After a turbulent year in the ad tech market, a brave new world takes shape

Applovin and ironSource consolidate to dominate

It’s hard to overstate the disruption that 2021 has brought to the ad tech market. For a decade marketing budgets have followed consumers online, feeding the ad networks, agencies, technology providers, analytics companies and consultants. Nowhere has this been more evident than in the mobile app ecosystem. Consumer spending on apps has busted through $110 billion in a very short period of time and is forecast to more than double over the next four years. Budget purely to drive app installs (so, not even to generate sales…) is estimated at over $70 billion already.

Year after year, sage voices have predicted mass consolidation in the industry. Ad networks would surely chase the advantages of scale? Yet this didn’t happen. Instead, we saw the real consolidation happening on the developer side, when Zynga bought every game studio they could find. EA did some chunky acquisitions too, as did a number of APAC-based studios. But ad tech remained fragmented.

Until quite recently, it was not uncommon to run 20+ ad network campaigns simultaneously. It was like putting chips down randomly on numbers at roulette. Some will hit, most won’t. But let’s try be in the game anyway.

Fast forward to 2021 and suddenly ad tech consolidation happened all at once. In the blink of an eye, two major players have emerged: Applovin and ironSource. Applovin has delivered a masterclass in horizonal consolidation. Beginning as an ad network themselves (to solve for User Acquisition (UA)), they added in-app monetization (Max), attribution (Adjust), game studios (owned studios and a game publishing division), and now the integration of Mopub for RTB. It is everything they need as a game publisher, plus all the tools every other dev/pub would need. 

Of course, the jury is out on how well one business will deliver across so many different functions. It’s sort of like buying an egg-roll in a deli. Can one restaurant really serve great food across so many different culinary genres? Can one company really offer tools across all these disparate disciplines that are effective and not self-biased?

ironSource, itself a UA and monetization platform, has bought creative services (Luna) and the leading Facebook Marketing Partner (Bidalgo), rivaling Applovin for all in one services. With this scale, these two companies now rival Facebook and Google for a decent share of growing mobile app UA budgets. 

Today, a reasonable estimate puts Facebook (Meta…) commanding 50% of all app developer UA budgets, Google 25%, and everyone else scrambling for the rest (those portions shift dramatically based on geo, app category and lifecycle of the app, but this is a reasonable working model). But this has been a tough year for Facebook. It has become the “bete noir” of the digital marketing world. The real and present danger to its business is that its developer advertising share is on the decline. Not only is Google ascendant, bringing that 25% up for grabs closer to 40%, but I predict Applovin and IronSource are positioned to take a larger chunk of it too. The rapid pace of consolidation has created a viable competitor to the Facebook/Google dominance for mobile app advertiser budgets, with a realistic prospect of one of these becoming a solid #3, commanding a competitive market share. 

The landscape has changed. The old dependencies on ad tracking and social profiling are breaking down, while business leaders remain skeptical about the real returns on digital ad budgets. And now the domination of Facebook is under threat from new platforms in the form of TikTok and networks in the form of Applovin and ironSource. With the certainties of old slipping away, it is going to be a bumpy couple of years ahead in the ad tech world.

Image source: Mobile Marketing Magazine