Dive Brief:
- Ad tech firms are feeling the pressure of delivering results to clients and investors and in response are lowering costs by laying off employees.
- In recent weeks ad tech firms Turn, PubMatic, Collective and Centro have all reduced headcount.
- One insider blames the layoffs on an oversaturated ad tech marketplace.
Dive Insight:
Darren Herman, digital ad exec at Mozilla, explained to Ad Exchanger that a lot of venture capital money came in in the years following the recent recession, but that that capital went straight to hiring.
"If you do simple math, some of that capital is now running out, and the growth trajectory you were on in 2009 to 2011 is not there in 2014 to 2015," Herman said.
Elgin Thompson, managing director at M&A firm Digital Capital Advisors, told Ad Exchanger, “There are too many companies feeding on the advertisers’ trough. It’s a sector that’s overbuilt and has to get fixed. There are companies that are going to go out of business.”
A problem for ad tech firms is that agencies, their primary client base, are getting pressure from marketers for results. Ad tech firms that won’t, or can’t, produce measurable positive outcomes are no longer a viable option, especially in an advertising climate concerned with ad fraud, ad blocking and ROI.
RBC Markets analyst Rohit Kulkarni added, “In advertising, the first million [dollars] is easy to get, but many of these companies are realizing that it’s much harder to get the next $50 million than the first $50 million. That says a lot about the underlying business model and value proposition [of ad tech].”
Another issue is two of the biggest ad tech M&A players – AOL and Yahoo – are effectively closed for business, according to Thompson. He attributes this in part to Verizon's purchase of AOL and activist investors calling for Yahoo to sell the core business.