‘So, you want to start an adtech company? Easy.’ by Tom Henriksson, Partner, OpenOcean

It’s easy to start a tech company within the advertising industry. Finding people with the technical know-how and the industry knowledge to build some kind of an ad-solution that can fit somewhere into the value chain isn’t the preserve of the few. However, with such a large, fragmented ecosystem, it’s difficult for those procuring technology solutions within advertisers to know if what they are buying will really work until proven at scale. In this piece, Tom Henriksson (pictured below), Partner, OpenOcean, breaks down the steps needed to make an impact.

In a city like London or New York, where the tech and media industries each have a massive presence, you’ll be spoilt for choice. There are an awful lot of startups out there that prove this is the case. It seems we hear about new adtech plays trying to raise investment most every day, and we’ve all seen the many infographics showing the adtech and marketing tech landscapes that highlight what a baffling ecosystem it is. This provides the people tasked with procuring and partnering with tech solutions, whether buy- or sell-side, with a real headache as they struggle to negotiate the minefield of providers.

However, while utilising old industry relationships to convince buyers of a product that looks good and pulls in some data that advertisers can target against, for example, doesn’t take a great deal of skill; moving beyond this point is much more difficult. If you want to build a company that lasts, is capable of scaling quickly, and can measurably provide better performance than existing solutions – then that is much much more difficult.

In order to make an impact in the market, this is what adtech vendors need to bear in mind:

1. If anyone can do it – you have to go further

Tom Henriksson, Partner, OpenOcean

There are many adtech solutions that are similar to others on the market with very few visible points of differentiation. This means those within brands and agencies that make the purchasing decisions have little to choose between the competing platforms, and may very well make their calls based on relationships. This is especially true in smaller geographical markets where choice may be limited further. However, the biggest advertisers and agencies in the biggest markets do have very high demands from technology platforms – the tools they use have to be the best in the business and bring efficiencies in workflow and strong advertising performance. To work with the best, you must be the best, and this involves knowing exactly what the advertisers want from a tool, and spending enough time developing something that really meets these needs. Often, the vendor will need to spend much time convincing buyers that their new shiny thing is something that is needed and will actually work – look at how much work retargeting innovator Criteo did to develop their retargeting product and bring it to market.

2. Find your niche

With so many different potential positions an adtech player can take within the value chain, with different and ever-evolving advertising formats, and new data-sets, you need to think very carefully about where you sit within it. It’s about knowing what you’re best at, to some degree, but it’s also about having a great deal of foresight. Given that relationships with buyers can take time to develop to scale for any vendor of a new solution, you’ll need to be in a position within the value chain that will still be relevant in the future. There’s no point in building a solution that addresses just today’s needs – you have to think about where the market is going and the platforms that advertisers and publishers will be using in the years to come.

3. You need more than relationships to build a profitable company

Although advertising still is very much a relationship-business, and knowing everyone in the industry can provide you with an edge – whether by working with them, meeting them at networking events, or reaching out to them via networks like LinkedIn – it is not enough in today’s fast-moving ad-tech world. Building and cultivating these relationships will take time. So, when growing rapidly, such a business-model will require serious investment in a direct sales force. Adtech companies valuations have been depressed for some time because of serious competitive pressures applied by Google and Facebook; and it is challenging to grow profitably with a predominantly salesperson-driven business model (which many of these smaller challengers still are bound by). The long-lasting and profitable adtech company of the future must deliver solutions that integrate with the customer’s other tools and data-sets, becoming an essential part of the workflow for delivering highly performing advertising. This is how you will convince advertisers to give you an increasing share of their budget over time, resulting in long-term relationships and a scalable recurring revenue model for your company.

4. Promote and position yourself

In any market where it is difficult to differentiate yourself from other players you need to ensure that you get noticed. This is all the more important in adtech. When you are working so closely with media and advertising industries, there is no excuse for being bad at PR. While working with PR agencies to get yourself media coverage is a good idea, you also need to ensure that you are being seen at all of the right events and engaging with influencers through social channels. Developing proprietary content for owned channels should also be a priority, as it gives you a chance to position yourself as a thought leader in your specific area. Your competitors will be doing this, so you need to be doing it at least as well, regardless of how good your solution is.

With such a large, fragmented ecosystem, it’s difficult for those procuring technology solutions within advertisers to know if what they are buying will really work until proven at scale. While targeting technologies are improving, being pushed by advances in AI and machine learning, getting yourself noticed for the right reasons – adding value to advertisers while respecting the privacy rights of individuals – is what really will win the day longer term in the adtech ecosystem. So, while you can create an adtech startup without too much trouble, if you want to make an impact, then you need vision, best-of-breed skills and solutions, as well as persistence.