Ad tech exits from a (semi) global perspective

Ad tech is not a sexy industry to talk about.

It is one of the most convoluted spider web of an industry. There is immense competition in every specialized area of the whole chain. Take app download tracking for example (not even listed in the landscape chart), you have no less than 10 players competing globally, MAT by Tune, Adjust, AppsFlyer to name a few. And then you have the most saturated segment of ad tech – mobile ad networks – all trying to carve out a piece for themselves in the $100 billion business (eMarketer).

Yet, it is one of the most dynamic industry work in. There is a tremendous amount of knowledge to acquire. There are specialists in SSP, DSP, DMP, ad exchanges, ad networks, attribution and analytics; there are experts in native, rich media and video, incentivized advertising etc. There are professionals who focus on performance advertising vs brand advertising. And these only cover a part of the entire ad tech ecosystem.

It seems like there is market and money. So that’s good news for all the participating companies, right? Well, the stock market suggests otherwise.

Take a look at Millennial Media (disclaimer: I was responsible for the supply side business for APAC at Millennial from 2012 to 2015). It IPO’d in March 2012 at $13 on NYSE and saw its share price free falling to $1.76 as of writing. Another oft used example of ad tech IPO, Rocket Fuel, opened at $29 and has seen similar decline ever since. While they are both great companies but the baggage of being a public company relentless.

Now, the stock price doesn’t necessarily reflect the potential of ad tech companies. But it signals three things:

• The market sees that the leading 300-pound gorillas, specifically Google and Facebook, will continue to dominate and gobble up majority of mobile advertising dollars, while smaller players fight for the scraps. (eMarketer, chart only references US market share. I believe it skews heavily towards Google and Facebook on a global basis.)
• In today’s landscape, IPOs are unlikely exits for fellow ad tech companies.
• As a result, the only option left is to be acquired. However, the leading companies winning at ad tech, i.e. Google and Facebook, have already built out the entire tech stack. Unless it’s drastically different in an untapped and growing segment, it’s not clear there are enough liquidation events for ad tech players.

Is there really no opportunities for ad tech companies then? Far from it.

There is something I haven’t touched upon, regions. Specifically, opportunities of cross-regional opportunities.

APAC is becoming a hot bed for companies fighting for Internet dominance due to the rising economies such as China and India. Both have huge domestic markets and are building up big war chest that could be used for acquisitions. Cheetah Mobile’s recent $58M acquisition of Franch affiliate network MobPartner is a sign of the beginning of the trend. I think we could see more of the same from leading Chinese companies. A possible driving force will be publicly listed Chinese companies de-listing in US stock exchanges to list in China’s red hot stock market.

As to Europe, while I have not been here long enough – I only relocated earlier this year from Singapore to Berlin, Germany to work for another mobile advertising company – I can say as someone seeing it from the inside that there are opportunities waiting to happen. I should also point to the recent news of AppLift’s acquisition of Bidstalk, a Singapore registered company.

I believe there will be more of such events taking place in the coming months and years, driven by local giants from China, India, Japan and Korea looking to exert control regionally and globally.

Exciting and rocky roads ahead. Mostly exciting.