Internet mysteries: Why do ad tech companies rarely die?

Although 5,000 ad tech companies exist today, the industry is full of dead men walking.

Unlike other tech industries, struggling ad tech companies rarely die swiftly, even if they’re not on the path to growth. Instead, they take a cut of the disappearing ad dollar while pivoting through various business models until they can sell off some of their assets.

In this edition of internet mysteries, we examine why floundering ad tech companies tend to linger.

False positives
The conventional wisdom that 90 percent of tech startups fail has been applied to ad tech. However, in ad tech, failures are harder to spot because ad tech has a lot of false positives.

Global ad spend will exceed $550 billion this year, according to a Zenith Media forecast. With that much money running through the system, there’s opportunity for many ad tech companies to reach high revenue run rates of more than $100 million.

“Rising tides lift all boats,” said Jonathon Shaevitz, president of ad research firm Industry Index, in reference to how the growth in digital ad spend helps ad tech companies stick around.

Even if these companies run out of funding, it takes a long time for them to die because they can glom off media buys to slow the bleed.

Perpetual pivoting
Ad tech companies frequently pivot whenever a business model doesn’t work out. And sometimes, this really pays off. Moat became an ad measurement juggernaut after it scrapped its crowdsourced marketplace meant to connect ad creators with brands, while Index Exchange became a popular header bidding vendor after it pivoted away from being an ad network.

Read More at Digiday

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