Will Mobile Ad Tech Consolidate? Not Yet, Says Verve CEO
In a blog post published last week, marketing analyst Greg Sterling asked whether the terms “local” and “location” have lost their luster as the semantic standard bearers for their industry. The question hits on a deeper debate, particularly within mobile advertising technology, over whether location is a feature, destined to be swallowed up by more horizontal companies, or a sector unto itself.
Over the past two years, venture firms have invested a solid amount of capital into mobile ad technologies with a focus on location. Among the startups, xAd, Verve Mobile, JiWire, and PlaceIQ have each raised more than $25 million. Then, there’s YP: the yellow pages spin-off has diverted a substantial portion of the hundreds of millions of dollars which the company still generates from its print product, to built its own mobile ad network through internal development and the acquisition of Sense Networks (another venture backed mobile ad technology firm) in January.
The question for the sector is what happens next. As cross-channel targeting — the ability for a marketer to target messaging to the same user across multiple devices — becomes more pervasive, the barriers which kept mobile and desktop advertising technology apart will start to subside. That could add fuel to the argument that consolidation is coming to the industry.
Street Fight recently caught up with Tom MacIsaac, chief executive at Verve Mobile, one of the earliest mobile-local advertising technologies to the market, to discuss the prospect of consolidation, the data quality problem in mobile, and what the endgame might be for location ad tech.
As the mobile advertising technology market matures, and marketers shift a larger portion of their budgets to mobile media, what’s the end game for startups in more niche sectors like local.
In 2000, I was running a video advertising business, and people would say, “Well, isn’t Google going to kill you guys?” But DoubleClick never rolled out a video division, and even now, it’s not great at video ad serving. Today, most video is still bought through stand-alone platforms like Videology and Tremor — and, frankly, I would argue that those two ecosystems are a lot more similar (display and video) than completely different technology environments in display and mobile.
I think most advertisers are buying audience and think in terms of a creative unit: they have video, display, and mobile assets. But I agree that the world is going to come to a handful of giant cross-platform ad technology platforms, but It’ll take longer than anyone thinks. Maybe that will include somebody like AppNexus, who started out as a sort of multi-platform technology, but I would argue that there aren’t any other clear winners right now, other than Google.
For the past few years, location has been an extremely valuable data point in an otherwise barren mobile landscape. What happens to the value of mobile-specific advertising technologies — and implicitly location data — when the walls between mobile and desktop fall down?
The more pressing question is who’s the tail and who’s the dog? On the one hand, there’s the cookie and on the other, the unique identifiers that are going to replace cookies, some of which have been spawned by cookie-less mobile environments. There’s a lot of speculation that the big guys, who have logged-in user bases — like Facebook, Google, and Apple and Yahoo — are actually fighting to save the cookie.
But now it looks like the big guys may be the cookie’s biggest enemy. Maybe they’re happy to see the cookie go away, because the businesses who serve as middlemen and don’t have a lot of end users are going to be in a much worse position. A lot of [companies] are very frightened by that. So, if you’re WPP, and you don’t have a lot of end users, you might be in trouble.
There’s been a lot of replication in the features among the mobile-local startups over the past 18 months. Is it fair to say that’s a sign of maturity, and redundancy, in the market?
It’s very early in the location-technology space, and in many ways we are still at the tip of the iceberg.
For instance, the location-targeting sector has sort of gotten ahead of where the quality of the data is today. I really believe that the access to high-quality location data is still a major hurdle for the industry. A lot of the companies in the ad tech world aggregated data from mobile ad exchanges where, at this point, it’s widely accepted that the data are highly unreliable — the implications of which, are seriously underestimated.
The reality is that the attribution technologies, which Verve and others have released over the past year, which use data collected from ad impressions to measure where a user goes in the real-world, are just directional. We’ve all come up with a bunch of great targeting tactics, but we still lack quality data coming in, and high quality analytics on the other side because we are relying on this large pool of largely inaccurate location data coming from ad impressions.
A big part of the challenge in mobile marketing is that most users convert offline (in-store, on the phone etc.) Where are we today in terms of solving the local attribution problem?
If you asked folks in the industry how they planned to close the loop in mobile 18 months ago, people would have said it would be done through coupons and the point-of-sale. But here we are: POS is too fragmented, there’s no sort of payment, no mobile payment technology, no single provider, no enhancement with some sort of ability to read coupons in a universal way, no platform that’s integrated with inventory management. There’s no payment or sales solution for closing-the-loop on the horizon.
What you need to do in addition is that we need to go from these directional studies and start triangulating with other data. We’re doing integrations with in-store technology providers like beacons and retailer’s own applications. The goal is provide other data, which is more reliable, to enhance the picture of location drawn from ad impressions.
So, back to the question of consolidation. What are the odds of a roll-up, and if so, who eats whom, and who is left on the curb?
I’m not saying there won’t be consolidation. I’m surprised it hasn’t happened more aggressively already because the big cookie-based online businesses are going to need to show meaningfully bigger mobile revenues. The big online advertising companies are about to start to get asked by analysts and others: “Okay, more than half of time spent is now on mobile, how much of your revenue is mobile?” Their ability to build native mobile technologies and grow real mobile revenues anywhere close to the pace of the consumer shift will be limited and they will have to look to acquisitions.
When they think about “who am I going to buy” in mobile, they’ll ask “what mobile technology is unique to the medium and differentiated?” Real-time mobile location data targeting and analytics is clearly one of the obvious answers. They won’t need or want the replication of the online stack that some of the horizontal mobile ad companies have built — they’ll want specialists.
Steven Jacobs is Street Fight’s deputy editor.