This week we’re thinking about marketing technology as we prep for our third sensational Gartner Digital Marketing Conference in San Diego.

Specifically, we’re asking: What is marketing technology (aka martech), exactly? And: Does it belong in the same hub/cloud/stack as adtech?

A few years ago, it became somewhat common to hear (and use) the term mad-tech to refer to the looming convergence of martech and adtech. Martech lived among first-party data and owned software systems, like email and web analytics; and adtech generally adhered to third-party data and paid media.

Togther, they’re mad-tech, a kind of delightful coalescence combining the best elements of each into a master blaster that would do for marketing what ERP did for … well, whatever ERP did. This “convergence” of (temporarily) separate domains appeared to be inevitable and was trumpeted by pundits (including myself) from coast to coast.

And it makes sense. Your customer, as she traverses her journey with your brand, shouldn’t be able to tell she’s been handed off from adtech to martech and back again. It’s a single journey, right? And from the vendor’s point of view, both parties to this romance need data, audiences, and insights from the other half. Why should they live apart?

And then — like an engraved invitation to the mad-tech wedding — last November, Adobe announced its acquisition of TubeMogul. Adobe is certainly a mar-tech leader, and TubeMogul is certainly in ad-tech. Case closed.

Or is it?

THE MARRIAGE IS (NOT) ON

Putting TubeMogul aside for the moment, there are a number of compelling reasons to believe that mar-tech and ad-tech will not converge into mad-tech — at least, not in any simple way.

As another learned pundit put it quite recently, “the marriage is off” between adtech and martech.

But why?

Brief Digression: Scholars among us will have heard of David Ricardo, a wealthy 18th century British trader who read Adam Smith’s “The Wealth of Nations” in his late 30’s and decided to become an economist. And that he did, producing many influential ideas, the best-known of which was his Theory of Comparative Advantage. In a byte, it’s basically the idea that companies should do what they do best and trade for the rest — and everyone is better off.

Now if we look at the elements of the classic business model — things like competencies, buyers, suppliers, costs, pricing and so on — on almost every dimension, martech and adtech are different. They’re a textbook-ready example of two disciplines that should stick to what they do best and enter into an API-fueled alliance for the rest.

SEVEN REASONS WHY

So here are seven reasons mar-tech and ad-tech will not converge:

  1. Buyers are different — Advertising is a skewed industry, with a relatively small number of big spenders dominating the game. The Top 100 global advertisers are responsible for about 30 per cent of total media spend. On the other hand, martech is much less concentrated. At a rough guess, the top 100 global marketers can’t be responsible for more than 3 per cent of total spend on marketing technology.
  2. Budgets are different — Advertising is definitely a CMO responsibility. Between the CMO and the agencies, ad budgets are negotiated and set. Nobody asks the CIO whether they should heavy-up their TRPs on “Duck Dynasty,” right? But martech is a hybrid buy. Although it says marketing in the title, mar-tech is almost always a joint investment decision among CMO, CIO, finance, legal and a motherboard of others.
  3. Customer data is different — Data itself is often different, and the requirements are distinct. Martech data emphasises depth and accuracy. If you’re extending a coupon to someone or an offer to join your Premiere Club, you want to know a fair amount about them, and you want what you know to be accurate. Otherwise, you’re out some change. Adtech prizes salience and freshness — that is, you’d rather know the one thing that matters (that they just visited Hyundai.com) than 200 things that might … and you’ll trade accuracy for recency. Stakes are lower in adtech. Mis-targeted ads are not a disaster on the order of a lost coupon.
  4. Talent is different — Adtech is a big-city, latte-sipping-coastal-elite, hipster-hugging multiverse. It exists in NYC, SF, LA, Chicago and … ? Martech can be anywhere; it’s not owned by agency hipsters and it is quite at home in Indianapolis or Battle Creek. Different types of people work in these milieu. Enough said.
  5. Revenue model is different — It’s the difference between monthly subscription revenue and CPM or (worse) CPA-based pricing. When a V.C. sits down to value a company, they’ll look at two things: future cash flow and risk (the discount rate). Mar-tech has subscription cash flow; lower risk. Ad-tech has media pricing, which is volatile and very hard to predict; higher risk.
  6. Risk is different — Speaking of risk … adtech is a lot more vulnerable to changes in the behaviour of consumers, who are genetically crazy. Take ad blocking, which seemingly swelled out of nowhere to commandeer some 70 million users in the US Business risk. Then there’s fraud and viewability, which are not consumer but market forces. Risk.
  7. Competitors are different — Here, martech can be justly proud of its dullness. Certainly, when the salesperson from one of the big martech players shows up at a pitch, she’s sitting in the waiting room with same three or four competitors she saw last time. It’s a controlled universe. But what about adtech? In the world of advertising, who is the competition? Well, just some of the biggest companies on earth: Google, Facebook, Amazon. Nobody knows what they are going to do, and they can do anything. This fact alone makes adtech a risky business.some of the biggest companies on earth: Google, Facebook, Amazon. Nobody knows what they are going to do, and they can do anything. This fact alone makes adtech a risky business.

THEY HAVE ALREADY CONVERGED

Where does this leave us? With a surprising idea: that the convergence of martech and adtech has already happened. I’m referring to the DMP. What does a DMP do? It takes in data from many systems, including martech platforms such as email and web analytics; it organiszes it; and it makes it available (syndicates) to outside systems, such as ad exchanges and content management platforms. It is a nexus where mar-tech and ad-tech come together.

Layer into this nexus on-boarding and identity management platforms, along with data governance to manage rights for collection and use — layer this together and you have got the point at which martech and adtech are doing what David Ricardo might call their virtuous exchange of value.

And what’s at the heart of the digital marketing hub of song and story? It looks very much like a DMP. That’s no coincidence. Adobe, Oracle and Salesforce — leaders in our Magic Quadrant for Digital Marketing Hubs — all have a DMP at the heart of their hubs. They serve marketers and advertisers.

That’s about as much convergence as martech and adtech may get — or need.

*This article is reprinted from the Gartner Blog Network with permission. 

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