For a very long time, ad tech startups have routinely raised billions of dollars in enterprise capital funding in a given 12 months.
Never again.
According to Crunchbase, this 12 months, U.S. advertising-focused startups have raised only about $360 million dataThat puts the industry on track for its slowest 12 months in greater than a decade.
To get a sense of how much funding has declined, we charted the annual investment in ad technology from 2015 to the present.
In addition to investing less money in the space, investors are also supporting fewer deals. The variety of rounds this 12 months is also heading toward an all-time low.
Why so low?
What gives? Per Anindya Ghoseprofessor of technology and marketing at NYU Stern Business Schoolthe decline in ad technology investment “can largely be attributed to market saturation, increased regulatory pressure and economic uncertainty.”
For anyone who spends time online, the concept of market saturation is easy to know. Everywhere we go online, we see ads. These include creepy, micro-targeted promotions delivered via tracking apps, flashing videos that strain the eyes, and pleas for money that interrupt our scrolling through social media.
Nobody says, It could be great to see more ads. And so it isn’t entirely surprising that VCs aren’t investing as much money in latest ad delivery platforms.
In terms of regulatory pressure, stricter privacy regulations resembling the EU General Data Protection Regulation or GDPRand the California Consumer Privacy Act or CCPApassed several years ago, are increasing compliance costs and complexity for adtech corporations, Ghose noted. That might be especially daunting for startups.
Startup exits not reflected in public markets
While startup funding is drying up, mature adtech corporations aren’t doing so badly. True, shares of many of the larger public corporations in the space are down significantly from their market peaks. But for the most part, shares haven’t collapsed.
One of the standout stars is sales officemarketing automation platform that is now a $43 billion market cap company, profitable, with nearly $2 billion in annual revenue last 12 months. The Ventura, Calif.-based company bills itself as a platform for advertisers who need to goal customers on the “open internet.”
Other notable public corporations that have received enterprise capital backing include: Double verification, Magnit, Taboo AND PubMaticOf course, the corporations with the deepest pockets and most sophisticated ad tech offerings are the largest web corporations, resembling Google AND Finish.
Some startups proceed to boost large rounds of funding
Among startups, there are several corporations that have raised large rounds of financing this 12 months.
The biggest beneficiary of the funding is a multi-year unicorn Brandtech Groupwhich earned $115 million in March C SeriesThe company describes itself as operating at the intersection of generative AI and promoting.
Durham, North Carolina Justad serving software tools provider, raised $23 million in a March Series C round. The Chicago-based company Vibrationa platform for promoting in TV streaming applications, he landed of $22.5 million in Series A funding at the end of February.
Total by Crunchbase dataThis 12 months, there have been 10 funding rounds of $10 million or more for promoting and marketing startups.
How VC Funding in Ad Tech Can Get Its Rhythm Back
While this 12 months could also be weak, Ghose is optimistic that funding for ad tech startups will eventually return, especially for those who can leverage AI technology for interesting use cases.
Certainly, the long-term financing data support the view that recently subdued investment levels are something of an anomaly. While we may not return to the highs of 2021, a return to the normal of the past decade would still mean significantly more financing than we are seeing now.
For now, we remain glued to our screens as all the time. So when funding returns, digital advertisers will know where to seek out us.