Terrence Kawaja’s “Great Ad Tech Cleanup” isn’t just a neat metaphor—it’s an industrial-strength decluttering of a sector that’s spent years accumulating more fat than muscle. For two decades, ad tech has lurched from manual insertion orders to programmatic automation, layering in more platforms, middlemen, and bloated fees with every step. DSPs, SSPs, verification layers, and data vendors all claim their “necessary” share, which Kawaja sums up as the “ad tech tax”—a nice way of saying “a whole lot of people getting paid for not a lot of value.”
According to Kawaja, we’re now witnessing the reckoning, and it’s not for the faint-hearted. Major players from Rocket Fuel to YuMe and Tremor Video have been gobbled up, unable to keep pace. What’s left? Leaner companies like The Trade Desk, who’ve stayed agile by trimming the fat and automating where others fell behind. It’s musical chairs for ad tech, and if you’re not at the table, you’re not in the game.
The Platform Era: Where Consolidation is the Name of Survival
Starting in 2023, the sector faced a grim reality. Rising interest rates and weary investors demanded cost-cutting and higher margins. Public ad tech companies collectively upped EBITDA margins by about 7%, making them irresistible for acquisitions. With IPOs effectively off the table, the motto became “get bought or get lost.” Kawaja argues this grand-scale consolidation was overdue, with each acquisition promising a streamlined future of fewer, stronger players. Forget your dreams of IPO glory; these firms are in survival mode.
It’s not just about slashing costs. The backdrop of shifting privacy regulations and the cookie apocalypse added another layer of pressure. The ad tech world has been scrambling to pivot to cookieless alternatives—clean rooms, first-party data solutions, contextual targeting, anything that looks like it belongs in a “privacy-first” world. Ironically, Google, the long-time ruler of digital ads, has turned into a “backseat driver,” delaying the end of third-party cookies repeatedly. Originally set for 2022, then 2023, and now slated for 2024, Google’s cookie phase-out has become a painfully expensive limbo, forcing companies to prepare for an uncertain, cookieless future.
In classic Kawaja style, he jokes that Google’s endless delays are a bit like Lucy pulling the football away from Charlie Brown. While tech giants have been left spinning their wheels, smaller ad tech players, many ill-prepared, face a “clean up or get out” ultimatum.
And if Google’s hand is eventually forced in its ongoing antitrust saga, we could even see Google Ad Manager put up for sale. Just imagine that ripple effect.
Betting Big on CTV and Retail Media
Beyond privacy pressures and investor expectations, the consolidation craze also marks a strategic pivot toward growth markets like Connected TV (CTV) and retail media. CTV is the new golden child, a landscape where programmatic advertising has taken off faster than you can say “prime time.” The Trade Desk, for example, shines here, riding the wave of automated CTV solutions. Retail media, on the other hand, is more complex. Sure, everyone’s excited about it, but we haven’t seen it unlock significant new ad budgets. Instead, retail media feels like a case of robbing Peter to pay Paul, as ad dollars merely shift from one channel to another.
Outbrain’s acquisition of Teads and DoubleVerify’s purchase of SciBids demonstrate this trend toward media channels that offer direct, measurable ROI. CTV and AI are both magnets for M&A, with the hope they’ll deliver a tech-heavy ad future minus the bloat of ad tax.
AI as the New Power Play
For Kawaja, AI isn’t just another buzzword; it’s the future of ad buying. With AI-driven tools promising smarter targeting and real-time campaign optimization, legacy systems may be on their way out. DoubleVerify’s 2023 acquisition of SciBids, an AI-driven campaign optimizer, exemplifies how companies are betting big on tech that reduces human error—and middlemen. By leaning on AI, Kawaja argues that ad tech can finally cut out redundant layers that eat up budgets without adding value. In theory, AI could turn the messy programmatic landscape into a streamlined ecosystem where fewer players capture more market share.
But this vision isn’t without its caveats. AI is great in theory but complex in execution, requiring expertise and budget that not every ad tech firm can muster. It’s also no guarantee that ad tech’s problems will magically solve themselves just because some algorithms are now running the show.
Challenges Loom Large: Consolidation as a High-Stakes Gamble
The “Great Cleanup” of ad tech, as Kawaja describes it, is anything but smooth sailing. Retail media, despite the hype as ad tech’s next big thing, isn’t quite the goldmine it was billed to be. Sure, it managed to secure a whopping $122 billion in global ad spending in 2023, but the problem is, much of that budget is siphoned off from other channels rather than being new, incremental spend. In other words, retail media isn’t actually expanding the pie; it’s just rearranging the slices. While retail media continues to emerge as an important ad channel, it hasn’t yet delivered the net new growth investors were hoping for.
The sector is also starting to outgrow its “experimental” label. With the IAB’s new Retail Media Measurement Guidelines aiming to introduce some long-overdue standards, advertisers finally have a roadmap to evaluate returns more consistently. Until now, brands have been hesitant to dive in, wary of putting big bucks into a channel that hadn’t quite proven itself or offered reliable ROI metrics. Many media buyers currently rank retail media ROI as subpar compared to more established channels. It’s like trying to sell a new soda without any idea of how much fizz is in each can. Meanwhile, partnerships are flourishing, with retailers linking up with giants like Meta, Criteo, and The Trade Desk, making retail media a ripe spot for mergers and acquisitions. But without robust data to show whether these big bets pay off, retail media could turn out to be just the latest flash-in-the-pan hype.
Enter AI, the new must-have for any ad tech firm looking to remain relevant. The promise of AI-driven tools—predictive ad targeting, fraud detection, and even dynamic ad creation—is huge. AI can streamline processes and slash inefficiencies in a single, powerful swipe. But AI adoption isn’t cheap or easy. Implementing machine learning and predictive modeling tools requires skilled teams and a sizeable budget, something smaller ad tech firms may struggle to provide. DoubleVerify’s acquisition of SciBids in 2023 was one of the first moves to make AI central to programmatic buying, showing how the big players are adapting AI to gain a significant edge. But for every win, there’s a question: can smaller players keep up, or will they be left behind, facing an industry barrier so steep it becomes a form of financial Darwinism?
For Kawaja, all this consolidation and adoption of new tech is more than a strategy—it’s the only path forward. Consolidation, he believes, will finally tame the unwieldy layers in ad tech, slashing the infamous “ad tech tax” that eats into profits at every turn. Investors seem to agree, as 2023 has nearly broken records for ad tech M&A. Yet consolidation alone isn’t a guaranteed fix. The industry is left with one big question: can these fewer, bigger players deliver the efficient, streamlined ecosystem Kawaja imagines? Or will they just become the last giants standing in an increasingly niche, hyper-consolidated market?
Retail media and AI are at a critical juncture. They hold the promise of transforming ad tech’s value and efficiency, but they also carry the risk of becoming another set of costly missteps. Will this “Great Cleanup” pay off, or are we simply seeing the ad tech tax shift from one layer to another? As Kawaja’s vision unfolds, ad tech finds itself both leaner and, perhaps ironically, more complex than ever.
The Brutal Forecast: Grow Up, or Get Out
Kawaja’s blueprint for the future isn’t all sunshine and roses. Ad tech needs to grow up, slim down, and cut the fat, or it risks total implosion. He envisions an industry where high-volume, low-margin firms set the standard while the bloated, inefficient ones either merge or disappear. His LumaScape might get leaner, but it’s still clear that this cleanup won’t be easy. It’s a call to action for ad tech to face reality: The future belongs to the lean, the nimble, and the efficient.
Whether the survivors can actually transform streamlined efficiency into true innovation—or if they’ll just be the last players left on the shrinking field—remains the billion-dollar question. Kawaja’s message is as blunt as it is optimistic: Clean up your act or step aside, because the Great Ad Tech Cleanup isn’t waiting for anyone to catch up.
