Data centricity and the convergence of AdTech and MarTech
There has been a decent amount of attention paid to the convergence of MarTech and AdTech, usually viewed through the lens of the vendor ecosystem. While there’s also been significant discussionthe underlying trends responsible for this convergence, I haven’t seen a thorough closure of the gap between the industry forces and vendor dynamics.
This take won’t solve that either, but it will provide high-level commentary on what’s happening between those vendor ecosystems and the broader consumer and data environment in which they’ve evolved.
The evolution of AdTech
It’s been a while since I’ve seen a presentation highlight the share of advertising revenue concentrated in the big two channels: Google and Meta. According to Statista, Retail Media spend has nearly tripled in the past five years.
Formats are diversifying: eyeballs are shifting from cable and YouTube into in-feed ads on TikTok or Insta reels, and with advancements like UID 2.0, it’s possible to imagine a connected experience for the customer across the open internet and connected devices (which are also proliferating).
Search has been the relatively stable inheritor of intent-driven advertising dollars in the shift to digital, but it now faces disruption at the hands of GenAI.
“Walled gardens” won market share from digital display ads not only because eyeballs shifted to social channels, but also because they enabled a level of first-party (1p) data targeting that wasn’t possible on the open internet.
Instead of trying to find customers who probably fit a brand’s desired demography, brands could simply target specific people with a custom audience or retarget customers who had browsed their site in a Faustian bargain for their data.
This shift slowed growth in AdTech categories that had experienced a huge run-up in the early 2010s (e.g., DMPs) and even pushed some AdTech players into the MarTech category.
Now we’re seeing a few simultaneous shifts in the industry:
- Macro pressure has shifted focus from growth to efficiency, forcing enterprises to focus their customer acquisition strategy on efficiently acquiring high-quality customers rather than focusing on optimizing for quarter-over-quarter sales growth.
- Enterprises are investing in optimizing the customer journey more holistically across advertising and marketing channels, moving from disconnected teams and tools to a connected architecture
- Enterprises are centralizing (or at least connecting) their data across marketing and advertising ecosystems
These shifts, paired with the above evolution of consumer trends (i.e,. many formats, new formats, and more devices), have increased the importance of a connected data strategy across previously disparate channels.
The evolution of MarTech
The evolution of MarTech is due as much to opportunities to drive marketing performance and consumer expectations as it is due to the evolution in the data capabilities of marketing technology.
To dramatically oversimplify things, consumers became more digitally and mobile-engaged. This enabled brands to become more direct-to-consumer focused and gave rise to thousands of, and billions of invested capital in, D2C businesses.
Veering back toward advertising for a hot second, this change also enabled the rise of search and social (because as a Shopify site, you’re likely to run Instagram ads and Criteo for retargeting vs. buying a DMP to establish a real-time bidding strategy across multiple display networks).
This evolution also gave rise to an explosion in first-party data, which fundamentally changed the MarTech space. The Lumascape exploded, marketing clouds became behemoths expected to support thousands of use cases, and platform width gave rise to point solutions that achieved subsets of those expectations much better, simpler, and faster.
This, in turn, brought about categories of technologies designed to make disparate MarTech tools interoperate (a subset of the CDP category).
Now, we have way too many MarTech solutions and existential questions for the solutions designed to make systems interoperate, as well as meaningful pressure for MarTech solutions to demonstrate return on investment (which is increasingly complicated when a MarTech stack has dozens of solutions all taking credit for campaign performance).
MarTech consolidation will occur. The next question is how will MarTech and AdTech consolidation shape the next business cycle for each respective category.
The convergence of AdTech and MarTech
As first-party data becomes more important than ever and businesses undertake data-centric strategies (you can make your own Madlib of the following: modern, data, lake, mesh, ocean, house, stack, etc.), all of this data will eventually land in cloud data infrastructure and not an amalgam of SaaS solutions (unless you believe in the Salesforce paradox).
It will become increasingly important for AdTech and MarTech solutions to interoperate with your cloud data infrastructure. This is why companies like Braze, The Trade Desk, and Simon Data are all building native data-sharing solutions.
As enterprises consolidate, face pressure to deliver measurable ROI from each investment, and aim to deliver a cohesive and performant customer experience, it’s fair to expect that MarTech solutions enhance and coordinate advertising experiences and improve advertising performance.
While some have (in a hot but shallow take) commented that the CDP is the new DMP and others (in a basic but accurate take) delineated between the first- and third-party data use cases each supports, for many reasons elaborated above, first-party data is going to be the fuel powering the advertising ecosystem for the next decade. AI will be the combustion process, and clean rooms (and the like) will become the distribution infrastructure.
It’s also worth mentioning that CDPs will not become DMPs, but will have an important role to play in this context (i.e., coordinating and optimizing customer experiences across paid and owned channels).
Just as platform width in the MarTech ecosystem created hundreds of point solutions in the previous business cycle, and the current market dynamics are a driving force for consolidation, this next cycle will push CDPs closer to data infrastructure and will play a role in both marketing and advertising.
