The Investment Community Reviews Advertising - A Look Back, A Look Ahead

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Well?It's the end of the year and it's time to look forward, but it's also time to look back and see what's happened - or not.

In its final plunge into the crystal ball of "predictions," AdExchanger.com reached out to members of the venture capital community and asked them to critique their predictions of last year as well as share an idea or two for 2012.

Well? How'd they do?

Click below or scroll down for more:

Gil Beyda, Managing Partner, Genacast Ventures (see 2011)

2011 predictions with my comments in [ ]...

  • Rise of Data 2.0 - next generation "smart" segments. [Right. Introduced by a number of data players.]
  • Consumer privacy policies implemented in technology platforms. [Right. OBA, though still slow to adopt.]
  • Consolidation in the online advertising ecosystem. [Wrong. Some but not much.]

2012 predictions...

  • Today's social commerce is neither social nor commerce...discuss. Social is a two-way discussion. The days of pimping your friends for "$10 off" will soon be gone. Look for real social commerce models in 2012: collaborative experiences driving commerce.
  • "More" is the new "new." Innovation will take a temporary backseat to scaling. Buyers, sellers and folks in between will take a deep breath in 2012 to absorb and roll-out existing solutions at scale, focusing less at doing new in favor of doing more with what is already working. It isn't about new in 2012, it is about more.
  • Early-stage investing in adtech companies will slow but later-stage investing will accelerate. Gone are the days of optimizing ever smaller slices of the online advertising pie. Investors will double-down on companies that can make a meaningful difference perhaps at the expense of the early pups.

Jeff Crowe, General Partner, Norwest Venture Partners (see 2011)

Post mortem on the 2011 prediction:

  • 2011 did turn out to be the year of big data everywhere, including the in the advertising arena. Data management platforms are now taking hold in the largest agencies and brands, as they use first party and third party data in increasingly sophisticated ways to segment audiences and target campaigns.

2012 predictions:

  • Cross channel advertising will be a major theme in 2012. Large agency trading desks and brands are already combining display and video ad buys across specific audience segments in individual campaigns. Over the course of 2012 these cross channel campaigns will expand to include mobile and social advertising as well. By the end of 2012, people will start talking about ads for TV apps in the cross channel mix (2013 prediction!).
  • Social advertising is hot, and 2011 has seen the rise of numerous independent social advertising ad agencies and technology vendors. Social will remain hot in 2012, but the big vendors are jumping into the social advertising fray with both feet. Whether due to consolidation or business pressures, not all of the small social ad companies will be around by the end of 2012.
  • Engagement advertising will be one of the most important new forms of social advertising in 2012.
  • Given the push toward cross channel advertising, solutions that comprise marketing mix optimization and attribution will become increasingly important to big brand CMOs and large agencies in 2012. These solutions have largely been consulting services in the past, but will be a new frontier for big data and sophisticated software in 2012.

Roger Ehrenberg, founder and Managing Partner, IA Ventures (see 2011)

The market for supply-side analytics tools has continued to evolve, but that has been overshadowed by the continued growth of large demand-side players increasingly competing against the agencies. How this resolves itself over the next 12-24 months will be interesting to watch. I expect 2012 to be the year of mobile and hyperlocal, where the challenge of aggregating highly fragmented supply and providing data-driven relevance will be addressed head-on. This is a nascent market but one with stunning and irrefutable potential.

Chris Fralic, Partner, First Round Capital (see 2011)

As I look back to my 2011 predictions, I’d say they were pretty much on target directionally – ad tech consolidation continued, privacy issues made headlines (but not yet new legislation), and Facebook continued to grow users and ad dollars/share. Looking forward to 2012, here are a few more predictions: The distinction between creative and media continue to blur, brands start taking content creation seriously, and social/earned/owned media takes it rightful place alongside paid media.

Jonah Goodhart and Noah Goodhart, Moat, WGI Group (see 2011)

Last year we predicted that the industry would begin focusing on the importance of creative. There are signs that this is occurring - we conducted a study and found that over 90% of the world's top brands now run display ads - even high-end luxury companies such as Burberry and Porsche. Top brands care deeply about their image and brand perception online, and invest accordingly in creative.

In 2012, we believe there will be more of a focus on serving the needs of brand advertisers, as opposed to direct response advertisers who have been the mainstay of display advertising for a long time. This may come in the form of more engaging ad formats (such as embracing the IAB Rising Star units) , better analytics and measurement approaches that are attuned to brand needs, and more social advertising solutions which enable brands to connect directly with their consumers.

Seth Levine, Managing Director, Foundry Group (see 2011)

We definitely saw an acceleration of consolidation in ad tech (and we benefited from that as portfolio companies Lijit and AdMeld were picked up by Federated Media and Google, respectively). I don't see that slowing down in 2012. While we didn't see a billion dollar adtech exit, there were perhaps a few head scratchers in the group. And while we talked a lot about data privacy, it looks like we'll be doing just that (talking) for at least a little while longer (although we did see the EU take stronger action around data privacy, which was to be expected).

As for one prediction for 2012, I'd look for this to be the year of programatic guaranteed. We saw some push from pure remnant to private exchange. I'm really interested in 2012 to see how we can take the fluidity and scale of api driven buying to the larger dollar value market of guaranteed.

Jerry Neumann, Neu Venture Capital (see 2011)

Regarding 2011:

  1. Innovation at the edges of the value chain: Yes, and it was a big theme for me as a very early stage investor. Yieldbot and Percolate were among the most innovative companies of the year, and they were firmly at the edge. Their genius is that they innovated perpendicular to the main thrust of where adtech's momentum is taking it. Innovation is never what you think it will be.
  2. Ad tech innovation will start to be digested: Digest was the wrong word; embrace would have been better, and not exactly how I envisioned. 2010 was the year that the managed services model won and everything else started to look charmingly naive. Needing managed services, in my opinion, is like needing elevator operators: it's a mid-evolution stage. Unfortunately, unlike elevator operators, a managed services environment can become embedded in the ecosystem architecture, making it very hard to back away from as the engineering improves. This is a problem that points out a fundamental flaw in our utopian vision of media buying.
  3. Core stack elements will be rebuilt: This is happening a bit.  Adzerk, for instance, and a few other companies. But for the most part, companies have followed the path of least business logic resistance and renamed or repurposed existing tech. I nominate 'Private Exchange' for the Best Non-Solution Solution of the year award, and most of the mobile DSPs for the Most, Missing the Point, Repurposing of Crappy Tech award (with one or two exceptions--you know who you are.) Still waiting on this.

For 2012:

  • We have reached the stage in our market where we are finally Real. Real revenue, real customers, real businesses. This is good news, but it means a change in strategic behaviour: companies in our ecosystem's peloton now have to decide if they want to break away and win or finish as part of the pack. The focus on customers rather than product innovation and the walls being put up by the agency trading desks are early signs that this year may finally see the winnowing of the field. Established companies need to be getting and keeping customers, now. If you are a DSP, SSP, analytics or targeted media company and you don't have some $20 million in media revenue in 2012, you risk being an also-ran.
  • For entrepreneurs, my advice is to not jump into the pack. Even a year ago, starting another DSP would be quietly welcomed by the existing players as another evangelical voice among the marketing heathen. Now you would be just more noise in a noisy market. If you want to start an ad tech company, you need to be perpendicular to the evolution of the industry, as Google was to the crowded ad-net field in 1998. Doing the obvious thing--automating what already exists at the marketer or agency--is not that interesting anymore. Build something technologically sophisticated that meets the needs of the real customer: the person marketers are trying to reach.

Satya Patel, VP of Product at Twitter, (was Partner, Battery Ventures) (see 2011)

Looking back on my predictions for 2011, I'd give myself a B+.

  • As I expected, there was less consolidation in the market than many expected, and the majority were small acquisitions. AdMeld seems to have been the exception to the general rule of private-to-private and tuck-in acquisitions. (A)
  • Data did increase importance and Data Management Platforms (DMPs) entered the advertising lexicon broadly in 2011. That said, taking control of data by advertisers and publishers did not seem to impact middlemen dramatically. (B-)
  • Networks and exchanges certainly pushed into new media types and channels, with mobile and video being particularly important. I was surprised by how quickly search, social and display seem to be coming together on various platforms as well. (B)
  • The Facebook equivalent of the Google AdWords ecosystem seems to be flourishing with over 100 ad providers, including growing companies such as Adaptly, GraphEffect and SpruceMedia. (A)

The more things change, the more they stay the same. In 2012, I expect the continuation of the same trends with some modest change.

  • There will be more consolidation than in 2011, but still mainly private-to-private transactions and tuck-in acquisitions.
  • DMPs will be required systems for large agencies, direct marketers and publishers, but dollars will continue to flow through a select number of middlemen that combine media and data into sellable packages.
  • Networks, exchanges, DSPs, SSPs and other aggregators of supply and demand will continue to expand into various media types and channels. Social will continue to grow in importance and attribution modeling across search, social and display will be a critical differentiator.
  • The Facebook ads ecosystem will continue to flourish while the Twitter ads ecosystem will emerge.

Bipul Sinha, Partner, Lightspeed Venture Partners (see 2011)

Regarding 2011:

Overall, I'd say I was generally right on the trends. The user engagement on tablets are growing fast. Albeit a bit slower, brand driven audience buying continues to grow. The social media share of the overall ad spend is now significant. Android is the leading smartphone platform.

2012 predictions:

  • Data platforms for attribution/targeting/verification would dominate the advertisers/agencies mindshare.
  • Social media would attract significant discovery/awareness marketing dollars.
  • Advertisers/agencies would start experimenting with mobile social network advertising to tie online offline commerce.

Andy Weissman, Partner, Union Square Ventures (see 2011)

  1. I was wrong about last year's prediction. It seems like monthly unique visitors is more entrenched as a metric than ever.
  2. For 2012, I would riff of of this post and say that in 2012 we will see more widespread emergence of revenues streams that are  native monetization models -  consistent with the fabric of the products they are related, that run with the grain of how users interact with and use the service.  Examples include Stumble Upon, Twitter, Buzzfeed, and the others listed therein.
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2 Responses to “The Investment Community Reviews Advertising - A Look Back, A Look Ahead”


  1. Great piece guys. Love seeing the year over year recaps. Here are my $0.02 on your 2012 calls:

    @gil – I agree, it’s all about scale. RTB CPMs remain flat as inventory floods the exchanges. Direct sales grow on the back of DMPs and publisher data.

    @jeff is social really a discrete channel like mobile or video? Maybe for investors, but on the advertising buy side, I think not yet. And mobile still suffers from huge transparency and performance issues – big budgets won’t shift there in 2012 in a meaningful, jump-tracks way. Totally agree with you on engagement, and marketing mix optimization – I like Covario in this space.

    @roger demand side players and agencies are proving to be symbiotic, and in the case of WPP, stack-integrated. And if mobile cannot figure out creative that works, it will remain transactional and that huge ad upside will indeed go unfulfilled.

    @chris The IAB and @r2rothenberg definitely agree that 2012 is the year of creative. We’ve squeezed the data orange nearly dry.

    @jonah and @noah we see the same trends at comScore – brands are investing real $ in studying up-funnel impact of display on offline sales and traditional brand metrics.

    @seth that’s the big question: will private exchanges blossom or will direct sales/publisher side ad servers finally upgrade from their traditional “deliver and report” function to let pubs keep the margin?

    @jerry totally agree on mobile. And as an entrepreneur, happy to have exited this year and be able to sit higher up the food chain and influence the ecosystem not just disrupt it.

    @satya cannot argue with any of your points.

    @bipul question is, which data platforms get top of mind/budget? DSPs or DMPs? Everyone wants to own the agency in their walled garden UI.

    @andy long live the unique visitor count! This data is still valuable for the big reach, conservative planner, but this year it should live in media planning and decisioning tools and even inform pre-bid inventory analysis.

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