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MarTech vs AdTech – Marcin Szelag

https://twitter.com/iamrobrown/status/460437900912369664Marcin Szelag

The post was first published at MarTech.vc

Last week we hosted another SaaS Meetup — this time the main theme was all about #people (hiring and company culture). During the event I had an interesting conversation with Kamil Stanuch — cofounder at KoalaMetrics(AdTech startup in the mobile space). We discussed the differences of Marketing Technologies versus Advertising Technologies.

MarTech and AdTech are often coined as the same “space” but that is not really true. There are no strict definitions of these terms. When I think of these two markets I think along these lines:

MarTech is all about understanding the customer and the ability to communicate with him on multiple levels
AdTech is mostly about Branding (copy and creative) and Traffic (clicks)

Both of these markets are very big in terms of $ spent and the number of available products. What is very different about these markets is the ability to innovate and come up with new solutions.

Advertising technologies are as old as the Internet itself. The first reported banner ad is dated back to 1993 and was sold by Global Network Navigator. Two years later came out the first central ad server released by Focalink Communications. Twenty years later the online ad business in one of webs most popular business models.

Publishers sell their “real estate” to advertisers. In order for this trade to happen seamlessly — there is a whole ecosystem of products in the AdTech space. I think the most interesting developments in the advertising technology in recent years can be pinned to Real Time Bidding (RTB) and programmatic ad buying.

Google is of course the undisputed king of AdTech. I heard that an internal joke around the campus is that people think that Google is a search engine company — when in fact it is the biggest advertising agency on the planet. Over the years Google has acquired many companies in this space. Google paid more than $3B for DoubleClick, which might be their biggest acquisition in the AdTech space yet. But Google is not alone, Facebook is also serious about the advertising space. With billions of people on the platform — Facebook has a lot of “real estate” to sell to its advertisers — especially in the mobile medium.

Google and Facebook are only two companies of hundreds active in AdTech. With RTB and programmatic ad buying it is a razor sharp game on margins. Advertisers are only getting smarter and want to pay for effect driving clicks. This drives margins down and makes it very hard to compete with big established players on the market. It might be the reason why so many VCs say no to AdTech companies. We have probably reached a peak in advertising technology and to be honest I don’t see anything in the near future that could bump AdTech onto a new growth curve.

MarTech on the other hand is nowhere near reaching a peak (at least in my view) but it also has a set of challenges on its own.

The markering technology world is hugely fragmented. Luma Partners or ChiefMarTech are very good at documenting all active companies in their supergraphics. There are probably few thousand vendors of MarTech solutions. This is mind blowing. I always like to joke that there are more solutions than marketers who know how to use them.

In AdTech the process of buying is very simple. Most advertisers will choose the biggest networks to allocate their budgets. With MarTech it is exactly the opposite. Each marketer is different. Each company is different. Each marketing process might be different. This is whay choosing your marketing technology stack is so difficult and might hugely differ from one company to the other.

To illustrate this — there are more than 200 marketing automation solutions on the market today. The value proposition of the bunch is pretty much the same — they take a data/event driven approach to automate marketing/communication activities. The differentiation lies in the tiny details of each product. The interfaces. The integration (API) capabilities. There is still plenty of room to compete even against the giants. My favourite example is SalesManago a marketing automation company based out of Poland — now with an office in New York.

Another difference between MarTech and AdTech is the adoption rate. Thanks to such products as AdWords by Google — even the smallest business in the most remote place on earth can use and uses AdTech. This low barrier of entry drove massive adoption among businesses.

In MarTech it is not so easy. One of the simplest marketing tools, a CRM is still not widely adopted by businesses. Another example — email marketing, although there are close to 60 different vendors of email marketing solutions — many businesses still have challenges implementing them in their marketing processes. We are talking about the most basic tools of them all. There is an enormous potential for growth in MarTech.

I am trully bullish on marketing technology companies as I think that their products benefit both the business and the consumer. With better marketing software, companies can far better serve their customers in a more 1on1 personalized way.

At Innovation Nest we consider MarTech as a very important area of focus. We have invested in marketing technology companies in the past and we will continue investing in the future. I still believe we are in the early days of this marketing technology revolution.

The post was first published at MarTech.vc

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