As the advertising world is getting back to normal after the latest week in the sun in Cannes, I’m reflecting on a noticeable difference between this year and my last visit two years ago. The biggest technology players have an even bigger presence at the festival whilst there were significantly fewer of the independent firms making any sort of splash. Facebook’s beach has now added a pier, and the Google and YouTube flags presided over arguably the largest area of sand of any exhibitor this year. Meanwhile, yacht row seemed a little quieter and fewer of the boats were collaborations between the smaller ad-tech players seen previously.
So, why does this matter? It matters because it is symbolic of an industry going through rapid consolidation, and this has big consequences for innovation and the value that customers receive. With a vibrant independent sector comes a higher level of disruptive innovation, and these innovations in turn fuel the step-changes in growth for advertisers and their agency partners. The smaller the pool of technology partners, the less choice is available and the more likely it is that at least one of two things starts happening:
- The solution becomes unfit for purpose; think about how Nielsen’s TV ratings system in the US lagged so far behind changing consumer viewing behaviour.As a monopoly, they had very little economic incentive to invest in the necessary innovation to adapt measurement systems to the new world, and broadcasters have suffered as a result – see Linda Yaccarino’s great 2016 CES Q&A to see how much this hurts.
- The biggest firms start increasing their prices for advertisers and their agency partners, and there is little they can do about it. We have a real example of this happening now in the DSP market as some players including The Trade Desk are using the shift to first price auctions as cover for charging extra fees for bid algorithms that clients were already paying for – see the recent article including the Head of Programmatic at Essence calling this out.
If there is a takeaway from Cannes this year it is that the advertising industry needs to be careful what it wishes for. History tells us that the more that business gets consolidated into fewer media players and technology firms, the higher prices will go and the less innovation we will see. Hopefully, as the sun sets on the 65thfestival, investment decision makers at agencies and advertisers will be bearing that in mind whilst creating their strategies for Xmas and beyond.