“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Matthew Greitzer, co-founder and CEO at Actable.
There are a lot of customer data platforms in the market. And I mean a lot – my team tracks this closely and at present we count 116 companies who characterize their offering as a CDP. This is a global total, to be fair (about half are US-based), but clearly there is no shortage of solutions in this crowded and increasingly competitive category.
Why so many?
Well, it’s a hot category. CDPs, in theory, solve for a host of problems that 100% of marketers have: data unification across channels, linking known to unknown customer data, unifying customer records, and providing a single point of entry for customer segmentation and message orchestration across marketing technology platforms. These are foundational marketing challenges, and there is a real opportunity for software platforms that provide solutions here. Dozens of intrepid entrepreneurs recognized this opportunity and built native CDPs from the ground up.
Additionally, a number of existing companies with “CDP-adjacent” capabilities are throwing their hats in the CDP ring via feature expansions. Email service providers, experience management platforms, and CRMs are quickly repositioning as CDPs, or adding CDP functionality.
What’s more, many CDPs are niching themselves in specific industry verticals. There are CDPs for retail, CDPs for B2B, CDPs for Pharma, there are even several specializing in ticketing and events.
And lastly, as mentioned earlier, this is a global phenomenon. About half of CDPs are US-based, with the others predominately located in the EU, and also APAC. Global demand across industries makes for a very big market.
Is a shakeout coming?
I will conjecture that it is unlikely there will be 116 CDPs in the market 36 months from now. But neither is this a market bubble ready to burst. Many CDPs are well-capitalized. mParticle, Tealium, Simon, Lytics, ActionIQ, to name a few, have each raised $30 million or more in the last year or so. And nearly two dozen CDPs have raised money since January 2019. So even with the current economic uncertainty there are plenty of CDPs out there with financial staying power.
Additionally, CDPs address one of the core areas of growth in today’s environment. Getting more out of existing customers is the primary focus of marketing departments at present, and customer-centric marketing initiatives are one of the few areas marketers and enterprises are making continued investments. While it’s doubtful 2020 will be a breakout year for anyone in the category, CDPs will not suffer for growth.
Then how does this play out?
With no rapid shakeout forthcoming, it is more likely that a gradual and organic reshuffling will shape the market over the coming years. For a recent historical analogy, the DSP marketplace offers a useful comparison. Like the CDP market today, the DSP market a decade ago was flooded with entrants. (I never counted the number of entities globally claiming to be DSPs at the time, but I’d give even odds it floated somewhere near 116).
Also like the current CDP marketplace, some of these DSPs were well capitalized and others were smaller entrants. Some were built as DSPs from the ground up, and others moved in from tangential industries (ad networks mostly).
As the market developed, only a handful of DSPs reached scale. Some did so via acquisitions by much larger entities (e.g., Invite Media and Google) and others did so as independent operators (e.g., MediaMath and The Trade Desk).
But few imploded entirely. The overall programmatic market was so big, and growing so fast, that it could support a varied and fragmented DSP ecosystem. Many sub-scale DSPs were acquired over time by a long list of companies that needed an asset to help them compete in the rapid shift to programmatic buying: ad holding companies, data companies, telecoms, all decided they needed a DSP, and all committed to that market (albeit with varied investment levels). Some of these DSPs subsequently retreated as their parent companies reevaluated their place in the market. But others remain active today. And still other DSPs remain active as independent entities, filling a vertical niche or catering to a specific market segment.
Likewise in CDP land, it’s fair to say that out-and-out failures and liquidations will be rare. Yes, a handful of CDPs will emerge as scale players, either on their own or via acquisitions by larger platforms. However, a wide range of acquirers – data companies, consultancies, maybe even DSPs – will likely move to bolster their own first party data initiatives via target acquisitions of “right-sized” CDPs (i.e., those within their M&A budget parameters). Still other CDPs will find niches as vertical specialists. Consider, for example, the recent emergence of CDPs targeted at small and mid-sized business, priced at hundreds (and not hundreds of thousands) of dollars per month. There’s a CDP for everyone.
One might wonder how to pick a winner in the current environment. That is, of the 116 participants today, who will achieve scale and who will not? Here, too, analogies to the DSP environment are useful. But that is a topic for another day.
Follow Matt Greitzer (@mattgreitzer) and AdExchanger (@adexchanger) on Twitter.
