Blurring the Line Between “Ad Tech” and “MarTech”
Despite steady growth and garnering billions of dollars in venture capital investments each year, the traditional ad tech industry is on the decline. According to the Wall Street Journal, ad tech reached its peak in 2011 with over $2.7 billion in VC funding. Each consecutive year has shown a sharp decrease in the total amount of investment dollars within the industry.
While traditional ad tech players are hurting from this decline, the closely related “martech” industry is on the rise. Martech can be defined by the convergence of marketing and technology. This includes any technology that aids marketers in achieving their goals.
This basic definition may sound similar to the functions of ad tech, but the two concepts do have fundamental differences. Jack Marshall details the key differences between advertising and marketing technology in a recent article posted to The Wall Street Journal:
“[Ad tech] companies have typically relied on “media-based” business models, whereby they collect revenue based on the volume of advertising they purchase and place on behalf of clients. They often sell to third parties in the ad ecosystem like marketers’ ad agencies, as opposed to the marketers themselves.
“By contrast, many marketing tech companies have instead focused on selling software on a subscription basis, often directly to marketers. The recurring and relatively predictable software-as-a-service revenue model is often more attractive to investors because it’s less exposed to fluctuations in ad spending and other market dynamics.”
In contrast to the declining state of ad agencies, martech companies have reaped the benefits of a healthy industry and increasing investor interest. Despite some key differences, the two markets are maturing and growing towards a similar goal, further blurring the line between ad tech and martech.
Many industry analysts even predict that martech will eventually merge with ad tech, giving marketers and advertisers the best of both worlds. Merging the two concepts unifies martech’s approach to building relationships and ad tech’s focus on metrics/results. With a new year upon us, it will be fascinating to see how these industries will react to the changing market.