Ad tech funding, deals drop in 2016

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Venture capitalists CB Insights revealed there was a 33% drop in the volume of funding over the past year, from $3.2bn to an estimated $2.2bn. Furthermore, only 69 ad tech deals were completed in the last quarter of 2016, the lowest in any quarter in the last four years.

The reason, says the Financial Times, is due to the significant growth of Facebook and Google who, together, account for three quarters of all display adspend in the U.S. and more than half (53%) of that in the UK.

“Ad tech’s struggle as a sector is absolutely to do with the dominance of Facebook and Google,” said Suranga Chandratillake, a partner at Balderton Capital, a venture capital firm based in London. “Ultimately advertising is about selling attention, and if most of that attention is focused on Google and Facebook, then naturally they can monetize it.”

In addition, Chandratillake highlights the problems caused by ad tech start-up focus being on attempting to reach the same level of scale of the Google-Facebook duopoly.

“Gains in ad tech are increasingly marginal because companies are constantly copying each other. Lots of ad tech start-ups go from zero to $30m of revenue and back down to zero again. As a VC that’s hard to back,” he said. “Even if you manage to build a sustainable advantage for a few years, how do you scale to compete with Google or Facebook? That’s why traditional adtech does feel dead from a venture perspective.”

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ABOUT THE AUTHOR

Kristina Knight is a freelance writer based in Ohio, United States. She began her career in radio and television broadcasting, focusing her energies on health and business reporting. After six years in the industry, Kristina branched out on her own. Since 2001, her articles have appeared in Family Delegate, Credit Union Business, FaithandValues.com and with Threshold Media.