Open the Gate.

by Doug Weaver on November 7, 2012 at 12:52PM

Looking back over the past 20 years in the Digital Marketing bubble, there have been a handful of disruptive “barbarians at the gate” moments that shake our foundations and challenge the way we think of the world.  The collapse of the tech bubble in 2000 reintroduced the ideas of gravity and final accounting.  The Wall Street Journal’s “What They Know” series changed the terms of the debate around online consumer privacy.  Now Mike Shields from Adweek has come to the gate with “Ad Wreck: VC-backed ad tech firms have arguably inflicted one big mess on digital advertising.”

Now, if you’re a CEO in the Ad Tech business, you’re probably not sending Mike a Christmas card this year.  Indeed, if you’d seen him at the gate you might have been tempted to call out the archers or dump some boiling oil from atop the castle walls.  I mean, he’s saying things like “It sounds counterintuitive that loads of cash threatens to harm an industry, but a growing chorus complains that VC dollars have, in fact, done more harm than good to online advertising.”  Ouch!

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But before you shoot the messenger, read the article.  Rather than quibbling over the details or reflexively staking your claim of exceptionalism, accept the reality of Mike’s thesis.  The article quotes Daniel Klaus of K2 Labs:  “There has been so much money wasted, and it continues to be wasted in this space. When it comes to ad tech, there are very few signs that it is really working.”   While investors like Klaus are more vocal, the meme is taking root at the publisher level as well.  “Publishers are reluctant to talk about their ad tech experiences on the record, but many privately describe having dramatically cut their lists of third-party partners.”

The weak CEO responds to these ideas with vitriol or denial.  The strong and visionary accept that there’s a sea change in marketplace attitude and adjust to that new reality.

People often ask me if I’m down on the programmatic, technology-driven side of our business.  I am not.  For the record, I’ve always believed that technology-driven process automation is a natural phenomenon in our world and will only get bigger as the years go by.  I wrote about it in 2007 and I still believe it today.  But I also just as firmly believe that (a) the ad tech marketplace must and should consolidate into the hands of very few companies and (b) that the flood of VC money has perverted the market, creating a surreal world in which “serial entrepreneurs” survive by continually taxing the dollar exchange between marketer and publisher.

So what’s an Ad Tech CEO to do?  Build your company and your services to last 25 years, not 25 months.  Build products that grow new value and create new revenue, rather than simply finding incremental savings in an already collapsing banner market.  In the flood of VC money, a lot of things floated that weren’t necessarily boats.  Now is the time to build well.

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