A Glimpse Into the Debate on Waste in the Adtech Ecosystem

Earlier this month, Alejandro Rivas-Micoud, the CEO of Userlytics Corporation, announced the launch of an Interview Moderated Feature for Userlytics, their Remote User Research Platform. This feature, called Instant Access, will help with qualitative remote market research with seamless user experience testing. Without any downloads or plugins, the functionality can help B2B and B2C commerce brands to conduct insightful research even during these remote work times. Undoubtedly, Martech innovations like these are helping the market fight the disarray caused by COVID.

However, things may not be so optimistic about Adtech.

A recent study by ISBA (Incorporated Society of British Advertisers) suggested that more than a third of adtech supply chain costs could not be unaccounted for. This has put the adtech ecosystem in a peculiar position raising questions about its transparency.

Thus, it seems an excellent time to understand the argument and see whether marketers consider adtech as an investment or a waste in these uncertain times.

The Wastage in the Adtech Ecosystem

Perceived to be a powerful ally of martech, adtech has been growing in influence over the last few years. Martech assists marketing in general. The tools used here can help streamline the marketing operations and generate actionable insights around different marketing activities. Adtech, on the other hand, branches out to advertising. Its tools mainly work for strategizing online advertising, planning mobile ads, and managing ad inventory.

One of the critical differences between adtech and martech lies in the way they bill. While most of the martech tools allow paid subscriptions, adtech revenue is generated from the volume of ads purchased.

The study conducted by ISBA focussed on this capital. Adtech companies deal with the planning and management of digital advertising for their clients and, in return, charge handsomely. A recent report by IAB suggested that digital advertising saw a spent of more than $300 billion in 2019 alone. With only 12% of this amount being completely traceable, marketers might well start losing faith in the advertisement technology ecosystem.

Of course, the “waste” in adtech by overoptimistic brands was pretty evident even before the ISBA report surfaced. The ‘long tail theory,’ for example, is a popular attraction offered by adtech companies. It suggests targeted advertising for the traffic generated by long-tail or highly specific by extremely extensible product keywords. However, it is no longer a secret that most of the “organic traffic” was a part of the ad fraud that long-tail sites were accomplishing through non-human bot users. Thus, the amount of investment that went into chasing the long tail myth was essentially unfruitful.

Talking about bots, another offering of the adtech companies that were brought to its figurative knees by ad fraud was behavioral targeting. Marketers were already signing their cheques when they heard that ad technology could gather customer data and extract meaningful behavior patterns to help deliver targeted advertising. But again, the bots generated much of the fake traffic that misguided these ad campaigns, wasting a lot more money.

In short, some supposedly-innovative ad tech solutions have been eating up a lot of marketing revenue with minimal payoff. This may be a big reason why adtech companies encourage marketers to invest in adtech and martech together. The ISBA report is created using the data collected from some of the marketing giants like Disney, Unilever, and Amazon. If this is the insight drawn from those companies, one cannot begin to fathom the scale of wastage in the rest of the digital advertising market.

In Favor of Adtech

Of course, this debate about adtech is not one-sided. In fact, marketers have always been a little skeptical about adtech platforms. However, the fact that extremely smart people and systems were still convinced to invest so much capital, resources, and time in digital advertising campaigns speaks volumes of the success of adtech tools.

For instance, the Q4 report presented by LUMA shows that public ad companies are continuously outperforming themselves. The spend on the programmatic stack, i.e., the set of tools used by advertisers to automate their campaigns, was also experiencing a boom until the pandemic hit. Currently, the adtech industry is going through some uncertainty, but so is the global economy!

Talking about adtech platforms, in particular, let us take a look at the most popular category – demand-side platforms. DSPs help the advertisers & brands to understand and bid for the meaningful ad impressions they need from the ad exchange. Based on this information, provided by the ad impression, they can plan their campaigns. The payment model is simple – a percentage of ad spend goes to the DSP provider. Therefore, the more the advertiser earns, the more profit the DSP makes. That means the ad impressions need to work for both parties to make money. Not much scope for anyone making money on “wastage” there!

Moreover, the audience segmentation and targeted ads are the two most valued capabilities of adtech solutions. Some companies don’t segment their audience regularly and are thus are tricked by the bots and other ad fraud techniques. However, it is not fair to attribute this failure to an entire solution set. Good adtech companies, consistently study industry patterns and pivot with the market. They keep evolving the knowledge of their audience and keep employing more targeted approaches for advertising.

In fact, the more insight we gather into this industry’s operations, the more baseless this debate about adtech revenue is. For instance, the DSPs that we talked about earlier, have what is called “a seat in the ad exchange.” That is the reason they can help the advertisers with ad impressions in the first place. Having that seat in the ad exchange allows you to access the system to extract meaningful information. Information that has been gathered by the exchange on running multiple kinds of research & tests. Even with this limited information, the DSPs can offer even smaller subsets of customer segments to the advertisers. This is one of the additional benefits provided by adtech companies to digital campaigns.

As mentioned before, the ISBA report was based on the data from marketing giants. In some ways, it’s fair to say that what’s going on in the rest of the market is possibly a different story.

Conclusion There is undoubtedly a need for transparency in the adtech ecosystem. Only then the marketers can have a better idea as to how things work for digital advertising, and they would be able to make more informed decisions. Moreover, no matter the side the one chooses in this debate, we all can unanimously agree that martech and adtech together can certainly help the businesses in these testing times.