The 87.5% Category According to Luma – Lots of Acquisitions

I’ve spent a bunch of time with ad servers in my life.  It all started when I was installing phpAdsNew for my brother‘s website, Exotic Car Network, creating ad zones across Student.com in OpenAdStream, a web property that about 7 of us ran in the late 90s, working on the team to create a self-service ad buying platform for eBay, creating a proprietary ad server for the in-game advertising marketplace called Radial, founded MDC‘s trading desk practice using BidManager and TerminalOne, and finally, using DART, Atlas, and MediaMind at the agency that I’m currently at.  Now looking back at it, I’ve centered much of my career around served and tracked media.

So as you can see from above, I spend quite a bit of time with media technologies.

I believe they will play a large role in the future of advertising and I will continue to play in this field over the coming decades.  There’s been an increased amount of coverage in this space which was once reserved for the back floors of the premier industry showcase, AdTech.  Terry Kawaja is bringing some light humor and some fantastic charts, John Ebbert is creating a mini-media empire (well, not an empire), Brian Morrissey is resurging an old newsletter back to the top, and there’s been a handful of acquisitions lately including Admeld (Google) and MediaMind (DG Fast Channel) totaling close to $1 billion.

According to the display Lumascape, the only category with 87.5% of companies acquired, yes, 87.5%,  is the ad server category.  Crazy when you think about it.  Atlas, DART, MediaMind, Pictela, PointRoll, MediaPlex, etc have all been acquired.  There are some independents in the market today such as OpenX and insurgent AdZerk, but the majority have already been acquired.  I predict that the category is still ripe for innovation and will continue to see many new players enter the space.  I was a personal shareholder of MediaMind and it was one of the larger positions I’ve held.

I continue to think that the best 3rd party ad server is exactly that – a 3rd party ad server that is not biased towards any media.  Almost exactly a year ago, I wrote a piece titled, “Insurgent:  How to take down Atlas and DART.”  I continue to dislike Google’s positioning in the marketplace as overnight they theoretically could shut off access to their inventory for non-DART users (could, not should), Microsoft has an ad serving system built in the 1990s and still feels like it, and this left an opening for a major ad serving player to come in with an independent stance, thus MediaMind gained traction.  I love this stance as mentioned above and it needs to continue.

A few days ago, I wrote a post about attribution and the growing advertising operations line-item.  If you haven’t read it, you should.

If I personally was to start a company tomorrow, I’d probably create the next 3rd party ad serving system built for the future of all media (able to serve site-direct placements, social media and RTB) and include the opportunity for biddable, rich media, video, and full reporting & analytics.  I believe no ad serving system delivers superior reporting and analytics so this is an area that I’d specifically make sure I’d nail.

I think this is an area for massive innovation because the vision that the industry hasn’t recognized the full vision for the future… I believe that all media will be served, tracked, and optimized across all channels.  Television, print, radio, and out of home will all in some way or another be served, tracked and optimized.  This obviously cannot happen overnight as there are quite a few barriers and obstacles to go thru, but the opportunity is huge.  There is a reason why 87.5% of the companies in the ad serving segment have been acquired.

Note, I don’t think you need to start from scratch.  If you could raise some money, you can start by acquiring several of the pieces.  There are quite a few DSPs who could use an exit right now.   There are even some large independent ad servers who would be interested.  A roll-up strategy would be interesting and something that could come together nicely.

One of the bigger parts here is that you need to service the advertiser (or marketer).  This needs to be written on all company walls.   Mandated thru corporate handbooks.  This is similar to how SSP’s service the publisher.  You cannot be all things to everyone and when this happens, decisions sometimes become very tough to make as you try to please too many constituents.  Think about all the decisions Google (and Admeld) had to make about where to flow it’s ad dollars – to Google-run sites or it’s 3rd party network of sites.  Stick to one core area of focus and innovate within it.

This area gets continually dinged because there isn’t a ton of money to be made.  $0.04 average CPM and 200 billion monthly impressions net out to about $8MM in monthly ad serving fees (~$100MM/yr).  That’s a nice company but think of how many are larger.  If you create a robust reporting & analytics infrastructure, ad verification, workflow solutions, etc – you can charge a premium.  I believe you can.  Create a premium bundle of services to execute within the Ad Ops space, and sell them as one package.  There are buyers.

The space is only going to heat up further.  Continued innovation, a lot more media technology thinking, and investment will raise the industry forward.  I know I want to be a part of it!

  • http://www.optimizeandprophesize.com/ jonathanmendez

    Great topic. One that touched everyone in the space and as you say is ripe for innovation. From where we sit at Yieldbot we’d like to see the entire object model of ad serving redefined away from managing campaigns, etc, and setting up “zones” that are supposed to represent physical inventory on a page and towards build ad serving technology that is packaged as a framework. Instead of just integration with the server as a packaged product with external interface we’d like something that you wrote your technology into. Imagine what Django does in allowing you to write a Python web server application - and then picture a Node.js based framework that you can write code for and integrate deeply. This would allow us to do exactly what we want to scale rich interactions and realtime rules. This opens the door to new and improved types of ad experiences that will drive higher media value.

    The web is alive. Ad serving needs to be too.

    • http://www.darrenherman.com dherman76

      Thanks for stopping by Jonathan.  I couldn’t follow your technical speak, but that’s OK, as your smart and I’d have to think what you said is impressive.  That’s why I backed Yieldbot :)

      • http://www.optimizeandprophesize.com/ jonathanmendez

        I get to sound smart but I learn from our crack engineering team

  • http://www.optimizeandprophesize.com/ jonathanmendez

    Great topic. One that touched everyone in the space and as you say is ripe for innovation. From where we sit at Yieldbot we'd like to see the entire object model of ad serving redefined away from managing campaigns, etc, and setting up “zones” that are supposed to represent physical inventory on a page and towards build ad serving technology that is packaged as a framework. Instead of just integration with the server as a packaged product with external interface we'd like something that you wrote your technology into. Imagine what Django does in allowing you to write a Python web server application - and then picture a Node.js based framework that you can write code for and integrate deeply. This would allow us to do exactly what we want to scale rich interactions and realtime rules. This opens the door to new and improved types of ad experiences that will drive higher media value.

    The web is alive. Ad serving needs to be too.

  • http://www.darrenherman.com dherman76

    Thanks for stopping by Jonathan.  I couldn't follow your technical speak, but that's OK, as your smart and I'd have to think what you said is impressive.  That's why I backed Yieldbot :)

  • http://www.optimizeandprophesize.com/ jonathanmendez

    I get to sound smart but I learn from our crack engineering team

  • http://twitter.com/nnagpal42 Niraj Nagpal

    Really enjoyed the post Darren. Couldn’t agree more regarding the tracking across diverse channels.

  • http://twitter.com/nnagpal42 Niraj Nagpal

    Really enjoyed the post Darren. Couldn't agree more regarding the tracking across diverse channels.

  • http://twitter.com/stevelatham Steve Latham

    Good article Darren – I think you did a great job of pointing out that there are many gaps to be filled in the ad server stack.  The industry needs integrated capabilities including ad verification, compliance, audience measurement and my fave: attribution.  If they don’t build the stack, the data management platforms will, and the ad servers will be stuck in a commoditized space with limited upside.  As MDMD’s rapid growth in share has shown, there is an unmet demand for capability-rich ad serving. I think it’s a great time for an existing platform to reinvent itself with a “partner centric” approach to integrating 3rd party capabilities listed above.  But it will require a new way of thinking that may be best suited for a startup (or a re-start) vs. one of the older incumbents.

    • http://www.darrenherman.com dherman76

      Thanks for dropping by Steve. Much appreciated. You’re totally dead right
      about the commoditization. Lets chat.

      • http://twitter.com/stevelatham Steve Latham

        Happy to chat!  Just followed you on Twitter – DM or email me steve (at) encoremetrics.com

  • http://twitter.com/stevelatham Steve Latham

    Good article Darren – I think you did a great job of pointing out that there are many gaps to be filled in the ad server stack.  The industry needs integrated capabilities including ad verification, compliance, audience measurement and my fave: attribution.  If they don't build the stack, the data management platforms will, and the ad servers will be stuck in a commoditized space with limited upside.  As MDMD's rapid growth in share has shown, there is an unmet demand for capability-rich ad serving. I think it's a great time for an existing platform to reinvent itself with a “partner centric” approach to integrating 3rd party capabilities listed above.  But it will require a new way of thinking that may be best suited for a startup (or a re-start) vs. one of the older incumbents.

  • http://www.darrenherman.com dherman76

    Thanks for dropping by Steve. Much appreciated. You're totally dead right

    about the commoditization. Lets chat.

  • http://twitter.com/stevelatham Steve Latham

    Happy to chat!  Just followed you on Twitter – DM or email me steve (at) encoremetrics.com

  • Sara Goold

    Darren – great article with keen insight on
    the ad serving space.  I have used both
    DART and Atlas as a vendor at various companies and both are extremely arcane,
    difficult to use and are extremely light on the analytics and data front. 

     

    One ad server, which you have neglected to
    touch on, is VINDICO.  Unlike DART,
    ATLAS, Pointroll or any of the other guys – VINDICO was built out of an ad
    network’s need to manage their online video and not a bunch of guys in a room
    with VC money.  Now I recognize that I am
    biased because I work at VINDICO, but please hear me out.  VINDICO is constantly innovating and moving the
    needle forward in the digital space.  We
    are not limiting ourselves to video – serving, tracking and reporting across
    all digital media from display to RM, video, rich video, mobile and IPTV.  Every aspect of VINDICO’s service is fully
    managed by a dedicated team, who are available 24/7 to clients.  We are pushing the boundaries of digital
    video by creating and distributing custom formats – everything from overlays
    and social bugs to in-player games – across an advertiser’s entire buy.  Everything is fully trackable via VINDICO’s
    user-friendly reporting and analytics platform that updates in real time and
    dynamically creates graphs and charts telling the advertiser a story about
    their campaign.

     

    Is there room for more innovation?  Of course – but we’re on the forefront and
    steps ahead of the market.  Let me prove
    it to you with a test campaign.  

  • Sara Goold

    Darren – great article with keen insight on
    the ad serving space.  I have used both
    DART and Atlas as a vendor at various companies and both are extremely arcane,
    difficult to use and are extremely light on the analytics and data front. 

     

    One ad server, which you have neglected to
    touch on, is VINDICO.  Unlike DART,
    ATLAS, Pointroll or any of the other guys – VINDICO was built out of an ad
    network’s need to manage their online video and not a bunch of guys in a room
    with VC money.  Now I recognize that I am
    biased because I work at VINDICO, but please hear me out.  VINDICO is constantly innovating and moving the
    needle forward in the digital space.  We
    are not limiting ourselves to video – serving, tracking and reporting across
    all digital media from display to RM, video, rich video, mobile and IPTV.  Every aspect of VINDICO’s service is fully
    managed by a dedicated team, who are available 24/7 to clients.  We are pushing the boundaries of digital
    video by creating and distributing custom formats – everything from overlays
    and social bugs to in-player games – across an advertiser’s entire buy.  Everything is fully trackable via VINDICO’s
    user-friendly reporting and analytics platform that updates in real time and
    dynamically creates graphs and charts telling the advertiser a story about
    their campaign.

     

    Is there room for more innovation?  Of course – but we’re on the forefront and
    steps ahead of the market.  Let me prove
    it to you with a test campaign.  

  • http://adgear.com/ Vlad Stesin

    That’s a vision we completely subscribe to. We’ve started rewriting our entire ad serving stack a few years ago, without knowing too much where RTB would lead. 

    Today we have traditional publisher and advertiser ad serving stack, and both can be extended to use RTB — to allocate inventory and send off bid requests on the publisher end, or retarget and extend traditional campaigns on the advertiser end. RTB can and should work in support of traditional campaigns for both sides of the ecosystem.

  • http://adgear.com/ Vlad Stesin

    That's a vision we completely subscribe to. We've started rewriting our entire ad serving stack a few years ago, without knowing too much where RTB would lead. 

    Today we have traditional publisher and advertiser ad serving stack, and both can be extended to use RTB — to allocate inventory and send off bid requests on the publisher end, or retarget and extend traditional campaigns on the advertiser end. RTB can and should work in support of traditional campaigns for both sides of the ecosystem.

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  • http://www.facebook.com/profile.php?id=677140695 Rajiv Khaneja

    I think Ad Servers have to play their role as enablers to publishers and advertisers.  Something we have always focused on at Ad Butler.  I have seen too many Ad Servers that require a technical person to setup a simple delivery.  This increases costs.  Currently, we are rewriting our Ad Serving back-end to support RTB and are having to be very creative to be able to introduce it in an intuitive way.

  • http://www.facebook.com/profile.php?id=677140695 Rajiv Khaneja

    I think Ad Servers have to play their role as enablers to publishers and advertisers.  Something we have always focused on at Ad Butler.  I have seen too many Ad Servers that require a technical person to setup a simple delivery.  This increases costs.  Currently, we are rewriting our Ad Serving back-end to support RTB and are having to be very creative to be able to introduce it in an intuitive way.

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  • http://www.cognation.net deancollins

    So now that OpenX have left the “downloadable” ad server market if you were a publisher and wanted to run your own ad serving platform what would you recommend today?

    • http://buysellads.com/ Todd Garland

      Pretty sure OpenX proved that you should never build a piece of software to serve something as sensitive as ads that a publisher is responsible for running on their own.

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