What challenges Amazon will face buying Sizmek ad server
Amazon has reportedly managed to outbid Maurice Levy-backed ad tech firm owner Ycor for the purchase of Sizmek’s ad server and Dynamic Creative Optimization business.
Ycor, which owns ad tech firm Weborama, launched a last-minute counter bid to Amazon’s on June 7, slowing the retail giant’s ad tech plans. But the delay was to be short-lived.
Amazon’s initial bid was for a reported $30 million, though documents filed in a New York Court on June 17, stated that Ycor was willing to raise its initial bid multiple times, by a total of at least $15 million, while Amazon raised its own bid by $7.5 million. No official disclosure of the final price has been given.
Regardless, Amazon has still managed to buy two of Sizmek’s core products for a song. Although the final bid is likely now higher than the initial price tag, $30 million is roughly a third of what Sizmek’s annual revenues are, according to sources with knowledge of the business.
What Amazon would stand to gain from the buyout, has been well documented. But there is just as much talk in the ad tech industry as to what challenges the retail giant may face after buying the Sizmek ad server in particular.
Here’s a look at some of those challenges:
Maintaining an expensive ad server infrastructure
Some ad tech executives believe the Sizmek ad server was not getting the full attention it needed over the last few years. In fact, Sizmek had tried and failed to relaunch its upgraded ad server several times with any success. The first and second attempts were “a disaster,” said an ad tech exec who previously worked for Sizmek. However, over the last year, the team had rallied under the new leadership of CEO Mark Grether, who joined in 2017, and managed to overhaul plans with the result that a successful upgrade was launched last Spring, complete with far more sophisticated attribution features.
However, migrating ad servers even internally is a major undertaking. Only some Sizmek clients have migrated over to the new ad server platform. Many of Sizmek’s largest clients remain on the old ad server, which a former Sizmek employee said was due to the fact that these clients required sophisticated attribution features that hadn’t been available on the new platform. That means that, currently, Sizmek is running dual ad-server platforms — at great cost.
“It takes a lot of development resources to keep an ad server’s features competitive in the market, especially when competing with Google,” said Arnaud Créput, CEO of ad server Smart. Amazon’s move demonstrates how hard it is to build an ad server from scratch, even for them, he added. “Many companies have acquired or built ad servers and then struggled to keep the solutions competitive and to make those businesses work.”
Although Amazon has the server capacity to help ease this, it will initially need to fork out a chunky sum in order to keep those dual ad servers going, before eventually migrating all clients over to the newer version, according to ad tech sources.
Retaining Sizmek talent
In order to sort through and manage some of the challenges that will arise on the technical side, Amazon will need to retain key Sizmek product talent. Even a business with Amazon’s engineering clout, won’t necessarily find it a walk in the park to pick up and run with another business’s ad server. They’ll need an in-depth understanding of the nuances of that particular ad server’s infrastructure, as well as a deep understanding of the digital ad ecosystem and how everyone fits and plugs into each other. “You can have the greatest coders in the world, but if they’re fresh into the ads business, it’s different,” said an ad tech executive who spoke on condition of anonymity. “When people talk about the [Amazon’s] DSP itself they say it’s one of the worst. Their tech isn’t known as the best in ad tech; they’re known for their data and their name.”
Have a look of the entire article on digiday.com