Casey Saran
2021 has been a good year to be an adtech investor. Valuations are surging, Wall Street is happy and exits are frequent and satisfying. It’s the perfect time to double down and invest in an area that has been largely ignored but is poised for major upside in the next few years: Digital creative ad technology.
Think about it. When was the last time we saw a major adtech funding round that was directed at the actual ads themselves — the messages people actually see every day? I’d argue that now is the perfect time.
Here are five reasons why VCs should consider ratcheting up their investment into adtech startups building the next generation of creative tools:
Creative tech is far from being saturated
Consider how much has been spent over the 15 years on digital advertising mechanics such as targeting, serving, measuring and verification. Not to mention the trillions that have gone toward helping brands keep track of customer data and interactions — the marketing clouds, DMPs and CDPs.
Yet you can count the number of creative-centric adtech companies on one hand. This means there is a lot of room for innovation and early leaders. VideoAmp, which helps brands make ads for various social platforms, pulled in $75 million earlier this year. Given how fast platforms like TikTok and Snap are growing, it won’t be the last.
Digital ad targeting is being squeezed
Ads need to do more work today. Between regulation, cookies going away and Apple locking down data collection, we’ve seen a renewed interest in contextual advertising, including funding for the likes of GumGum, as well as identity resolution firms like InfoSum.
But the digital ad ecosystem can’t get by only using broader data-crunching techniques to replace “retargeting.” The medium is practically crying out for a creative revival that can only be sparked by scalable tech. The recent funding for creative testing startup Marpipe is a start, but more focus is needed on actual tech-driven ideation and automation.
Regardless, it is increasingly clear that targeting specific users with specific messages is only going to get harder. The era of one-to-one marketing may have passed. The ads many web marketers have relied upon for years weren’t effective because they were good ads — they worked because they got to users at just the right time. Now, as the number of blunt targeting options available to brands go down, it is much more important to produce ads that both catch your attention and engage it. This is where machine learning can help.
Consumer experience is a mess on the open web
There are many reasons why platforms like Facebook, Instagram and Pinterest are successful. At the top of the list is the fact that they are primarily in the business of making consumers happy, which requires massive investment in user experience. The average publisher — slowed by dozens of ad tags and plug-ins, along with far too many intrusive display and video ad modules — takes the opposite approach, to its detriment.
Plus, the ad units themselves are locked literally inside the box, i.e., standard banner placements. Much of “creative” digital talent these days is stuck working on resizing banner ads to make sure they can fit different boxes. It’s the opposite of what happens on social platforms, where despite preset dimensions, the ads are at home on the platform, and creativity rules.
That’s why there is a big opportunity for the right creative ad technology to bring this dynamic to the open web — one that emphasizes user engagement while benefiting media companies at the same time.
If you build it, brands will come
As more brands have dedicated resources to produce social content of their own at an ever-increasing pace and volume, we’ve seen an entire ecosystem of startups pop up, with companies specializing in automating and managing this output. Yet, there has been a dearth of similar support players in the programmatic advertising sector, where the variations of ads number in the trillions.
There is an endless supply of vendors who can help brands reach the right person at just the right time, but as for the actual messages people see, marketers are stuck having their agencies churn out as many banners as they can and seeing what works.
I worked with a major retailer that developed more than a dozen rich profiles of consumer segments that could be applied when targeting people on the web. Yet when it came to producing creative assets, the company tasked its ad agency with making hundreds of variations of banner ads and videos for a single campaign, spending hundreds of hours and thousands of dollars before it had any inkling of whether people would respond to their messages. Surely software is better suited to tackle this problem.
Video is everywhere
Connected TV viewership is exploding, but creative formats are still being ported over from TV. For many years, we saw display ads being shoved onto mobile devices without much regard for screen size or navigation capabilities. Eventually, technology allowed advertisers to factor in touchscreens, navigation and so on.
Something similar needs to happen now, as ads are increasingly video first and are expected to travel from screen to screen. The adtech startups that can figure out how to adapt ads that can interact with the remote control, a synched smartphone or voice commands — maybe even make them shoppable — can theoretically produce a game-changer.
This is particularly true as programmatic buying platforms like The Trade Desk bring a new crop of first-time advertisers to television. These brands have come up through channels like Instagram and will expect interactive, engaging ads that are easy to produce, test, tweak and swap out rather than ads that require a million-dollar studio shoot. The need for scalable technology that both meets this new medium and elevates it is very high.
The market is frothy, and there is a new crop of potential buyers. Adtech is having a moment, and while much of the oxygen has been soaked up by large legacy companies hitting the public market, there have been smaller deals that indicate a hunger for better creative adtech.
Take Walmart’s acquisition of creative automation startup Thunder in February. The retail giant is one of the most aggressive new contenders in digital advertising that is recognizing the need to build out its own stack to compete and differentiate. Between the likes of Instacart and Target and, of course, Amazon, it won’t be the only one.
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