Sizmek’s travails and walled gardens’ performance hint at adtech’s path to growth

Given Facebook’s history when it comes to consumer privacy and policing content, you might question Mark Zuckerberg's sincerity when, during Facebook’s annual shareholders’ meeting, he expressed the need for more government regulation.

I, for one, am willing to take him at his word. I do so not because I’m naïve, but because I think we have reached a major inflection point where the tolerance for issues surrounding the dominant platforms like Facebook and Google have reached the boiling point.

The drumbeat for regulation of big tech has come from the likes of former Obama Federal Communications Commission Chairman, Tom Wheeler, and Democratic Party presidential hopeful, Elizabeth Warren, who advocates the break-up of big tech and even bought a campaign billboard in San Francisco to that effect.

While it wouldn’t be surprising if Mr. Zuckerberg’s openness to regulation is simply a PR move to appease these strident, influential voices, it should also not be a surprise if there is a baseline of sincerity, including his endorsement of data portability. Perhaps, he’s finally come to the sobering realization that Facebook fully realizing its marketplace potential may require a more self-critical and corrective lens.

As the industry sorts out the best way forward, adtech companies themselves should be engaged in their own soul-searching. The recent spate of adtech failures have many pundits wondering if adtech companies can be competitive in the world of dominant walled gardens.

I believe we have an opportunity to rewrite the current narrative of uncertainty in favor of a second chapter marked by growth and more credibility.

Sizmek, performance metrics, and the path forward

As a European, I’m accustomed to a stricter regulatory business environment, so all of this saber-rattling in the US is not new to me. While many of my American colleagues may recoil at the thought of increased regulation, the net effect, I predict, could be salutary for the entire marketplace.

The trail of antitrust chatter that has come with this renewed cry for regulation is waking us up to the idea that market dominance by just a few large players is not a healthy scenario. Is it possible that acquisitive vertical integration as practiced by Google (DoubleClick, YouTube, Android, Adsense and Waze) and Facebook (Instagram and WhatsApp) may no longer be tolerated?

The adtech sector has also experienced consolidation and diminished funding as the pendulum has swung further in the direction of the walled gardens. The irrational exuberance that governed much of the adtech funding during the past decade led to the propping up of shallow point solutions that ultimately didn’t deliver value while contributing to the complex, bloated supply chain.

Many struggling adtech companies are quick to finger the duopoly plus Amazon as bullies, who ruthlessly exert their brute force to mold the marketplace to their advantage. These smaller companies also need to take a hard look at the mirror and ask themselves, “But did we really deliver value to our clients?” — the advertiser or the publisher. Too many players in programmatic touted formats and inventory when, at the end of the day, all marketers ever cared about was performance and business outcomes.

One needs to look no further than the recent news about Sizmek. While nowhere near as big as the walled gardens, the company had achieved a relative level of scale that was the envy of many companies that have been consolidated. Yet, here we are in 2019, with Sizmek rescued from bankruptcy by Amazon, and with many predicting the deal as Jeff Bezos’s way to more fiercely compete with Google.

What would have happened to Sizmek’s fortunes if it had taken a more methodical and thoughtful approach to scaling its business with a primary focus on the delivery of value to the advertiser? Would that approach have created a more sustainable path, leaving the company in the good graces of investors and industry players?

As adtech players bemoan the dominance of the walled gardens, the irony is that the blueprint for relevance and success has been forged by Facebook and Google, who at their core, are companies that are intent on one thing: performance.

Adtech 2.0 should learn from this and focus on business outcomes rather than on the vanity media-based KPIs that are misguided metrics for measuring success for brands. Once adtech companies recommit themselves to this modus operandi, the quicker our sector will renew itself, and the louder and prouder we will be able to proclaim our own future success stories.

Christophe Collet is chief executive and founder of S4M

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