There are over 2,500 companies on the many advertising- and marketing-tech industry landscape slides produced by investment bank Luma Partners, from display to search to video to native. Yet Luma’s own analysis is that little more than one in 20 will likely exit for more than $75 million.
You’d think that means the collapse of the ad-tech bubble. You’d be wrong. A separate Luma analysis found that for every one company that is consolidated, another 1.5 are spawned. Yes, the landscape is horribly complicated, with many downsides for brands and agencies, but that doesn’t mean anything’s going to change anytime soon, according to Luma CEO Terry Kawaja, who spoke to Digiday editor-in-chief Brian Morrissey and platforms editor John McDermott in this week’s Digiday Podcast.
“We’ve seen a period of time over the last 10 years where companies got ample funding and most of the business models in advertising technology have been fueled by a media model,” Kawaja said. “When you do that it’s easy to garner share and spend, therefore the perceived growth of your company is very fast. Companies go from zero to five to 10 to 20 to $50 million in revenue with a fair degree of ease.”
Here are some excerpts from the 25-minute conversation with Kawaja. Subscribe for future episodes, published weekly, at iTunes.
Few ad tech companies will amount to much.
Luma has to determine where to spend its time and focus its attention. In a strategic planning process completed in November, it found only a fraction of the many companies in advertising and marketing technology warranted Luma attention. It drew the line at companies likely to be bought at $75 million or more. Only 148 made the cut, or less than 6 percent of the companies analyzed.
“That was surprising to us,” Kawaja said.