Good day to you, reader. FPC hopes this edition of the FPC newsletter finds you well. If not, then we can understand why. Over the past twelve months, a deluge of negativity from all directions has focused on ad tech’s long-term viability. Most of it has been confused, reductive analysis, an unfortunate conflation of confirmation bias and outright ignorance - first from the public markets and then from industry insiders.
Of course, all this matters very little to the industry’s broader growth outside declining areas like browser-based advertising. But FPC feels it needs to put the bull case forward anyway. We think the upside is significant. In this edition, we will outline 6 reasons - in no particular order - why (to steal from the Dandy Warhols) ad tech chat is so passé.
1. Elasticity Versus Consolidation: Ad tech is the central nervous system of activation and measurement of media and marketing. It evolves with every new piece of consumer innovation. The rise of answer-based search is surfacing a new category for monetisation - and ad tech is already building for it. And yes, browser-based ad tech will consolidate. That’s an inevitability as the “open web” experiences its print moment. But the industry “landscape” always keeps evolving and adding new logos because the game never stops.
2. European M&A Tech Is Buoyant: There is buoyant M&A in European ad tech. Sub-£50 million-priced companies are fetching strong multiples (well above the industry average). FPC is working on a few deals right now. Strategics are looking to buy good companies - and Europe has them in spades at affordable prices. Skyrise’s exit to TapTap this week was another example of that. Skyrise built a strong OOH activation and measurement platform. Its proprietary data product gives TapTap a solution that can now scale to the US and other European markets. Smart strategics are buying Europe.
3. Ad Tech’s Undiscovered Country: In a recent post, we discussed our Fund 2 focus on incubation strategy. The hot take: why are we building for the US when huge, scalable opportunities exist elsewhere? The point is that ad tech, broadly, operates with blinkers on. The agentic hype train is the current quasi-zeitgeist, sucking time and resources. Maybe (or maybe not) buying agents will replace The Trade Desk, and its chunky media budget will be distributed. Maybe agencies will embrace agentic trading/measurement agents/verification agents, and brands will shift budgets. But it’s all highly speculative and highly competitive, where name recognition matters more than core tech. We prefer the road less travelled around compliance, data modelling, verticalised AI infrastructure, media risk intelligence, and verticalised media plays, where our incubations focus on winnable and scalable sectors in our own backyard. We prefer pushing the envelope to just reinventing another ad tech margin layer.
4. The Open Internet Is Growing: The open web (browser-based advertising) is definitely on the wane. Hard to ignore the evidence. But even that will plateau at some stage - as publishers find new ways to reach users. The open internet (CTV, app, OOH, audio) is growing. If you talk to any of the SSPs on the quiet, they will tell you that they are growing. Having focused on app and CTV, they are less dependent on open web display. Money will flow to where users are. And the fact is, all the channels named above are growing. So don’t conflate open web decline with the rest of the media and marketing ecosystem. Honestly, readers, things are pretty good.
5. Platform-Based Tech, Very Investable: Walled gardens are growing their market share of advertising. It’s a stat we cannot ignore. Many of the walled gardens are still very messy around brand safety, compliance, targeting, and measurement. You need third parties to plug that gap. And you can grow decent-sized businesses on the platforms. Of course, there is always the risk that the platform could disintermediate you, building your functionality into the platform. Possibly. But there are things they cannot do. PBTs have a place in the ad tech ecosystem - and will be in demand as walled gardens become even more entrenched.
6. Shifting Holdco Model, A Good Thing: The holdco model is changing radically. Omnicom, Publicis, and WPP have all bought ad tech assets, mostly to build out data IP. Publicis has been the most aggressive. They recently bought LiveRamp, which has given them a scaled global spine when merged with Lotame. All of them are looking to control execution (whether it’s overall media buying execution or a carved-out principal media operation). What do they want from ad tech? Signal: they want proprietary signal to train their buying algos. FPC continues to invest in this side of the business. Supply-chain control: agencies want to improve performance, cut costs around media execution and innovate at the edge. Containerised DSPs offer a new level of efficiency and capability for outcomes-focused agencies. We see this holdco shift as fertile ground for cos like Bedrock to build market share.
And we will end it there on that dose of positivity. The space is as exciting as it ever was - except if you have managed to paint yourself into a one-dimensional ad tech corner. Look forward to seeing you all at MadTechMoney and ATS London in a few weeks, where we can discuss all of this.