Op-ed: Mobile is driving the decline of traditional ad tech

Josh Engroff is managing partner, kbs+ Ventures and chief digital media officer at The Media Kitchen

I come bearing words of advice for new ad tech entrepreneurs: use the future, not the past, to fuel your product vision. The smartphone age we live in has revalued the currency of innovation, with the result that most of the fundamentally hard problems in mobile have been solved by first parties.

First, a brief history lesson: Over the past two decades, ad tech, much like digital marketing itself, has undergone waves of innovation and expansion. The late ‘90s saw the rise of display ad serving and DoubleClick’s acquisition of NetGravity, the company that essentially invented ad serving. The dot-com implosion of 2001 spelled the end of many Internet startups but not the Web itself: users continued to flock to the new medium, and both display and search ad inventory increased exponentially. One could say that the years between 2003 – 2007 were ad tech’s coming of age, with technologies like ad serving, bid management and rich media playing a vital role in the advertiser-publisher ecosystem.

The period from 2007 – 2011 saw an explosion of ad tech companies and the first Lumascape; this is where ad networks and behavioral targeting were born and the seeds of DSPs, exchanges, and mobile advertising were sown. This is the period of Tacoda, AdMob, and Omniture, and lots of acquisitions. The industry was booming.

The period since 2011 has been rightly called the programmatic age, because it underscores the profound importance of real-time bidding, data and automation to all facets of advertising, including display, video, mobile, social, you name it. Today nobody asks anymore why you’re buying programmatic, they only ask why you’re not.

Given this history, you’d think we have sufficient grounds to be optimistic about the future of third-party ad tech. Don’t be so sure. The future will not be like the past.

This is because we now live in the age of mobile, a period fundamentally unlike the others, for two big reasons: One, the smartphone is not just another device, it is the device around which most future consumer devices will orbit. In fact, the smartphone supply chain is already fast replacing the PC supply chain as a key driver of the tech industry. The second reason is that, because of the first, we will soon live in a cookie-less world. And the loss of the third-party cookie means that the basic system of accounting third-party ad tech relied on for so long is gone too. No cookies means that marketing becomes harder (witness the painful early years of mobile advertising), until the large first-parties with reliable, scaled user authentication across devices step in and make it easy again.

This is already happening. When you think about it, most of the really tricky problems in mobile have been solved by the big first-party platforms. This includes creative formats (native, social, search and video), cross-device attribution (deterministic authentication always trumps probabilistic), data (the first parties often know what you buy, the best data of all), and targeting (no need for lots of Javascript weighing down ad delivery if you know who someone is).

All of this is good for Google, Facebook, Amazon, LinkedIn, Aol/Verizon, good for marketers, and mostly good for consumers (though privacy concerns remain). It is not good for tech startups living in the past.