Investing in Adtech 2.0
We have compiled this document to offer insights regarding the Ad Tech landscape. Our exploration begins with the sector's investment allure, centred on its immense value and the transformative influence of AI. Next, we grapple with the industry challenges; data privacy considerations, the declining efficacy of third-party cookies and the limitations of AI tools. Finally, it charts the exciting new trends redefining the sector's future, including product-led growth and the ascendancy of immersive experiences. Harnessing expert insights, this document serves as a guide to the evolving world of Ad Tech
Host
Joaquin Dominguez, was joined by marketing experts to discuss the topic.
Guests
Sanja Partalo, Managing Partner, S4S Ventures
Mike Kelly, CEO, KellyNewman Advisors
Filippo Chisari, Founder, Agile GTM Web3
Ashley Abrahams, Fund Manager, Guiness Ventures
Helena Haykin, Partner, Digital Horizon
Rich Ashton, Managing Partner, FirstPartyCapital
The immense value and growth potential makes it an irresistible opportunity
Sanja Partalo, Co-Founder and Managing Director at S4S Ventures, highlights the immense value of the digital advertising market, worth $875 billion, and, when combined with the 'MarTech' side, reaches over 1 trillion. This market's significant size and growth potential make it an attractive opportunity for investors who must pay attention to such a lucrative sector. If they back a successful company in this market, it can grow massive, very quickly. So, finding a company with a new and interesting idea in this market would be silly to ignore.
The expanding market and varied consumer interactions drive the importance of digital innovation
Mike Kelly, Co-Founder and CEO at Kelly/Newman Advisors, agrees with Sanja and says the market is growing. He mentions that even traditional areas like television are now part of the digital market. He points out that how consumers interact with media and shopping has become more widespread and varied, which is another reason why digital innovation is so important. He gave the example of a telecommunications company helping Uber with monetization, something not imaginable in the past. 'If you provide a critical service in a massively fragmented market, you've probably got a valuable business'.
Unlocking the Power of AI in Advertising
Sanja believes that an exciting aspect of the advertising industry is its potential of AI to address content creation, which has remained relatively analogue despite advancements in media optimization and targeting. This presents a valuable investment opportunity as it disrupts the traditional value chain and opens monetization avenues for publishers and legacy media companies. For example, some companies are experimenting with inserting products into pre-shot content. However, they still need to be capable of independently delivering client-ready end products, given that the technology is yet to be ready and because of unresolved copyright issues. That's why businesses will keep relying on agencies.
Digital agencies are not going anywhere
Mike believes agencies play a vital role in the advertising industry, offering vital support to major brands, especially during uncertain times. They provide the expertise and services that big advertisers rely on, ensuring their campaigns are successful. Despite predictions of self-service models, Mike expects agencies to adapt by incorporating traders, focusing on productization and specialization. This opens up opportunities for innovative agencies to thrive and attract investments, as their commitment to delivering effective marketing solutions remains strong.
Data privacy laws and the discontinuation of third-party cookies
Rich Ashton, Managing Partner at FirstPartyCapital, highlights how data privacy laws and the discontinuation of third-party cookies are reshaping the advertising industry. This period of change has sparked the emergence of innovative companies leveraging first-party data and developing cookie-independent solutions. Data privacy is a driving force behind industry transformation, with a wealth of innovation in this area.
AI and the future of Adtech depend on the access to data
Ashley Abrahams, Fund Manager at Guinness Ventures, highlights the significance of data and AI in the ad tech and marketing industry. He emphasizes that AI is simply a new method of performing statistical inference, and its effectiveness relies on the quality and diversity of the data it is trained on. Ashley acknowledges the growing importance of first-party data, especially in light of tracking solutions like cookies becoming less effective or being turned off due to developments like Apple's iOS 14 update. He suggests that companies capable of aggregating data from multiple sources and deriving meaningful insights will be the ones to watch in the coming years, as they can drive impactful and successful digital advertising strategies.
Industry needs to adapt to evolving consumer preferences and embracing immersive experiences like gaming
Filippo Chisari, Managing Partner at AgileGTM, points put that in recent years, there has been a shift towards product-led growth in B2B and a transformation in the searchability factor with the rise of video content in B2C. This calls for adapting to evolving consumer preferences. As upcoming generations gain more purchasing power, agencies need to invest in self-serving products and embrace immersive experiences, especially in gaming. With 3.09 billion inclusive gamers across age groups and gender, it's essential to recognize the changing advertising landscape, driven by anonymous data and the influence of immersive experiences on the purchasing journey of younger buyers. Agencies and venture studios must address these trends to avoid falling behind and stay relevant in the evolving landscape.
The Role of Human Involvement and Revenue Models in AdTech
Rich acknowledges that product-led tech founders often assume that a great product alone can drive self-serve success. However, he emphasizes the importance of human involvement in effectively using and implementing these products, as demonstrated by the success of MIQ. As an investor, there is a preference for high-margin Software-as-a-Service (SaaS) revenue over campaign-based managed services. While achieving a pure SaaS business model may not always be feasible in the advertising industry.
Seeking out companies that dare to be different
Helena Haykin, Partner at Digital Horizon VC, points out that investing in ad tech involves seeking out companies that dare to be different, like Owlee, which offers a unique promise, based on their innovative in-house developed technology, of delivering results in their advertising campaigns or refunding customers. Hourly's approach sets them apart from others in the industry by providing a guarantee, demonstrating their confidence in their services. Helena says they look for companies with good technology or an interesting way of doing business. Hourly fits both these categories because they're changing how people think about advertising and are good with technology. That makes them an exciting ad tech company.
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