As ad tech providers consolidate, marketers will benefit from a less fragmented marketing technology ecosystem. But solutions often rely on conflicting business models and it could take years before they become fully integrated.
On 5 August 2014, Rocket Fuel said it will acquire [x+1] in a deal valued at $230 million in cash and stock. The deal is set to close in early 4Q14.
Continued consolidation among programmatic media providers has exposed a fault line between the ad network model, based on aggregating and reselling media, and the ad tech SaaS model, based on software licensing. The union of Rocket Fuel and [x+1] should induce marketers to consider approaches to the inevitable consolidation of point solutions into more integrated systems, their comfort with managing marketing risk, and digital advertising’s evolving role in their marketing organization.
Rocket Fuel exemplifies the latest generation of ad networks. Two trends contributed to its rapid ascent: an embrace of ad retargeting tactics by performance marketers, and the application of data science to systematically target and buy a desired audience, reselling its frequently undervalued media impressions at a value-based price. Gartner believes arbitrage margins will face pressure as the real-time media market matures and self-service approaches, which Rocket Fuel began to offer prior to this acquisition.
Self-service offers more transparency to pricing and targeting. But a pay-for-performance model is attractive to many marketers and agencies as it eliminates risk and raises the value and accountability of media investments.
[x+1] exemplifies a complementary trend of approaching digital media via enterprise software to empower marketers to leverage their own data and weave advertising into a broader multichannel engagement strategy. [x+1] supports its software solutions with strategic and operational services, making it potentially more compatible with Rocket Fuel than pure self-service providers. Still, while powerful and flexible, this approach can also be complex to operate and integrate with internal systems. It offers more transparency than the network model, at the cost of expertise and higher operational overhead.
As the merger seeks to fuse these approaches, Rocket Fuel joins acquisitive challengers to large players. All seek to compete by integrating programmatic media capabilities into larger digital marketing hubs: Neustar (Aggregate Knowledge), IgnitionOne (Knotice), Lotame (AdMobius) will challenge Oracle (BlueKai) and Adobe (Demdex and Efficient Frontier). Conspicuously absent are programmatic media acquisitions by IBM and salesforce.com. As consolidation continues, marketers will benefit from a less fragmented marketplace, although they still face complex alternatives among different provider business models. Providers have a long way to go to integrate acquired point solutions into seamless multichannel offerings.
Digital marketers: Analyze trade-offs between pay-for-performance and self-service approaches to media acquisition. Prioritize integration of your marketing data with programmatic media solutions, taking care to avoid provider lock-in and protect proprietary data.
Rocket Fuel customers: Consider the [x+1] acquisition as an opportunity to explore the benefits of taking a more active role in integrating marketing automation with media operations.
[x+1] customers: Look for ways to leverage Rocket Fuel's network to amplify campaign objectives. Emphasize the continuing requirement for transparency and neutrality with respect to data and media sources in your data management platform.
Customers of other marketing solution providers: Evaluate your partners’ road map for integrating marketing automation solutions with programmatic media and develop options for your own organization. Don’t ignore performance-priced outsourcing’s risk-reduction benefits where appropriate.