Why We Invested in Adster

Digital ads constitute the present and future

Today, a person sees between 4,000 to 10,000 ads in any given day—an 8X jump from the estimated 500 to 1,600 daily ads in the 1970s. Migration from offline advertisement channels to digital advertising has greatly facilitated this jump. Rising digital penetration and increasing number of shoppers spending online have prompted brands to be present where their customers are. Improved efficiency in targeting specific customer types, along with real-time analytics and attribution of ad performance, have led to advertisers going digital over time. 

Global digital advertising sales (which includes advertising on all internet-connected devices) is estimated to have hit $627B (+10.4% YoY) in 2023, and is estimated to see a 9.9% CAGR between 2021-2026. Digital ads as a percentage of total ad spends is estimated to have increased to 67% in 2023, rising from 65% in 2022. This share is further expected to increase to 73% in 2026, at which point digital ad spending will constitute $836B of a total $1.2tn media ad spend worldwide. In the US, the share of offline media fell to 38% share of total spend in 2023 (down from 41% in 2022 and 50% in 2020), and is expected to further drop to 35.5% of total spend in 2023. As more consumers move to digital channels, the demand for digital advertising is set to increase as advertisers continue to look for more accurate and tangible attribution.

Where, and how, are digital ads placed?

On the other end of the spectrum, are publishers, who are owners of digital ad inventory and monetize through showing ads on their platforms. These publishers could range from online news media such as NY Times, to mobile apps / games such as Candy Crush. Depending on their nature of business, and their size and scale, publishers use different channels to earn ad revenue. 

Typically, when an advertiser wants to run a campaign, they either strike a direct deal with a publisher, or go through the programmatic route. Direct deals are set through an agreement between the publisher and the advertiser wherein different terms such as pricing, number of ads to be shown, location of the ads on the platform, etc, are negotiated. Programmatic ads, on the other hand, allow advertisers and publishers to work at scale, through a real-time bidding mechanism wherein advertisers place bids simultaneously for an inventory slot and the highest bidder gets to place their ad. The direct ad sales process tends to be manual in nature, while programmatic runs on real time algorithms and requires minimal human intervention. 

Going the direct ads route tends to fetch more revenue for publishers, as advertisers are willing to pay more thanks to the additional layer of clarity over the nature and type of audience their ads would be shown to. However, earning meaningful revenue through direct deals is only possible once a publisher reaches meaningful scale post which it makes sense for advertisers to deal directly with them (due to the manual intensive nature of direct ads). This has naturally led to programmatic advertising accounting for a large chunk of the overall digital advertising market. In 2022, ads bought programmatically accounted for ~84% of global digital advertising spending, with the share expected to increase to 87% by 2026. The total programmatic ad spend is expected to see a 11.2% CAGR between 2021-2026, and is expected to hit $727B by 2026.

Challenges faced by publishers

With that context, it sounds like essentially all a publisher would need to do is monetize through programmatic channels until it becomes large enough to also earn revenue through direct ad deals, correct? Unfortunately, it seldom ends up as simple for publishers, who often face numerous challenges as they set on their ad monetization journey. 

Typically, publishers are faced with two choices: either to hire an in-house ad tech team, or to outsource through an ad monetization partner. Each of these choices comes with their own set of issues. While an in-house ad-tech team might setup an ad-tech stack to monetize efficiently, setting up such teams tends to be quite expensive, with an additional challenge of resource allocation (for example, a gaming app having to choose between budgeting resources for further game development vs building an ad tech team to build ad revenue). On the other hand, outsourcing to monetization partners often leads to a lack of transparency in terms of tracking ad revenue and its attribution, in addition to a lack of accountability on the partner’s end which leads to the publishers facing the brunt of negative consequences in any case of turbulence. Furthermore, most publishers also find it difficult to effectively collect and track their first party user data in order to better contextualize their ads and increase monetization. A mix of these issues makes it challenging for publishers to track down and fix their errors, thereby monetizing inefficiently and effectively leaving money on the table. 

Making matters worse for publishers, is the inherent duopoly the ad tech world has seen over the past two decades, with Google and Meta seemingly holding all control over the digital ad landscape. With the recall these giants have created in the digital advertising world, many publishers seem to believe this duopoly holds the key to all their dreams of monetization, without which the realization of any ad revenue becomes bleak. And indeed, the scale of these giants is remarkable. Google continues to hold the largest share, raking in $224B of revenue in 2022 (+7% YoY, 79% of overall revenues) from its ads business. Meta, on the other hand, generated 98% of its 2022 revenue ($110B) from advertising on Facebook and Instagram.  

Although Google and Meta’s duopoly in digital ads still exists to a large extent, recent trends seem to point that this dominance has slowly started to fade. Google and Meta 's share of US digital ad spending stood at 48.4% in 2022, falling below 50% for the first time since 2014. Insider Intelligence further estimates this number to have dropped to 44.9% in 2023. Google and Meta’s dominance has been further challenged by large advertisers increasingly willing to diversify away in the search of more options, and has led to the rise of Amazon’s ad business as well as the emergence of Netflix and Disney+ ad-supported app versions. In addition, social media advertising is also expected to continue to see strong growth with TikTok expected to earn $15.2B in ad revenue in 2023. Furthermore, other large retailers such as Walmart and Target have also seen their individual ad businesses expand rapidly over the recent past. Walmart Connect, the company’s retail media business which offers brands ad space, saw its sales rising 30% YoY in FY23 to reach $2.7B. Target ’s media business, Target Roundel brought in $1B+ of revenue in 2021 through vendor partners using ad placements, and has grown more than 60% over the past two years. 

The diversification away from Google and Meta has led to the rise of other large-scale walled gardens. InMobi Advertising , which has partnered with Microsoft since 2019, and is responsible for the sales, account management, marketing, finance, collection, and billing for Microsoft Advertising customers, announced an expansion of its partnership to SEA and MENA in June 2022. In another case, Magnite, which had earlier partnered with Hulu, extended its partnership as Disney's global programmatic SSP partner to include the full portfolio of Disney properties. Microsoft’s global ad revenues in 2022 came in at $11.5B (+25% YoY), while Disney secured $9B in commitments from advertisers from FY23. Given the scale of ad revenue of these enterprise publishers, such partnerships with them can be potentially lucrative, and although the expansion of such walled gardens in some ways makes it harder to gain access to the inventory of these large publishers, it is encouraging to see behemoth publishers willing to diversify away from the Google and Meta cartel to look for more nuanced solutions catering to their adtech requirements.   

Adster empowers publishers to make the most from their ad inventory

This brings us to Adster, who at their core, aim to help publishers maximize revenue from their ad inventory. Adster’s vision is to build a full stack platform solving for challenges publishers face throughout their lifecycle as they scale. 

At the onset, it helps publishers remove roadblocks that prevent full utilization of their inventory through improving metrics such as fill rates (ads served as a percentage of ad requests sent) and render rates (ad impressions served as a percentage of total number of auctions won) through enabling publishers to gain access to additional demand partners and enabling efficient ad serving. 

As the publisher continues on its monetization journey, Adster continues to add efficiencies through optimizing ad formats / layouts, and floor rates, in addition to allowing publishers to capture data which covers a larger section of their user base, in turn allowing better targeting and higher yield. For enterprise grade publishers, the platform offers all these capabilities in addition to a self-serve platform which enables monetization through direct demand in a DIY fashion with little manual intervention. 

Adster’s platform is designed to empower publishers to solve for each problem statement faced on its journey to scale further, irrespective of its current size.

Co-founders Rajiv Kumaar , Girish Vishwanath C , Ketan Chandak , and Ranganathan Srinivasan come with over two decades of experience in building ad tech platforms. Rajiv and Ranga, who met at Vizury , initially spent time understanding the demand side of the equation in helping brands scale user acquisition, engagement and retention. Girish, who comes with a wealth of B2B sales experiences across Xoxoday, 24x7 learning and Infosys, had previously co-founded Planetworkx with Ranga, with a focus on helping advertisers serve targeted ads through leveraging geo location of users. In addition to the above, Rajiv and Ketan have also spent time at Truecaller in scaling up its ads monetization business. A lot of what the team is trying to productise is their learnings from their prior experiences where they have managed to scale ad revenues significantly, and their extremely unique understanding of the ad tech ecosystem and the challenges faced by publishers places them in a strong position to build a global ad tech platform which empowers publishers worldwide.  

We are excited to partner with Adster in their mission to hyperscale publisher revenues. We sat down with the team recently to capture their back story and journey to starting up Adster on our WaterBridge FastForward exclusive podcast - That One Idea. 

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