Can creative tech break out?

Creative tech has been around for decades with very few winners. Why?

Can creative tech break out?

I’m getting a little overwhelmed by the number of pitches promising AI-driven creative tech. “Build video creatives in minutes” is starting to sound more like a threat than a promise. Even this week’s vendor interview was with one such company, Waymark, though their go-to-market is a little unique.

It makes me once again contemplate the question: Why haven’t there been any great exits in creative tech?

Defining the thesis

This article is likely going to cause some death threats, so let me shore up my defenses before I get started by just talking about what I’m talking about. The strong form of my thesis is:

• There have been very few (if any) creative ad tech companies that have gotten to scale, say over $100 million in ARR or over $250 million in equity value;

• This is focused on ads. Adobe, Figma, Canva, and others have created scaled creative platforms where you can make ads, but that’s not the same thing;

• I’m including all ads, including walled gardens, open web, TV, etc.

The corollary to thesis is:

• Creative tech companies inevitably pivot to become either ad networks or full stack ad serving

Rich Media: Limited scale

Rich media is the market where I first cut my teeth when I was the product manager of a god-forsaken product called DART Motif that enabled rich media ads to be natively served by the DoubleClick ad server (pre-Google). Broadly speaking, rich media technologies allow advertisers to do “special effects” within ad units, such as pushdown ads, interactivity within ads, or more modern examples like TV ads that respond to the remote control.

During the heyday of rich media in the mid-2000s, there were a half dozen companies competing for advertiser dollars, and the largest of the pack, Pointroll (which I wrote about before in Some lessons from good ad tech marketing ) maxed out at about $100 million in revenue. The rich media market faded it importance when consumers moved to mobile, and the web standardized on HTML5 (vs Flash).

There are three fundamental problems with rich media businesses:

1. You have to sell to the creatives, not just the brands. This means that you rarely get the kind of repeatable, always-on revenue you need to build big businesses.

2. The competitive advantages vanish over time. You might come up with a new way for an ad to shimmy around the page, but as soon as it gets popular everyone will be doing it.

3. Brands don’t want to use “special effect” in every campaign. It will always be a sub-set of the total media campaign, limiting the opportunity.

DCO: A media business that fools people into thinking its a SaaS business

Dynamic creative optimization has been around since the engineers at Criteo were enjoying their first croissants and cigarettes as babies, yet there’s never been a big company that enables DCO at scale. Criteo, in fact, is the largest DCO company in the market — by a very wide margin too — and it is instructive to note that they execute a media model, rather than selling the tech.

The problem with DCO is that it’s really only half the performance equation. The “O” in DCO stands for “Optimization” which starts to hint at the dynamics here. In order to get the most “O” out of your DCO, you need to also control the media and pricing. Just enabling a banner to have good looking product shots, or updated pricing is not enough for most use cases. As a result, while companies like Innovid, Crisp, Flashtalking, and others have really nice DCO products, they sell to a pretty small market of those brands that want performance, but also want to do the optimization work themselves.

Creative management: TAM too small

Many entrepreneurs have identified the problem that going from a single creative concept to many versions in many sizes is an activity ripe for automation. Companies like Thunder (defunct), Celtra, Marpipe (pivoted), and many others have given this a go. These companies tend to have whizz-bang demos and obvious use cases, yet then inevitably stall out and lack exit velocity.

It seems like the problem here is again that you need to sell in to both the brand and their many creative agencies, which can be very difficult. In order to make this dynamic work the brands need to take a strong hand on standardization, and frankly the juice isn’t really worth the squeeze. Sure, you save some time and money, but is the overhead around digital banner ads really that big a deal?

AI-driven creatives: How to differentiate?

It’s a bit too early to tell, but the headline says it all. How good can your AI be that it can’t be reproduced by someone else?

Counter examples

At the start I gave a shout out to the non-ad companies, like Canva and Figma, which serve some of the same purposes as the ad-centric companies. Two ad companies that have scaled come to mind, though: Smartly.io and Vidmob. Smartly started as a Facebook creative tool, but has expanded to now do everything related to media optimization and performance — they aren’t a pure play creative company anymore. Vidmob was on the pod recently (VidMob: Analyzing and optimizing creatives) and is just now doing analytics for creatives using AI, which is an interesting niche but pretty far from what I would consider creative tech.

What can we learn from these counter examples? Their primary selling point is performance, not anything inherent to the creative itself.

Let me know why I’m wrong.

Reading list

• Publicis buys Lotame (link)

• TMobile buys Blis for $175 million (link)

• Viant acquires Lockr (link)

• Management buys out R/GA from IPG (link)

• Amazon launches “Complete TV” new CTV buying/planning tool (Adweek, link)

• Google asks DOJ to stop spin-out for national security reasons (link)

• MNTN divest’s Ryan Reynolds’ agency Maximum Effort (link)

• Firsthand raises $26m Series A (link)