Marketing Tech: the 4 most exciting areas for future early-stage investments
Before the end of the year, and as the dust finally settled after DMEXCO — Europe’s largest Digital Marketing and Advertising conference, we at OpenOcean like to take stock of what’s hot and what’s coming next in Marketing Tech (MarTech).
OpenOcean is one of Europe’s most active early-stage investors in MarTech with investments in fast-growing and category-leading marketing tech and consumer data companies like Leadoo, LoopMe, Personalyze, Supermetrics, Tapdaq(acquired by Tapjoy, Inc), Truecaller, Unacast, and Verto Analytics.
Current industry winds support rapid MarTech growth and renewal in the enterprise
It has become evident that marketers are now completely dependent on technology. For close to two decades marketers have invested in an increasing fashion in software and data-analytics infrastructure, to increase the measurability and automation of their marketing and digital advertising. Today this is reflected in a significant marketing budget allocated to technology, where marketing leaders allocate 27% of their investment budget to technology. Already at the end of 2017 this equalled on average 3.24% of overall corporate revenue, which was comparable with the technology spend of CIOs at 3.4% of revenue (source: Gartner). Gartner now predicts that CMOs outspend the CIOs in Enterprise IT investments.
When we last year shared our thoughts about the state, and future of investing Media and AdTech, there was much ado about consumer privacy and the large tech companies’ disrespect of user data. Rightfully so, and this story continues to unfold as we write (for example, see the shocking memo from Facebook employees to Zuck). Now businesses have also woken up to the realities of a post GDPR world and how critical it is for them to not only adhere to privacy regulations, but truly understand the chain of data custody and take data governance for all their data-sets to the next level. As a result, we’re seeing a dramatic upswing in demand for software related to data management and governance in the enterprise.
Media agencies, unfortunately, continue to be in a tough spot with hard to come by growth, margins being squeezed, all while having to still aggressively continue to invest in their digital talent base and -tools. Adding insult to injury, Accenture Interactive surprised everyone by becoming the biggest and fastest growing digital agency network (source: AdAge), delivering digital experiences, marketing, commerce, and content. For software vendors, it was never quick or easy to sell software to agencies in the past, or just to make larger agency group-wide deals happen, but recently this seems to have become even more difficult. The general agency business model is still geared towards billing customers for work performed and even software purchasing budgets at agencies may now be frozen due to the agencies’ challenges.
Some of the hottest investment opportunities going forward
MarTech categories such as Personalization, Content marketing & Curation, Influencer marketing, and Social intelligence are all growing strongly today, which means they might be a little bit too late to enter for early-stage investors, as there already are quite established players in the market.
At OpenOcean, we think the most exciting areas for future early-stage investments are:
AI for profiling and targeting. As both data-sets continue to evolve rapidly and ML/AI algorithms are getting much smarter, this is an area where much innovation (around delivering respectful advertising that feels like a service) will take place in the next decade.
AR/VR/MR. New user experiences and interactions are popping up in this area, also for advertising and conversational marketing. I can’t even imagine what data-sets and innovations we will see as XR technologies become ubiquitous and people get used to interactions with much stronger stimulus than in the current main web interfaces.
Enterprise Data Management & Infrastructure. As noted at the beginning of this post, enterprises have started investing seriously here.
Automation of Marketing for the execution of work and across data-sets and systems is a huge area of focus for marketing organisations. Our investment in the ultra-rapidly and profitably growing analytics and reporting tool Supermetrics(with now some 11,000 customers) proves the dramatic demand for these types of solutions for marketers. Not too far in the future there will be an AI providing holistic planning and execution instructions to marketing decision-makers, while automagically executing at least the more clear cut use-cases.
Furthermore, within automation Conversational marketing solutions provide new and richer data for companies to interact with customers and facilitate more sophisticated customer engagement. Conversational marketing is a key building block in achieving the so-called meta-intelligence managing much of digital marketing. Our investment in Leadoo, delivering for websites in-page (in content) chatbot driven dialogues for moving leads forward in the funnel, represents a first step in a world where marketing automation is also a two-way dialogue with the customer and carries out a faster and more personalized experience.
A very different perspective for identifying investment opportunities would be to take a look at what the strategic focus areas and key assets of AdTech giants Google, Facebook, and Amazon are, and then dive into the remaining white-spots. A thorough analysis would take at least a separate article to summarise properly. For now, it’s safe to envision that:
- Solutions that disrupt GFBA’s current business models of monetizing various consumer data-sets (graphs) and eyeballs, are both very interesting and quite tall orders at the same time.
- There are also new datasets coming, e.g. around mobility and human biological data, which could provide huge business opportunities for new leaders.
- Finally, within enterprises, there seem to still be attractive MarTech opportunities even on the data layer and definitely on the business (software) layer.
MarTech is a huge vertical with plenty of investment opportunities
The digital marketing and MarTech ecosystems are just simply huge and the technology is developing extremely quickly. Therefore, I think much of the fear surrounding marketing-related tech amongst early-stage investors is again exaggerated, if not unmerited. If your company brings to CMOs solutions that deliver better and more measurable advertising, and/or clear automation and efficiency improvements to the marketing operation, the door will be open.
Even much battered mobile AdTech is now having a bit of a renaissance, with several mobile AdTech (infrastructure) companies reaching a serious scale and getting notable valuations as private equity has come in. Some fairly recent examples include:
- Applovin acquisition by KKR at $2Bn valuation already in summer 2018. We have heard in the market that Applovin has since been growing very efficiently.
- IronSource recently raising $400 million with a >$1Bn valuation in a transaction by CVC Partners.
- Video ad network Vungle gaining a $750m valuation by Blackstone. Here I do need to note that mobile video is an area where OpenOcean also has serious interests, as we among other activities last year sold the UK based mobile publisher monetization platform Tapdaq to US based rewarded video leader and growth stage company Tapjoy.
All these players have shown profitable business models and sustainability in this fast-moving market. It does seem like there will be a wave of IPOs and perhaps consolidation coming up soon!
So yes, there’s still obvious investment potential in the massive MarTech sector for savvy early-stage investors, and we intend to keep a close watch on the space. Entrepreneurs and co-investors, if you are moving forward with companies ready for fast growth and within OpenOcean’s areas of interest, please do let us know at tom@openocean.vc
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Thanks for your time Tom Henriksson!
