Luma's Conor McKenna on the recent uptick in M&A, whether retail media shows any signs of slowing, and why ad tech is both consolidating and proliferating
Aug 22, 2023
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Conor McKenna, partner at Luma Partners, talks about the recent uptick in M&A activity and ad spending growth. They explore the potential of retail media, the lack of innovation in CTV advertising, challenges and opportunities in the ad tech market, and intersections in the advertising industry.
The ad tech industry is expanding its influence beyond advertising, with industries like retail and commerce players adopting ad tech to promote their brands.
Retail media, while valuable in its transactional nature, cannot replace upper-funnel advertising which requires broader spending and channels that drive brand awareness and reach beyond retail media.
Deep dives
Overview of the ad tech market and its growth potential
The podcast episode delves into the state of the ad tech industry, highlighting the significant growth potential driven by ad tech's expanding influence across various channels and platforms. The guest emphasizes how ad tech is increasingly 'eating the world' as more industries outside of advertising, such as retail, airlines, and commerce players, are adopting ad tech to promote their brands. However, the guest also discusses how fundamental changes, like cookie deprecation and shifting from third-party to first-party data, are impacting the ecosystem and driving consolidation. Companies are exploring new advertising opportunities, such as commerce media, CTV, and mobile in-app advertising, in response to these shifts.
The role of retail media and its limitations
The podcast explores the potential impact of retail media on the advertising landscape, discussing whether it could eventually dominate the majority of advertising spending. While acknowledging the value of retail media's transactional nature and close proximity to the cash register, the guest argues that upper-funnel advertising, which requires broader spending, cannot be replaced solely by retail media. Brands still need to consider channels that drive brand awareness and reach beyond the narrow focus of retail media. Additionally, the guest highlights the importance of innovative advertising strategies tailored specifically to the unique opportunities presented by retail and commerce media channels.
The convergence of TV and commerce
The episode considers the potential integration of TV and commerce in a significant way. However, the guest believes that true integration will depend on data and audience targeting capabilities rather than solely on shopping capabilities within TV ads. The guest highlights that TV advertising, due to its typically laid-back and immersive nature, may always have a delayed impact compared to more interactive devices like mobile. While there may be opportunities for convergence, the guest suggests that TV and commerce will likely remain separate in terms of advertising strategies, with the focus on brand advertising on TV and performance-driven commerce media in separate channels.
Market outlook for ad tech M&A
The podcast episode explores the current climate for deal-making in the ad tech market. The guest highlights the contradictory nature of the deal environment, which has recently experienced challenges due to fluctuating valuations and macro trends. However, with stabilizing valuations and improved market conditions, the guest expects an increase in M&A activity. Factors contributing to this outlook include the entrance of private equity into the space, the broader recovery of the advertising market, and strategic opportunities arising from industry changes. The guest anticipates that larger enterprise companies and public ad tech firms will consider more consolidation and deal-making, driven by a clearer market outlook and opportunities for growth.
Next in Media spoke with Conor McKenna, partner at Luma Partners, about why we're seeing so many companies enter the ad business for the first time, and whether recent upticks in ad spending bode well for the rest of this year.
Guest: Conor McKenna
Host: Mike Shields
Produced by: Fresh Take
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