Emarketer
However, much of the recent growth in CTV advertising is being driven by platforms like YouTube and Amazon Prime Video — so-called walled gardens that don’t integrate third-party adtech vendors such as buying platforms and exchanges.
CTV is also a lower-margin channel for adtech vendors than traditional online display, where up to half of every dollar spent on ads gets gobbled up by vendors like demand-side platforms, ad exchanges, ad servers, measurement vendors, and data brokers.
“In network TV, those supply chain costs are in the 15% level — you have to take 50% and squeeze it down to 15%,” Prohaska’s Wright said. “It’s going to put a real emphasis on operating at scale and put a pressure on margins.”
As TV viewing grew fragmented, several adtech companies that took on investment in recent years positioned themselves as rivals to ratings giant Nielsen. These firms are jockeying to become the go-to companies for tracking audiences or to become the universal currency used to buy TV and video ads.
But Nielsen still hasn’t been unseated. And Walmart’s acquisition of TV manufacturer Vizio — from which many adtech vendors license viewing data derived from its tens of millions of TV sets — could signal further trouble ahead if the grocery giant doesn’t renew those contracts when they expire.
With the Walmart-Vizio deal front of mind, adtech companies and investors are likely to turn their attention to retail media, where ads are placed on e-commerce sites. Retail media is also growing at a clip, with almost every retailer and app owner now also operating an ad business.
The increasing complexity for advertisers offers opportunities for adtech companies to innovate. Though, while around $1 in every $7 US ad dollars is expected to go to the space this year, according to Emarketer, retail media is largely dominated by Amazon.
There’s also some executive shuffling happening in the retail media ranks: Megan Clarken, who leads the publicly traded adtech company Criteo, said she plans to step down within the next year once her successor is found.
Many industry observers expect more adtech management upheaval ahead, as well as a further consolidation of the sector once the intense fourth-quarter holiday period is over.
“You will see more heavy-handed PE involvement primarily because the M&A market hasn’t been great and people sat on the sidelines,” said Domenic Venuto, COO of investment bank Progress Partners and soon-to-be chief of product and data at media agency Horizon Media.
“The market can only sustain so many of these companies that have grown to be quite sizable but are now hitting their upper limits,” he said.