For several years, there has been much buzz about the convergence of marketing technology (martech) and advertising technology (ad tech). As Joe Stanhope of Forrester put it: “Some reactions to looming convergence approach satire, sometimes even intentionally. Like the war-room-bound leaders in the movie ‘Dr. Strangelove,’ we wonder: Are we heading for mutually assured destruction? Is somebody harboring a doomsday device? Have our deterrents been rendered useless? Which side will strike first? Who’s really in charge?”
This might seem overdramatic, but the convergence of martech and ad tech have far-reaching consequences, potentially affecting the allocation of tens of billions of dollars in marketing budgets.
But is the convergence of martech and ad tech (affectionately dubbed “madtech”) a sealed fate, or merely a pipe dream?
To answer this, it is important to first understand the difference between the two.
What’s the difference between martech and ad tech?
This question is actually a fairly complex one, and the answer largely depends on who you ask.
According to LiveIntent, the differences boil down to 3 fundamental factors: audience, channel and data.
|Audience||Reaches out to unknown individuals (a one-to-many environment)||Reaches out to known customers (a one-to-one environment)|
|Channel||Uses 3rd party paid media||Uses owned media, like email and website|
It is this data that lies at the crux of martech and ad tech convergence. By combining this once-siloed information, brands are able to build more holistic, behaviour-driven customer profiles, allowing them to create a more seamless brand experience.
What are the pros of martech and ad tech convergence?
According to a whitepaper released by AdRoll called “The Convergence of Ad Tech and Martech”, there are several benefits.
According to Lewis Brannon at CPC Strategy, “in today’s world of digital commerce … the average transaction has more than 30 touchpoints in it”. But, in a first-click last-click model, the first or last click receives 100% of the credit for the eventual sale, creating a misleading representation of how other touch points are contributing to the journey.
The convergence of martech and ad tech make multi-touch attribution easier, allowing marketers to ascertain the true value of campaigns and where leads are potentially falling off the buyer’s journey.
Improved customer experience
We have seen examples of how marketing technology can be used to provide outstanding customer service. Now, throw data gleaned from ad tech into the mix, and you get an all-round view of the customer, with transaction history, behavioural characteristics and social activity all linked together. By knowing exactly how customers engage with your brand, you can create more cohesive campaigns and more seamless buyer journeys, resulting in increased engagement and lifetime value.
Personalisation at scale is the holy grail of marketing – and the convergence of martech and ad tech makes this possible. By knowing the identity of a customer with complete certainty, marketers can personalise not just the message, but also the product and service offering. In other words, “it is direct marketing with mass-media scale”.
This has financial implications too. According to McKinsey, “personalization can reduce acquisition costs by as much as 50%, lift revenues by 5% to 15%, and increase the efficiency of marketing spend by 10 to 30%”.
More sales at better prices
In the end, marketing is about selling as much product as possible at the best possible price. By having tighter integration across all marketing activities, brands can deliver the right offer to the right customer at the right time. It’s no coincidence the product you were just viewing on the net is now popping up on your Instagram feed, and in-text ads on the websites you’re visiting.
Marketers can take control of data that was traditionally the purview of agency partners, and use attribution modelling to hold agencies to account.
What is standing in the way of martech and ad tech convergence?
So far, martech and ad tech convergence sounds pretty great, right?
But while large martech players, like Adobe and Oracle, have already started acquiring ad tech companies, the convergence of the two is not necessarily a foregone conclusion. Some, like Gartner’s Martin Kihn, argue that martech and ad tech are two disciplines that differ on too many dimensions to ever fully converge.
According to Khin, there are 7 differences between martech and ad tech that makes them (possibly) incompatible:
- Buyers: While advertising is a very top-heavy industry – according to Gartner, the top 100 global advertisers are responsible for 30% of total media spend – martech is much more evenly distributed.
- Budgets: While advertising lies firmly in the purview of the CMO, martech is usually a joint investment decision between several stakeholders, including the CMO, CIO, Finance, Legal and others.
- Customer data: While the data may be complementary, the way in which they are used by ad tech and martech is very different. In martech, depth and accuracy is key, whereas in ad tech, where the stakes are much lower, recency is valued above all, including accuracy.
- Talent: Kihn writes: “Ad-tech is a big-city, latte-sipping-coastal-elite, hipster-hugging multiverse. It exists in NYC, SF, LA, Chicago and … ? Mar-tech can be anywhere; it’s not owned by agency hipsters and it is quite at home in Indianapolis or Battle Creek. Different types of people work in these milieus. Enough said.”
- Revenue model: Martech is subscription-based (making it much more attractive to venture capitalists because of its predictable revenue model), while ad tech relies on media pricing, which is volatile and harder to predict, making it much riskier.
- Risk: Ad tech is more susceptible to changes in consumer behaviour. The nature of trading desks and real-time bidding also opens ad tech up to fraud and viewability.
- Competitors: While martech’s competitive landscape is a “controlled universe”, as Kihn says, ad tech is forced to compete with some of the biggest companies on the planet, including Facebook, Google and Amazon, which adds yet another dimension of risk.
AdRoll, however, argue that these obstacles are not insurmountable, and that marketers’ desire to achieve a universal view of their marketing activity will eventually make it possible.
It seems the eventual convergence of martech and ad tech is inevitable – and those that are the first to create truly seamless brand experiences will be the ones to reap the rewards.
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