your flatshare? Quell any infighting with this green energy news.
PrettyGood Launches Offering Brand & Media Solutions For Australasian SMEs
B&T applauds the charitable nature of this new agency. Although we'd hate to see it impact any Chrissie present sends.
A Blunt End: Dolphins Medicinal Cannabis Sponsorship At Risk
Yes, it's another NRL drug story. Yet, thankfully it doesn't involve coke in Kuta during the off-season.
Slew Of New Creative Hires At Leo Burnett Australia
Ahhh, all black! The outfit of choice for agency creatives, David Jones staff and everyone in Melbourne.
Under Armour Unveils Local “Live in UA” Campaign
American apparel brand set for yet another tilt at the Aussie market, as Nike declares "we'll see about that".
Pepsi Launches New Look, Refreshing Classic Fashion Staples Via Special PR
Are you always the bridesmaid, never the bride, as the old saying goes? How do you think Pepsi feels?
Pure Blonde Returns To A Place Purer Than Yours In New Campaign Via The Monkeys
B&T's always been a huge fan of the 'drink yourself thinner' diet plan. So big thanks to Pure blonde, vodka & tequila.