KEY POINTS

  • Technological innovation has fundamentally reshaped the digital advertising industry. This disruption is benefiting advertisers, brands, and publishers alike as they leverage vast sets of data to deliver highly targeted advertising.
  • Ad tech connects the buyers of advertising space, such as brands and marketers, with the digital publishers selling it. The automation of the buying and selling of ad space between these parties is known as programmatic advertising.
  • The ad tech industry is made up of a diverse group of entities that play this intermediary role. It includes ad exchanges and networks, demand- and sell-side platforms, agency trading desks, and data management platforms. 
  • Programmatic ad transactions are varied and depend on the preferences of publishers and advertisers. Ad tech allows advertising to be bought or sold via methods including real-time and header bidding, private marketplaces, and programmatic guaranteed deals.
  • The ascendancy of mobile and digital-video advertising is shaping the growth of the ad tech industry. By 2020, mobile will be the biggest online advertising market, and video the fastest growing, BI Intelligence estimates. 
  • A small number of companies attract the vast majority of digital ad spending in the US today. This group is dominated by Google and Facebook, which are referred to as "walled gardens" because of their control over the advertiser experience on their platforms. Critics cite a lack of transparency and the difficulty of managing cross-platform campaigns.
  • Despite this dominance, walled gardens' strategies present positive experiences for both users and advertisers. The platforms are leaders in mobile and video. In addition to simplifying the ad-buying experience, they allow users to tailor the content they're served, which can also streamline targeting for advertisers.
  • The ad tech space is ripe for consolidation. Growth can be challenging for players outside the walled-garden duopoly, and many companies are reaching a level of maturity that may prompt investors to push for an exit.
  • Companies specializing in certain ad formats like mobile, video, and TV are attractive targets. They are well positioned to take advantage of the fastest growing segments of digital media.
  • Ad blocking, fraud, and measurement challenges are among the hurdles the ad tech industry must overcome to achieve its full potential.
  • The rise of new digital-media formats, the increasing power of artificial intelligence, and the potential emergence of a third huge walled garden are among the biggest trends that could shake [...]