2015 has been a prime year for the sector, with startups in the space raising $3.1B funding through 220+ rounds
According to Tracxn’s report on the AdTech space, the sector has witnessed a total funding of $17.5B across ~1700 companies, with First Round Capital, Accel Partners and DFJ being among the sectors most active investors.
The sector has been showing incredibly positive signs and with the increasing internet, tablet and smartphone penetration now taking place in emerging markets, we can expect the momentum to continue. Also, with spending on digital advertising tech expected to increase on a Y-o-Y basis, investors have shown positive interest towards the sector, as indicated by the upward trend in funding activity witnessed over the last few years.
2015, in particular, has been a prime year for the sector, with startups in the space raising $3.1B funding through 220+ rounds. The increase in funding could be attributed to industry-shift towards programmatic advertising, Native Advertising and analytics. Moreover, the year witnessed higher average ticket sizes with less number of rounds, with larger players now raising a majority of the funding.
The investor sentiment is warranted considering that M&A Activity in the space has been quite strong, with 375 companies being acquired till date. According to Ernst & Young, the AdTech space has been the third highest targeted sector for acquisitions behind only the cloud/SaaS and mobility sectors. 2016 has continued this trend, with the year till date witnessing notable acquisitions in the form of Appscotch being acquired by App Annie, and Interactive acquired by RNTS Media.
On the other side, the trend of the number of companies founded in the space decreasing continued in 2015, with the year seeing the lowest number of new companies since the 2005-2006 time frame.
The 2011-2012 timeframe, conversely, witnessed the highest number of companies founded in the sector, driven by mobile, digital video, cross-screen advertising and programmatic buying targeting specific sectors or audience groups. 2011 also marks the emergence of Business models such as Location-based advertising, native advertising, Data Management Platforms ,cross-device technology and demand side platforms which have since been gaining traction.
Due to this trend, the years post 2011, notably 2012 and 2013 have witnessed a large number of early stage deals, accounting for 62% of the sectors early-stage round investment post-2012.
2011 and 2014 witnessed the sector’s largest number of late stage rounds with 39 a piece.
Business Models in AdTech
In terms of the Business Models within AdTech, Ad Network companies have seen a mammoth share of the investment in the advertising landscape with a cumulative investment of around $4.3B. Ad networks have been around since 1997 and Networks act as connectors between advertisers and publishers by matching the ad inventories from publishers to match it with the advertising demand. Ad Networks, generally, work with multiple supply partners and have their own monetization models. The segment witnessed its highest funding in 2015, raising $713M of the total funding, and drawing parallels to its success in 2011. Panshi lead the funding in 2015 with $200M.
Campaign management and Demand Side Platforms are the next highest funded space, receiving $2.1B cumulative funding with AdKnowledge and AppNexus as major players respectively.
Native Advertising is a fast upcoming sector, receiving a cumulative funding of $1.1B, and is soaring as marketers and digital media publishers realize the benefits.
The Tracxn AdTech Report covers companies providing platforms and technology solutions for brands, advertisers and publishers. Companies that enable the entire advertising ecosystem such as the Data Management Platforms (DMP), Ad Analytics, Retargeting and proximity based advertising platforms are also in the purview of this report. Media Agencies and advertising giants such as Google, Facebook and Twitter are excluded from the scope of the report. However, the advertising products of those companies that have large market shares are included in the report.
Check out the Tracxn AdTech Report here.