RBC Capital Markets: Long Live Ad Tech (But Only The Differentiated Companies)

andrewbrucknewrbcAndrew Bruckner, VP of equity research at RBC Capital Markets, will share the Wall Street POV on programmatic at Programmatic IO on April 5 in San Francisco.

There’s room in the digital advertising ecosystem for more than just the duopoly.

“I do see an opportunity outside of Facebook and Google,” said Andrew Bruckner, VP of equity research at RBC Capital Markets.

But that opportunity only exists for companies with differentiated tech – and the public markets are littered with the stock tickers of ad tech companies that haven’t fared all that well post-IPO.

Rocket Fuel, Rubicon Project and Tremor, for example, have “all kind of fallen off a cliff in terms of stock price, and that’s mainly because it’s easy for their technology to be circumvented,” Bruckner said. “If you’re not investing properly in the future, which these companies have faltered on, it’s easy to be left behind.”

For those not left behind, however, there are spoils to be had.

AdExchanger caught up with Bruckner to talk programmatic media trends, ad tech consolidation and why Criteo is still killing it.

AdExchanger: Investors are down on ad tech. Ad tech is seeing a resurgence. You hear people say both. What’s the truth?

ANDREW BRUCKNER: Year to date, ad tech is up, but overall there have been a lot of negative stock stories. A standout, though, has been Criteo, and that’s because they carved out a unique niche for themselves around retargeting. They also invested heavily in mobile and cross-device, and both are key to their success.

Does the ad tech ecosystem have a future considering the amount of incremental ad spend Facebook and Google are scooping up – 85% of every new ad dollar, according to some estimates.

Yes, I think it does. One thing you can point to, again, is Criteo. They have 7,000 customers that use them to bid on ad inventory, including on Google and Facebook properties, which makes them like a one-stop shop for the automation of ad bidding.

You’ve mentioned Criteo twice already. Is it the only bright spot in the ad tech ecosystem?

The Trade Desk has done quite well and, as long as ad agencies exist, The Trade Desk should as well.

But it is becoming more difficult on the whole. Programmatic tends to be a winner-takes-most scenario, especially in a machine-learning environment where the more bids you put out there, the more inventory you see and the more data you have, the better you’ll be at it – and that does limit the field to fewer key players. As a whole, the industry is ripe for consolidation.

The key here is that they’re not usually buying the business, they’re buying the engineers. There are not that many people out there that understand programmatic, maybe myself included. It’s hard to find and hire these people.

Can companies like Time Inc. with its Adelphic acquisition or LiveRamp with Arbor and Circulate mount scalable, competitive people-based solutions?

They can. There is still a good amount of ad inventory outside of Google and Facebook that needs to be addressed and filled so that all of the publishers out there can get paid. And that creates an opportunity, although we’ll also see continued consolidation, because this is a business with a network effect. The more data you have and the more people you can recognize with Apple IDs and cookies, the better you’ll be at it. That is why it doesn’t make sense to have 10 different players.

What’s a bit of conventional wisdom about programmatic you’ve heard repeated that’s just completely bogus?

That with the rise of Facebook, programmatic would go away. There continues to be a lot of inventory off of Facebook – and Facebook inventory is fulfilled programmatically.

In terms of third-party fulfillment, big advertisers don’t necessarily want to give all of their sales and marketing data to Google and Facebook because that gives them too much power. Advertisers feel like they’re giving too much away and they do want independent players.

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