Monday, March 11, 2013

BIG’s Blog: Trend No. 5: Consolidation of Ad-Tech Will Grow the Ad-Tech Pie

Max Kalehoff is one of those people who is followed by many in the marketing/tech world. He is currently VP of Product Marketing at Syncapse… one of those fairly unheard-of tech companies that is really changing things.

Max recently published a paper for the University of Pennsylvania’s Wharton School’s Future of Advertising 2020 Program. His paper entitled 11 Big Trends That Will Reshape Advertising In 2020 And Beyond has garnered a lot of attention.Over the next few blog posts, I will attempt to take each one of his eleven points and give it my interpretation from the nonprofit Development perspective. Let’s take a peek into the future together.

5. Consolidation In Ad-Tech Will Grow The Ad-Tech Pie. The diminishing cost of computing and starting a company means that we’ll continue to see a steady flow of innovative media and advertising upstarts. Still, we’re due for a large wave of consolidation among venture-backed ad-tech companies. That will be a good thing because that sector is experiencing a tragedy of the commons: lots of noise, too many companies, not enough traction. Fewer companies will mean fewer choices, which will mean simpler decision making for marketers, which will mean lower friction to spend more money in innovative ways on new platforms. Second, ad-tech consolidation will concentrate talent and resources into fewer companies, which will mean a higher likelihood for the most promising companies to achieve critical mass in adoption and revenues. Ad-tech consolidation will have the ironic outcome of creating a larger sector, altogether.

Reading Mr. Kalehoff’s fifth trend, I can imagine that most of my fundraising management and leadership readers will fall into three groups.

Group number one consists of our current and former clients who clearly understand what Mr. Kalehoff is talking about in general.

Group number two are those fundraisers who have been watching the world of marketing change dramatically with the advent of the digital Internet and all the new tools, social media, and services created for the marketing communications industry (which includes nonprofit fundraisers) but have not moved to change their fundraising model.

Group number three has no idea what Mr. Kalehoff is talking about… Ad-Tech??

Rather than comment directly on his insight about the consolidation of Ad-Tech and its implications for marketers, let me first comment on the specific mention of consolidation in this sector and, second, comment on why our clients understand this.

First, consolidation. When do industries consolidate as defined by the bigger and more successful companies buying up the smaller? Answer: When the industry has matured.

Some examples that will resonate with you.

In the early 20th century, when the automobile industry was brand new, there were forty to fifty auto-manufacturing companies just in the U.S. Now the auto industry has consolidated down to three in the U.S.  Many of the General Motors brands for instance used to be separate companies. This consolidation took 60 years.

In the early days of the personal computer in the 1980s, there were over twenty companies that I can think of (maybe more) building PCs. Today, maybe five big players worldwide? Obviously the PC industry rapidly consolidated within its first twenty years.

So, for many of my readers, Mr. Kalehoff is talking about the consolidation of an entire industry that, as marketing communications fundraisers, they should not only be aware of but actually be using these products and services.

Interestingly, our clients, if not knowing all the Ad-Tech companies and services, nonetheless understand that the digital Internet-based marketing communications product and service sector exist, but more importantly, they understand what it means for their future in fundraising. Their biggest insight is they have learned how inexpensive and powerful these tools are for building supporters from the younger generations. They understand how to integrate these new digital tools into a new model of fundraising, which gives their Development group a future in fundraising.


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