Yesterday, (November, 3, 2015) the last ATS event of 2015 took place in New York City. The day started with a fireside chat between ExchangeWire’s CEO, Ciaran O’Kane and Michael Rubenstein, president, AppNexus. The discussion focussed on the future of independent ad tech companies, how publishers are fighting back against media giants and how on earth we ended up with ad blockers being commonplace.

Ad tech companies need a home to survive

Consolidation is driving change in the ad tech industry. A recent article published by Digiday describes how venture capital firms are turning their backs on the ad tech space. Certainly in the US, VC companies are not investing in new ad tech companies the way they were five years ago.

In order to survive, emerging ad tech companies, and those that may have been over-funded, now need a home to survive. Simultaneously, large telco, media, and martech companies are acquiring ad tech companies in order to participate in the digital advertising industry.

Verizon’s merger with AOL and AOL’s subsequent acquisition of Millennial Media is an example of how this is playing out today. Verizon’s merger with AOL will allow the telco to compete with Facebook and Google in mobile; and the acquisition of Millennial Media provides a delivery mechanism for world-class content married to seamless advertising across all channels through its advertising platform, ONE by AOL.

Such acquisitions and mergers could result in increased reliance on walled gardens and closed systems. For example, today, Amazon does not allow the DoubleClick bid manager to touch their data, preferring to keep it within its own ad tech products.

This may be in the media owners’ best interests, but it is not sustainable in the long term.

Long-term success of any media owner, or ad tech solution, must be married to the best interests of brands – after all, they’re the ones writing the cheques. Brands need solutions that enable them to use their first-party data and buy seamlessly across platforms and devices.

Brands do not want to see a turf war that makes it harder for them to reach consumers, which is why the mergers and acquisitions of 2015 do not pose a long-term threat to independent ad techs.

What does this mean for innovation?

Google’s announcement earlier this year that YouTube inventory would no longer be available via their ad exchange, but would instead only be accessible through DoubleClick bid manager could have signified the end of independent video ads.

However, companies, such as AppNexus, chose to maintain their market share by diversifying supply. They made distribution deals with other suppliers, demonstrating that there is enough reach and volume to support independent players, as well as YouTube.

This year has also seen Facebook, Apple, and Google change the way they aggregate news to extend their influence on the internet. Publishers need to innovate in order to keep up and maintain their share of advertising budgets.

However, whilst publishers are excited to experiment, as content owners who have been burnt in the past by giving third parties too much control and access to data, they are wading in carefully. Signifying an overall trend of consolidation, not just of ad tech companies, but of spend.

The power of the big five is massive and increasing, but the emergence of competing platforms, such as AOL, is exciting and clearly signifies that this is not the end of independent publishing. Moreover, ad tech companies need to support independent publishers by helping chart a path to independence and monetisation.

Publishers are becoming more self-aware about how they take control of monetisation

A case in point is the recent advent of header bidding which, according to O’Kane “feels like a hack against DFP’s dynamic allocation”. Header bidding is actually a move towards holistic yield management, where every impression competed. Publishers are voting with their feet. According to a recent Hearst report, more than 20% have implemented a header-bidding solution.

Google is now beta testing its own header-bidding solution in what could be seen as an attempt to maintain pace with independent vendors and publishers, and maintain its walled garden, as well as the advantage they have enjoyed for decades with DFP being the dominant ad server.

Publishers are not going to be passive and continue to allow such domination – publishers need choices in the market. They need intelligence and ad tech companies that provide them with forecasting solutions for the most effective monetisation of their inventory.

Monetisation is compelling to publishers. The ad server is not irrelevant at this stage; however, it was built to serve ads, to order the sequence of ads, and support a direct-sold model, which today, is not the dominant channel for ad sales. Furthermore, an ad server is just one piece of the puzzle – today, publishers need a suite of best-in-breed tools that play together.

If we’re five years away from a world of immersive virtual reality, where a tag-based system will no longer suffice, the industry needs to rethink how publisher advertising operates and how publishers can maximise revenue and yield in each moment to ensure survival.

Ad blocking – the canary in the coal mine

The digital publishing and advertising industries forgot about user experience to the extent that it has become acceptable for a person to install ad-blocking software in order to access ad free content, free of charge, because they hate ads.

As an industry, we should be thinking more about the user experience, for example, what is the true impact of latency? Little attention is given to the fact that loading ads drains battery life on mobile devices, most conversations about user experience focus on ads disrupting the browsing experience. We’re not really in a position where we understand how far reaching the value trade is.