The Innovation Wasteland of Ad Tech

Being a New York based advertising technology company means that the annual Ad Tech conference is a pilgrimage not to be missed. This year, ad tech was a wasteland of ad networks, hosting providers, and a whole bunch of white label beauty and vitamin supplement providers. In fact, one of the Jonas brothers was the most hyped keynote speaker. Seriously? We walked around the floor confused and dazed. Not a single company that matters (except Microsoft promoting their Surface device) was there. Worse still, there were no startups doing anything in the advertising transaction space. Put simply, there were no new ideas. How is this possible? How can it be that there are no new ideas worth spreading in ad tech?

This is bad. This is bad for all of us. If we do not innovate, if we as an industry can't figure out new and better ways to do things, our industry will be commoditized. Let's put this in perspective - if you want to see the most commoditized technology environment globally, look at fin tech. NASDAQ OMX  and NYSE Euronext, two of the most dominant financial exchanges in the US and across Europe, together generated less than $6.5 billion in annual revenue in the last four quarters (12/13). To put that in perspective, that is a month and a half of Google revenue! Think about how much trading happens in the exchanges in dollar terms... Today, these exchanges transact in excess of $500 billion a day! That is more dollars per day than impressions across all of ad tech. Again, $6.5 billion in annual revenue for $500 billion of trades a day. That's a clear and present danger of commoditization that should be obvious to the ad tech industry.

Today, a trade of 100 shares on a US exchange, regardless of transaction value, generates about $0.02 of revenue to the exchange. To be clear, buying or selling 100 shares of Google, a $100,000 transaction, generates $0.02 of revenue. For my ad tech brethren who charge 5%,10%, or 15%, consider this a warning. Fin tech has not figured out new ways to trade stocks in over 30 years, since the start of electronic trading. While there has been lots of innovation driving faster and more efficient trading, the exchanges have not been able to innovate in ways that create more value. Don't get me wrong, efficiency is absolutely important, but finding new ways to create value is how industries expand their share of the economy.

So, to my ad tech colleagues, I implore you, unshackle old ways of thinking, take risks, break rules, and most importantly, build new and groundbreaking technology!