Breaking news in the digital marketing industry

Recently, when I was reading news from an RSS reader, I found shocking news of the digital marketing industry. Media Math, which was one of the leading DSP in the world , has announced its bankruptcy. By recalling all the major events in this industry in my memory, I realized that this is the first well-known digital marketing player falling down of all the time. It rang the bell for all the players in the industry. The era of DSP has already gone.

First bankrupted well-known digital marketing company

In all these year, DSP company are not making much money as the age when programmatic ad. When the programmatic buying concept swept through the digital marketing industry, there are tons of DSP companies came out in just one night. However, with development of digital marketing, DSP companies lost their valuation in the industry. Some became more like an traditional agency which lost their technical gene.

History of Media Math

In short, Media Math was found in 2007 and it was known as the earlist DSP in the world. It has raised about $500 million funding since it was found. As the earlist DSP in the industry, MediaMath led the evolution of the digital marketing. It introduced the programmatic buying concept to most of the agencies and advertisers. It helped the client understand how important the data is. As a pioneer of this area, MediaMath presented examples on how to buy and sell inventories with programmatic methodology and solutions to the market. Other competitors in the market are mostly imitators to some extent.
Unfortunately, the industry pioneer can’t get away from fate of falling down.

Look back at demand side platform

With the beginning of digital marketing, the demand-supply business model was broken own by different roles in the whole proess. The players on the supply side are called SSP ,and players on demand side are called DSP. There are some other roles like exchange platform, DMP, etc. . Demand side platform, aka DSP, is a technical platform which helps buyers/advertisers to buy digital marketing inventory with better efficiency. Obviously, their value is to optmize the performance of the advertisement. As a DSP, the firm should be standing with the buyers and control the budget with their technical efficiency boost. However, the performance of advertisement is difficult to optimize as a DSP. The predicaments DSP encounters are as below,

• Lack of data As a 3rd party technical platform,data is the selling point and the limitation. There typically 3 types of data which are 1st party, 3rd party and 2nd party. 1st party is the data from advertisers. 2nd party is the data from publishers or platforms. The 3rd party data is collected from some other entities which are not supplier nor advertisers. The accuracy descends in the order of above and the sizes of the data ascends in the opposite. As DSP platform, it doesn’t own 1st party or 2nd party data. Hence, it can’t add too much value in the aspect of data.Even with most efficient algorithm, the performance improvement is blocked by the quality of data. Despite some advertisers are willing to share 1st party data, scaling is the new problem needs facing.
• Inventory with uncontrollable quality Besides data, inventory quality is another topics that always discussed when DSP firms bidding a new project. Programmatic buying means to select most fittable impression from massive traffic with various quality. DSP is not able to control the total quality of the pool. If the whole pool is in low quality, even with best algorithm, it’s difficult to find out the targeting inventory. Moreover, DSP can’t control the price of the inventory. The profit margin is not controllable either that DSP can’t make much profit from the whole process that such firms can’t stay alive for long.
• Privacy policy change of different audience platforms This is the significant impact on the digital marketing especially for DSPs. Most DSP doesn’t own any audience ID system. They mostly rely on the advertising ID of different platforms in the mobile era. Whenever Apple grant the permission to users to decide whether to enable the advertising tracking, more than 50% of iOS users turned off the tracking function. Unlike Meta, Google or Amazon, who already built their own inbound identifier and their inbount inventory, DSPs don’t have the ability to defence their territory in front of the platform shock.

Way to survive for DSPs

Although the industry environment is not satisfying for DSPs, the light is still shedding on them if they make correct decisions of development.

The ways to survive

There are a couple of ways for DSPs to survive.

• Build their own inventory by leveraging their current budget. This is like a snow ball rolling game. Whenever a DSP make decision to move on with this solution, they can accumulate more and more traffic from then on. The most difficult is to kick off the rolling.
• Meanwhile, with the inventory , DSPs can track users via different apps. The density of the audienec behavior data can help DSP to build their exclusive user pool as well. Such solve the lack of data issue at the same time.
• Turn the advertising business to more vast marketing concept. No matter how large the advertising business is, it’s still one little part of the whole marketing industry. As a DSP, it can output its technical infrastructures to marketers, like inventory planning, audience data analysis, campaign management across different platforms as well.
• The last one is to avoid the privacy issue caused by platforms. Extend inventory to more different platforms like CTV, OOH, etc. which are not strictly controlled by either Google or Apple.

Conclusion

In summary, the fall of Media Math is not a single case in the digital marketing area. The digital industry is always changing. The ever dominant programmatic entities should figure out better way to survive with the market.