The announcement of Oracle’s acquisition of BlueKai brought me to the realization that the story of ad tech, and how it went from antagonist to ally of the software megavendors, is not so well known outside the insider’s clique. This has created some challenges in interpreting this event. So here it is – my take, anyway – in suitably condensed form.
It all started when Google’s search engine first struck advertising gold, spawning the ad tech gold rush that’s been picking up steam ever since. As digital ad spending grew, a rift opened in Silicon Valley between the maturing IT-centric software providers and the young digital media rebels. As the IT world focused its gaze and efforts toward the clouds, ad tech proceeded to develop its own sub-culture, complete with a new language and value system, inventing and appropriating terms like “data management platform.” This one in particular confused and irritated many IT leaders who saw data management as settled territory whose relation to advertising – an “application” – was at best obscure. Analysts passionately debated this terminology. But the trade had spoken: DMP became a fixture near the center of the ad tech universe, connecting data and media in a constellation of acronyms from ATD and DSP to RTB and SSP.
It wasn’t just the IT world that was rattled by all this: the traditional media and advertising worlds, as well, were often caught up short by these developments, especially as they started to attract real media budgets and disrupt well-established ad marketplace practices with alternatives like real-time bidding exchanges. In spite of resistance, media budgets follow the eyeballs and the arc of the marketplace bends toward efficiency, and so ad tech continued to attract investors, customers, and talent, to the point where media and advertising had little choice but to embrace and try to direct the movement. Ad tech companies, eager to counter charges of comprising a second dotcom bubble, accommodated them by accepting some of the old ways, such as using television-style metrics to measure media rather than the native digital ones they started with. They invented media-friendly formats like native advertising. Jeff Zucker gradually revised upward his “analog dollars for digital pennies” exchange rate to quarters and rising.
As this was happening, the software megavendors, recognizing that marketing was shaping up to be a key consumer of big data and cloud services, went on a marketing provider shopping spree, buying up marketing automation and social marketing management start-ups at eye-popping valuations. But – with the exception of Adobe – they largely avoided ad tech, to the point where nervous investors started to look to IPOs as the exit strategy for ad tech – with a healthy mix of disappointing and home run results (here’s a nice summary by Luma Partners).
Somewhere along the line, the ad tech vendors made an important discovery. In solving the problem of how to best target and trade display ads in real-time, they’d actually solved a much bigger problem that’s bedeviled marketers for some time: how to effectively apply data to optimize their marketing operations in real-time. They realized the algorithms that could optimize display ads sold on real-time exchanges could also optimize email, the web site, mobile communications, even the call center and direct mail. They also realized that, although they’d focused initially mostly on third-party data collected in cookies, by combining this with their customers’ first party data they could produce even better results. They added better analytics and started to acquire complementary technologies like attribution and tag management (which were also making the same discoveries). This made the software megavendors see them in a new light. They began to realize that ad tech – DMPs in particular – would be a key integration point in the comprehensive marketing solutions they were constructing.
The story doesn’t end here. While we believe that Oracle’s BlueKai acquisition will light the way to a wave of ad tech consolidation into megavendor marketing suites, a few hurdles remain on the way to complete reconciliation. Ad tech is still retains its “Wild West” image, struggling with issues like privacy and fraud. Perhaps as the megavendors bring them on board, they’ll also bring resources and experience to tame these issues and reassure the public more successfully than Google and Facebook. Still, I doubt they’ll ever be comfortable with the idea that a “data management platform” is an ad tech product. Some things are a matter of principle.