The ad tech funding dry period may have broken as a fresh spate of new funding deals has kicked life into the sector, which has been hit by concerns the market is over-crowded, unprofitable, and in drastic need of consolidation.
The gloss had also come off the ad tech sector as marketing technology investment soared ahead in the first half of this year. This was underpinned by large software companies, such as Oracle and Salesforce, making big bets that marketing automation would be the hot new battleground for the CMO dollar.
The dominance of Google and Facebook in digital advertising was also weighing down investor interest, as their 52% share of the sector is seen as potentially holding back new entrants.
Throw in debate about the rise of ad-blockers, the ongoing picture of fraudulent bots being out of control, reports that too many online ads are slowing down the web, and the overall picture was turning negative.
Not so, some investors believe.
The biggest recent funding round, this week, saw anti-fraud and verification vendor Integral Ad Science pick up US$67 million to take on the vexing problems of ad viewability, fraud, and ad effectiveness.
Integral, which has operated at a profitable level and high growth rate for the last three years, says due to the worldwide demand for media quality measurement solutions including viewability, fraud and brand safety, it doubled staffing in 2014 and anticipates doubling again by the end of 2015. This growth includes new international markets such as the office openings.
Sydney-based MD at Integral Ad Science, Stephen Dolan, said it's a tough environment to raise capital in right now.
“There are 2000lb gorillas and attracting attention as a startup is exceptionally difficult. We are in a good place as we have executed well, have high growth/profit and are well funded,” Dolan said.
“Investors are definitely wary of ad tech in general as you either have to be the leader in the space or have a unique proposition that will scale to attract investment.”
Mobile video ad firm Jun Group, which is now focusing on in-app advertising, also just secured US$28 million from investors, after previously dabbling in the social gaming space. It now plans to take on Google and Facebook and bring video advertising to mobile apps.
Meanwhile, Pushspring, a mobile audience data platform, raised US$5 million last week, promising to scale up its business, which delivers cookie-like mobile app data to advertisers. Another mobile-focused company, WizRocket, secured US$8 million, to help build out its plans to create a mobile, web and email notifications platform that promises better consumer engagement.
Venture capital and private equity investors may still be bullish on ad-tech, but the IPO market is still a ghost-town, after investment bankers and their brokers found themselves underwater from a series of poor-performing ad tech companies that went public in the last two years.
The next sign post, or yardstick, for the ad tech sector, will come this month, as the US ad tech and programmatic firms report their earnings for the second quarter of the year. All eyes will be on their path to profitability.
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