Adtech Funding in Decline Amidst Facebook and Google Dominancelmwsadmin
Funding in adtech startups has dropped 33 per cent in the past year, from $3.2bn (£2.6bn) to an estimated $2.2bn as Facebook and Google assert their dominance over the ad sector.
According to a Financial Times (FT) report, from data collated by CBInsights, funding has crashed to its lowest point in five years – with global venture financing deals seeing a 17 per cent drop from 414 in 2015 to 343 in 2016.
Much of this is down to the growth of Facebook and Google share in the ad market over the last 12 months.
In 2016, they jointly accounted for 75 per cent of all new online spending, according to a Kleiner, Perkins, Caufield and Byers report. Furthermore, 85 cents of every dollar spent on digital went to the two in the first quarter of 2016 in the US.
Suranga Chandratillake, a partner at venture firm Balderton Capital and board member of mobile adtech company Adludio, told FT: “Adtech’s struggle as a sector is absolutely to do with the dominance of Facebook and Google. Ultimately advertising is about selling attention, and if most of that attention is focused on Google and Facebook, then naturally they can monetise it.”
Venture Capital (VC) activity has also been on decline since early 2015. US VC companies invested the lowest amount in adtech companies since 2010, only investing about $860m, according to PitchBook. As of August, 2016 was on track to surpass – becoming the lowest since 2005.
“Gains in adtech are increasingly marginal because companies are constantly copying each other. Lots of adtech start-ups go from zero to $30m of revenue and back down to zero again. As a VC that’s hard to back,” Chandratillake added.
“Even if you manage to build a sustainable advantage for a few years, how do you scale to compete with Google or Facebook? That’s why traditional adtech does feel dead from a venture perspective.”