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Why Ad Nets Must Rule The World; The Bullish Case For The Trade Desk; A Correction On Last Week’s Newsletter
The Case For More Ad Nets Not Less
Nobody wants to be called an ad net. It conjures up too many bad memories (or good, depending on who you are) of Bachallania-esque partying and eye-popping margins.
Nascent programmatic vendors (like MediaMath) used this unpopular image as a sales tool to entice agencies to push money into DSPs et al.
The irony of course is that this perceived “lost” margin was swapped into an equally murky programmatic supply chain. All the ANA reports can attest to that.
Despite the promise of transparency and self-service, managed service still prospered. Aggregation and activation are services that agencies and brands are looking for.
Agencies with little-to-no trading resources lean heavily into ad nets to deliver campaign performance for clients. And for every in-housed success story, there is likely, behind the PR noise, an ad net pulling the strings.
When we talk about ad nets, we are not talking about walled gardens. Classic ad nets are independent managed service providers that work with agencies and have either one or more of the following characteristics:
Trading capabilities and are technology agnostic
Are a channel specialist (audio, TV, retail media, OOH)
Have a point solution (social, search, contextual etc)
FPC believes that we need even more ad nets, not less (note to LPs: you will see why this benefits the FPC fund in the long term).
Let’s list off why the indie ad network model is about to have another moment:
Fragmentation is a friend of the ad net: Things are getting even more complicated for planner buyers. Brian Weiser wrote an excellent substack on the subject this week, “The Medium Is The Mess”. Brian makes the argument that channel-specific selling is challenged given the content pushed out by platforms and media companies is consumed in so many ways. From a practical media buying perspective this is a proper headache - but it’s always been thus. Not everything will be enabled via a DSP UI. Aggregation will still be a core skill. Enter the specialist ad nets who can make agencies' lives easier.
Curation scales but needs sales and activation: Curation is one of the core ways to activate programmatic buys and scale disparate ad tech solutions. Companies like Audigent and MediaGrid (Criteo) have emerged to make it all possible - but you still need an ad net/sales house to sell it and deliver it. PMPs don’t work without those two core pieces.
Agencies lack resources and need to make margin: Agencies are in a tough spot. Squeezed on margin by clients and increasingly disintermediated by the likes of Google and Meta (cc: Performance Max and Advantage+), agencies are leaning into partners to help them remain competitive. This is not a bad thing. Both Google and Meta are weak in specific channels where agencies can make money. This is going to be a good hunting ground for independent specialists and point solution providers. OOH, audio, retail/commerce media and TV remain strong areas of growth for aggregation and activation.
The US remains an outlier: It’s easy to preach the ad tech SaaS doctrine in the US. It is the most scaled digital media market in the world. There is nothing like it. Ad tech vendors therefore have an easier time pushing a quasi SaaS model there. This invariably falls apart everywhere else though. We believe more ad nets and sales houses can help solve problems like scale and privacy - especially if you are building ad tech that acts as an enabler. Our view: let them sell it and let them scale the fragmentation.
FPC portfolio helping ad nets/sales houses make money: From a selfish point of view, FPC wants more ad nets and sales houses in the market. We have the technology in our portfolio to help these companies deliver capabilities and make money. Curation is the key framework to scale across the broken and complicated media and marketing ecosystem outside the US. We have even cobbled together a new curation model to make this happen. FPC is actively talking to ad nets and sales houses globally to help resell the likes of Lumen, Evorra and Good-Loop. If you are reading this, and want to learn more about the FPC curation program (more on that next week), email us on email@example.com.
A Bullish View On The Trade Desk
We spoke about TTD being an anomaly in ad tech in last week’s newsletter. It has the greatest ad tech CEO of all time - and just keeps surpassing market expectations.
This success was rewarded this week with the news that it is being added to the Nasdaq 100 Index (a basket of the 100 largest, most actively traded companies listed on the Nasdaq stock exchange).
It's an incredible journey for an ad tech company.
But you do have a prevailing view in the industry that TTD is overvalued - and that gravity will ultimately pull it down at some stage.
FPC isn’t so sure that argument holds up anymore, and would like to outline the bull case for continued growth (which incidentally is also good for the industry as a whole):
SPO is the genius move: TV wants to be data-driven not RTB-enabled cannon fodder. Direct integrations into the ad servers of walled gardens makes TTD the go to for data-driven TV. By layering in more 3rd party data partners and specialist solutions into the platform, TTD can increase margins.
TV is still a growth area: Just echoing the above. There is still so much to play for - especially as linear and digital teams merge at the agency level. TTD is best placed to be the UI for data-driven TV. It will have to make some ad tech acquisitions to realise that aspiration though (FYI: some of these assets are sitting in our portfolio).
Retail media, the five-to ten year play: The current retail media narrative is so nascent in its development that it's difficult to understand the real opportunity. It is definitely going to be bigger than anything we have ever seen in digital media. But it’s not what people think it is. Jeff and the TTD team know it. The opportunity is in aggregating commerce media and retail media sites, unlocking existing and future trading budgets. We are nowhere near that - as it will be a 5-to-10 year process. For the minute, retail media is mostly hype around retargeting and non-endemic banner advertising. Once we work through these early iterations, TTD will eventually emerge as the buying platform for retail and commerce media - fuelling the growth of its market cap.
Correction In Last Week’s Newsletter
Last week we announced the return of MadTechMoney on October 31.
We posted a link to apply for MadTechMoney tickets that mistakenly led to an Ari Paparo podcast (an excellent listen incidentally).
The correct link is now posted below, so get applying for tickets.
And on that apologetic note, we will end this week’s newsletter. Have a great weekend, readers.