Commoditisation is Cannibalising Differentiation
Hardly a week goes by in ad tech land without news of a partnership or acquisition as companies battle to build the ultimate end-to-end technology stack. In this piece, we explore whether the buy side/sell side divide still exists, how tech buyers can differentiate between vendors, and whether owning the supply has become the only true differentiator.
Buying and selling ad impressions has become highly commoditised.
In theory, the trade is relatively simple: publishers have ad impressions that they want to sell – advertisers want to buy ad impressions from publishers.
Technology automates this trade and vastly improves the efficiency of the trade for both the seller and the buyer. However, the idea of a technology company operating as a stand alone entity on the buy side or the sell side seems to have become obsolete.
In the past there were clearly defined supply-side platforms (SSP), ad exchanges, demand-side platforms (DSP), ad servers and data-management platforms (DMP)s.
Today, the lines are blurred with many companies operating on both sides of the fence through partnerships, acquisitions, and organic product development.
The reason for this ‘diversification’ is simple – by operating on both sides of the trade, these companies double their margins by taking a cut from the sale and the purchase.
Furthermore, licensing technology that sits between the two sides, i.e. a DMP, provides an additional revenue stream. Additionally, integrating another technology solution into the trade makes it harder for publishers and brands to unravel the stack and start again with a new provider.
The problem with this type of dominance is that there is no transparency. It becomes difficult, if not impossible, to decipher the value-chain and ensure that the publishers and brands are seeing true value.
It also makes it tough for technology buyers to differentiate between solutions. Previously, it was quite straightforward, buyers could put out an RFP for an SSP or a DSP and an ad sever etc. Today, RFPs are being circulated for point-solutions and stack-solutions and vendors are competing for the largest slice of the pie they can viably take, often promising integrations that turn out to be less than complete, leaving the marketer frustrated and, perhaps more importantly, lacking trust in the vendor community.
In an attempt to break through the smoke and mirrors and differentiate, Google have recently removed some YouTube inventory from their exchange product; meaning that in order to access this inventory, buyers must work with Google’s technology products. This creates a stronghold on the market without requiring unique product features to be built and, more importantly, in a way that competitors cannot copy. (Other vendors can copy the idea of withholding inventory, if they have their own, but they cannot offer the same inventory as Google; thus, Google have achieved true differentiation.)
The problem with this strategy is that brands do not want to only buy inventory from one supplier and, if this differentiation through supply continues, brands will be forced to deploy multiple supplier-owned solutions, which is not scalable.
This will give rise to the superstack – yet another technology solution that sits above all solutions and provides one centralised point of control for the marketer. Which was actually the point all along.
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