Ari Paparo, chief executive of the ad tech start-up Beeswax, said he had noticed a distinct decline in venture capital funding for ad tech firms just in the last two years. “The private market is influenced by the public market, and you saw so many fail as publicly traded entities,” he said.
There were 260 deals between ad tech companies and venture capital firms in 2014 but only 122 in 2017, according to PitchBook. In the first half of 2018, there have been 53 deals.
The fear is that when investment dries up, innovation will die.
Small start-ups are crucial to the industry because they often serve as catalysts for technological advances, said Doug Knopper, one of the founders of the ad tech platform FreeWheel, which was sold to Comcast in 2014.
“There’s still more innovation to come, but if V.C.s don’t put money into it because they don’t see a path to exit, does innovation stall?” he said, referring to venture capitalists.
Some are hoping a third big competitor could help the industry. Eric Adelman, president and one of the founders of Three Pillars Recruiting, said while the AT&T acquisition consolidates power in fewer places, the deal could help make AT&T a rival to Google and Facebook.
“Having three giants in the industry is much better than having two giants,” he said.
Amazon is also making inroads into advertising, with a new advertising arm, raising the possibility that it will become a top competitor. Its trove of data on consumer spending habits could make it a formidable opponent. The company recently reported that it generated $2.2 billion in revenue from its advertising business in the second quarter, more than twice as much as in the same period a year earlier.
Not all smaller players are giving up. Kevin Hunt, senior vice president of global marketing for the ad platform SpotX, is betting that his company’s focus on video advertising will set it apart.