How Paid Social is Dominating the Ad Tech Ecosystem, One Layer at a Time
by Andrew Krebs-Smith | September 16
Social Advertising platforms are fundamentally changing and consolidating the entire landscape of advertising technology. Microsoft’s acquisition of LinkedIn is a massive signal of this consolidation. So that we ensure this post doesn’t become a knee-jerk reaction to recent news, here are some other examples of consolidation in ad tech:
- Verizon acquires AOL
- AOL acquires Millenial Media
- Facebook acquires Instagram
- Millenial Media acquires Nexage
- Facebook acquires WhatsApp
Why is this happening? Our argument is that paid social platforms are driving ad tech consolidation because of the incredible efficiency that social platforms created in the ad market. Typically there can be myriad players between Advertiser and Publisher, as indicated by the image below:
In the above ecosystem, to drive marketing ROI decision-makers can find themselves paying 10 different vendors and experiencing issues with data architecture, attribution, reporting/feedback latency, and lack of visibility. If you can’t relate to these issues, here is a post from Agency Spotter that explains some of the issues in a bit more depth.
But social platforms have revolutionized the ad tech stack, by consolidating the entire supply chain into 1 company that serves advertiser, publisher, and everything in-between.
To look at how the industry is changing, it can be useful to look at Facebook as an example. Here are the parts of the ad tech stack that Facebook serves in current day:
Here is a way to think about it in “ad tech” terms:
- Facebook became a DSP (Demand Side Platform) the day they launched their ad platform. Advertisers could access the audiences on the FB platform.
- They launched FBX which served as an exchange in 2012.
- The functionality of sell side platforms and an ad networks were launched with the Facebook Audience Network, and before that when FB acquired Instagram and WhatsApp (i.e. additional “publishers”)
- Facebook acquired Atlas (an ad server) from Microsoft.
- Facebook has become a DMP (Data Management Platform) over time as it aggregates first party, second-party, and third-party data across its billions of user profiles.
So, what does this mean for digital advertising as a whole? We think it changes the type of expertise necessary to drive performance.
Consolidation means more efficiency
The end result for you, the advertiser, will be extremely positive. You will eliminate inefficiency (i.e. costs), you will increase speed, and you will have much more accurate data regarding your marketing campaigns. However this does require some work on your part. You will need to have deeper technical knowledge of each channel or platform, your team might need to change, and there will certainly be some chaos as things change.
At the end of the day, these are just our thoughts. What do you think?