YAPRC: Yet Another Post Regarding Consolidation
Ad Age usually provides news and interesting points of view. Not today. Someone has gone and repeated that the online advertising value chain is extremely crowded and is ripe for consolidation. Usually, comments to posts are usually folks arguing over arcane points, but in this scenario, the sole commenter (at least when I read the post) calls him to the carpet:
Eh. I'm all for being a contrarian, in fact, I should make it my middle name, but like all views that sit on the polar opposites, what's most likely to happen is somewhere in the middle. In some parts of the value chain, it makes absolute sense for some companies to consider horizontally or vertically integration, either backward or forward. The real issue with online advertising, unlike many other industries, is that you can become very good at say, being a DSP, but if you sit idly while you're #1, six months later, you are no longer. We're not Dunder Mifflin making paper. The learning curve is extraordinarily steep for every step of the value chain. Therefore, I think it'd be foolish to think large pools of these companies post-consolidation would be able to move at the right speed. Then you look at industries that decoupled their value chain, like the car industry. For them, it was mainly a good idea (except Ford and GM never truly cut the umbilical cord with Visteon and Delphi, respectively). In others, it ended with disastrous consequences like Boeing's attempt to outsource most of the Dreamliner's construction. Someone point me to a thoughtful notion of what this market may really end up looking like with some solid reasoning. I want to read something profound.
When everyone decides to take their bat and ball home with them, these middlemen are going to be left with aging IP that does not generate revenue. No one, at least in 2010, is ready to make a big bet on technology. It ages too fast.
Eh. I'm all for being a contrarian, in fact, I should make it my middle name, but like all views that sit on the polar opposites, what's most likely to happen is somewhere in the middle. In some parts of the value chain, it makes absolute sense for some companies to consider horizontally or vertically integration, either backward or forward. The real issue with online advertising, unlike many other industries, is that you can become very good at say, being a DSP, but if you sit idly while you're #1, six months later, you are no longer. We're not Dunder Mifflin making paper. The learning curve is extraordinarily steep for every step of the value chain. Therefore, I think it'd be foolish to think large pools of these companies post-consolidation would be able to move at the right speed. Then you look at industries that decoupled their value chain, like the car industry. For them, it was mainly a good idea (except Ford and GM never truly cut the umbilical cord with Visteon and Delphi, respectively). In others, it ended with disastrous consequences like Boeing's attempt to outsource most of the Dreamliner's construction. Someone point me to a thoughtful notion of what this market may really end up looking like with some solid reasoning. I want to read something profound.
