Adtech execs keep leaving. It's a sign of a new era.

• Adtech startups have faced leadership changes as investors demand growth and profitability.
• Private-equity firms are looking for adtech startups to achieve scale.
• Connected TV and retail media offer growth, but challenges remain with margins and competition.

Close observers of the adtech industry will have noticed there's been a heap of change in the upper ranks of the sector's startups in recent months — especially those financed by private equity.

Louisa Wong stepped down in August as the chief executive of the Gamut Capital-owned XR Extreme Reach. She was replaced in the interim by Chandler Bigelow, the company's chief financial officer. Doug Knopper, an investor in the company, was appointed executive chair, while Jo Kinsella, an adtech veteran, was promoted to global president and chief operating officer.

In July, Dave Clark left his role as TripleLift's chief executive. His responsibilities were split among an "office of the CEO" led by Eric Roza, a managing director at its lead investor, Vista Equity.

At the turn of the year, VideoAmp CEO Ross McCray exited, passing the reins to a board member and investor, Peter Liguori, who's now the executive chair. Axios reported this month, citing multiple sources, that the company was pursuing a sale, adding that its investor Vista Credit Partners was said to be leading some of those discussions.

Each of the changes comes with its own company-specific nuance, but experts said there were broader industry trends linking them. Those experts — bankers, adtech executives, and consultants — told Business Insider that the revolving door is likely to continue over the next six months as investors press adtech companies for growth.

It marks the next stage of evolution for the adtech industry. With the digital-ad market largely dominated by the tech giants Google, Amazon, and Meta, independent adtech companies are forced to find new ways to compete over the remaining scraps. The small and midsize startups still duking it out are now entering their operator era.

"Automation, AI, and the optimization of corporate structures will mean that only the lean, mean companies are going to end up gaining market share and be in a position to win," said Chris Karl, the chief business-development officer at the M&A advisory firm JEGI Clarity.

Adtech valuations have come back down to earth, but PE investors still want scale

Private-equity firms such as Vista, GTCR, and Blackstone have been increasingly active investors in the adtech space, leading a flurry of deals between 2021 and 2022.

There were 784 PE or PE-sponsored transactions in the media and marketing space in 2021, up 96% from the prior year, according to the advisory firm Ciesco. That number rose to 874 in 2022 and lowered slightly to 786 in 2023, per Ciesco.

Now, a few years have passed, and leadership changes are to be expected, given historic PE investment cycles, said Mark Wright, a veteran tech investor and executive who now leads the M&A-strategic-advisory practice at Prohaska Consulting. Founding teams make way for more experienced operators who can take the company to the next level, he said.

"Although there are exceptions to the rule, there are very few founding teams that are marvelous at groundbreaking innovation that can successfully make the transition to managing and operating at scale," Wright said.

Public and private valuations of adtech companies have dropped dramatically since 2021, the height of the zero-interest-rate period when there was a rise in digital-ad spending and a slew of adtech initial public offerings. Tougher macroeconomic conditions in the years since put a strain on consumer spending and marketing budgets, cooling the markets and mergers-and-acquisitions activity.

"Some of the changes you're seeing are indicative of a two-year cycle post-COVID where things are back to normal, or the new normal," Karl of JEGI Clarity said. "Where company performance could be tied to events that were out of their control a couple of years ago, that excuse no longer suffices. Investors want growth."

Meeting growth expectations has been a challenge for some companies. JEGI Clarity, which, alongside CIL Management Consultants, surveyed 25 leaders of marketing-services agencies this summer, heard from multiple CEOs who said 2022 and 2023 were some of the most difficult operating environments of their careers.

Those surveyed said they were more optimistic about 2024 now that rates have stabilized and clients are less risk-averse with their marketing budgets. Almost three-quarters, 70%, of respondents in the study said that their margins had remained stable or increased this year.

CTV is adtech's bright spot — but it's complicated

Despite a rising global advertising market that is expected to surpass $1 trillion in spending next year, not all adtech vendors are positioned to reap the rewards.

Take the connected-TV space. It's one of the fastest-growing ad channels in the US, with spending expected to grow 13.3% and cross $30 billion in 2025, according to Emarketer. The change in viewing patterns and forecast ad spend attracted investor interest in adtech companies that had a strong position in CTV.

However, much of the recent growth in CTV advertising is being driven by platforms like YouTube and Amazon Prime Video — so-called walled gardens that don't integrate third-party adtech vendors such as buying platforms and exchanges.

Connected TV is also a lower-margin channel for adtech vendors than traditional online display, where up to half of every dollar spent on ads gets gobbled up by vendors like demand-side platforms, ad exchanges, ad servers, measurement vendors, and data brokers.

"In network TV, those supply-chain costs are in the 15% level — you have to take 50% and squeeze it down to 15%," Prohaska's Wright said. "It's going to put a real emphasis on operating at scale and put a pressure on margins."

As TV viewing grew fragmented, several adtech companies that took on investment in recent years positioned themselves as rivals to the ratings giant Nielsen. These firms are jockeying to become the go-to companies for tracking audiences or to become the universal currency used to buy TV and video ads.

But Nielsen still hasn't been unseated. And Walmart's acquisition of the TV manufacturer Vizio — from which many adtech vendors license viewing data derived from its tens of millions of TV sets — could signal further trouble ahead if the grocery giant doesn't renew those contracts when they expire.

With the Walmart-Vizio deal front of mind, adtech companies and investors are likely to turn their attention to retail media, where ads are placed on e-commerce sites. Retail media is also growing at a clip, with almost every retailer and app owner now also operating an ad business.

The increasing complexity for advertisers offers opportunities for adtech companies to innovate. But while about $1 in every $7 US ad dollars is expected to go to the space this year, according to Emarketer, retail media is largely dominated by Amazon.

There's also some executive shuffling happening in the retail-media ranks: Megan Clarken, who leads the publicly traded adtech company Criteo, said she plans to step down within the next year once her successor is found.

Many industry observers expect more adtech management upheaval ahead, as well as a further consolidation of the sector once the intense fourth-quarter holiday period is over.

"You will see more heavy-handed PE involvement primarily because the M&A market hasn't been great, and people sat on the sidelines," said Domenic Venuto, the chief operating officer of the investment bank Progress Partners and soon-to-be chief of product and data at the media agency Horizon Media.

"The market can only sustain so many of these companies that have grown to be quite sizable but are now hitting their upper limits," he said.