Marketing tech is booming. According to chiefmartec.com, there are almost 7000 vendors playing in the mar-tech field in 2018. And the growth will not stop.
So the question that comes naturally is how on earth is this possible? The answer lies in the key macro and industry trends.
The content creation and consumption have increased significantly in the past years, driven by Social Media giants. According to Statista’s 2018 Digital Compass Study, 79% of US citizens, 75% of UK citizens and 73% of German citizens consume social media daily.
Along with this, a huge amount of data and information should be collected, stored, analysed, generate insights from, used for development of plans and tactics and than track the results. The work of marketeers has increased in complexity and will continues to do so. This generate a plenitude of startups which are developing AI-driven business intelligence tools and apps to help marketeers take insights driven decisions on fragmented customer data, predictive consumer behaviours, etc.
Cloud development is solving the big data storage issues, helping startups playing in this vertical to enhance business scale up bringing elasticity and efficiency.
The huge amount of content available made consumers decision journeys towards buying products and services chaotic. To this contributed also marketeers, creative and media agencies which were not able to deliver to consumers relevant, personalised, multi touch point and multi device advertising. Many of them are still monetising based on reach & frequency business models which are not effective in terms of targeting. The business opportunity for mar-tech startups is to make available for marketeers: conversational web voice search, chatbots to efficiently manage customer service, social monitoring and customer engagement, relevant and personalised automated video content @ scale, etc.
Last but not least, the use of existing amount of data available and lately Cambridge Analytica scandal rise to the general public and regulators the attention towards the legal and moral framework of personal data usage. This is also a business opportunity for mar-tech startups.
Having this context in mind, does it make sense to make early stage investments in mart-tech or ad-tech startups?
Well, according to Pitchbook.com & WSJ.com, the combined US VC funding on mar-tech and ad-tech, between 2011-2015 were not less then 1.5 billion USD per year, with the 2011 peak of almost 3.5 billion USD.
Where these funds are going? SaaS models will attract VC focus due to recurring revenues, direct relationships with customers, ability to extract greater revenue from the same clients over time and lower dependency on fluctuations in ad spending.
A consolidation trend, in a very fragmented market, will give birth to ‘’one stop shop’’ companies which will serve more customer needs, will allow faster scale-up, lower customer cost of acquisition, higher loyalty, better predictability of incomes and better customer service.
Mar-tech startups which will become integrators and develop communities of apps, based on a SaaS models, will grow fasters due to the benefit of reducing complexity, lower cost and faster service for marketeers.
Exit opportunities for investors will increase as the fast paced industry changes will attract also traditional advertising and media agencies and big marketing spenders to acquire mar-tech companies as they don’t have the core competences and time to create competitive advantage by building in house mar-tech capabilities.
Vlad Panait
Founder of Sparking Capital
