Funding for adtech start-ups decreased by -17% last year, according to data collated by CBInsights for the Financial Times – the lowest it has been in five years.
The growing dominance of Facebook and Google is thought to be responsible for the decline, which saw the number of global venture financing deals drop from 414 in 2015 to 343 in 2016.
Just 69 deals took place in the fourth quarter of 2016 – again, the lowest it has been in any quarter since 2012.
“Adtech’s struggle as a sector is absolutely to do with the dominance of Facebook and Google,” Suranga Chandratillake, a partner at venture firm Balderton Capital, told the Financial Times.
“Ultimately advertising is about selling attention, and if most of that attention is focused on Google and Facebook, then naturally they can monetise it.”
The data also revealed that there has been a 33% drop in the volume of funding over the last year from $3.2 billion to around $2.2 billion.
“Gains in adtech are increasingly marginal because companies are constantly copying each other,” Chandratillake added.
“Lots of adtech start-ups go from zero to $30m of revenue and back down to zero again. As a VC that’s hard to back.
“Even if you manage to build a sustainable advantage for a few years, how do you scale to compete with Google or Facebook? That’s why traditional adtech does feel dead from a venture perspective.”
Google and Facebook currently account for around 75% of the display ad market in the US, worth £18.4 billion, and more than half (53%) of the £4 billion spent in the UK.
It is estimated that the two giants will take 71% of UK online ad revenue by 2020.
