COVID-19 threatens to accelerate ad tech consolidation in second quarter

covid 19 threatens to accelerate ad tech consolidation in second quarter

Companies such as Teads, GumGum and PulsePoint have all recently extended their payment terms in anticipation of a scenario like the one above playing out.

GumGum was the first company to extend its payment terms, which allows its partners more time to pay them any money owed. “We wanted to be preemptive,” says GumGum CEO Phil Schraeder. “We wanted to start having those difficult conversations early because it is in the best interest of our entire industry.”

Roughly 25 to 50 percent of brands are either canceling or scaling back their ad spend this quarter, according to the IAB report. “This is the new reality,” says Schraeder. “It means we, as an industry, might need to reset a bit. But the industry needs to have a conversation about it.”

What’s happens next 

“What we are asking ourselves is whether the aftermath will be like what happened in 2000 or 2008,” says the CEO of a large ad tech company, who asked to remain anonymous. “If it’s 2008, it will be layoffs, cost cuts, some failures, but mostly a painful year.”

The CEO adds: “If it’s like what happened in 2000 with the dot-com bubble, we’re going to see massive failures, fire sales and wholesale landscape change. The jury is still out, but the latter is starting to feel possible.”

The COVID-19 pandemic threatens to accelerate what many believe is a looming consolidation of ad tech.

“I have real trouble believing things bounce back by the second quarter, given that we are now in April,” says Joanna O’Connell, an analyst at Forrester. “It’s plausible that consumers [will] live in a world of no restaurants, bars, travel, entertainment or shopping for, at minimum, some months.”

O’Connell says advertisers will push through the pandemic by changing messaging in creative. “But that doesn’t mean advertising won’t continue to take a hit in the foreseeable future,” she says. “And that has clear implications for ad tech.”