What you need to know:

• Oracle's decision to abandon the adtech sector after a precipitous revenue decline has sent a chill through the rest of the supply chain – although analysts suggest the reversal may have more to do with some of Oracle's own decision-making.
• Support for its advertising products will end on September 30 according to communications with some of its customers.
• However, there is a near-universal view that also reflects the impact of disruption from cookie deprecation and strengthening privacy rules around the world.
• The rise of CDPs is also helping to bridge the adtech and martech worlds, say some, although that bridge is imperfect.
• The adtech sector is assailed by challenges such as the primacy of walled gardens over the open web, competition over new ID types, innovation around ad formats, and maybe, the return to favour of contextual advertising.
• Expect a new wave of disruption thanks to generative AI. (Or a new wave of opacity.)

Oracle’s retreat from the adtech ecosystem was announced last week in a single throwaway one-liner by CEO Safra Katz. It likely points to “a gross miscalculation” by the company, say those paid to ponder these things, but also speaks volumes about upheavals in the digital advertising landscape due to privacy concerns and cookies deprecation.

It additionally reflects the rise of CDPs where media optimisation is often a key business use case.

While Oracle had dropped back into the second tier of adtech and martech in Australia after rolling its Marketing Cloud group into its wider CX offering last decade, it still has an impressive set of customers especially in higher education where for instance University of Tasmania, and QUT's Gold Coast Campus were both BlueKai customers. In the wider business community, BlueKai also found favour at Coles Liquor, Sixt, Fisher and Paykal, and Emirates.

But maybe the writing was on the wall. Oracle last year told Australian lawmakers that its ad business was a 'rounding error' in its submission to the Attorney General's proposed privacy overhaul – and urged the regulator to go nuclear on its rivals Google, Facebook, Apple, Amazon and Microsoft, alleging 'excessive, intrusive, unfair, anticompetitive data collection'.

Either way, customers Mi3 spoke with said they had not heard from Oracle about the decision, although one indicated they were already looking for an alternative following advice from their partner Deloitte about the impact of cookie deprecation. Deloitte declined to comment and Oracle has not yet responded to request for comment.

However, it has contacted some US clients to tell them support will end on September 30.

$1.7bn crash

To understand the forces driving its decision and importantly, what it says about the wider adtech market, Mi3 spoke to Constellation Research's VP and Principal analyst Liz Miller, along with Forrester principal analyst analysts Xiaofeng Wang, privacy and marketing analyst Stephanie Liu, Gartner's Eric Schmitt, and senior analyst Mo Allibhai, as well as IDC’s research director of advertising technologies and SMB Marketing applications Roger Beharry Lall and research director, enterprise technology, Gerry Murray.

In its most recent quarterly earnings call last week, the Oracle chief told investment analysts, “In Q4, we decided to exit the advertising business, which had declined to about $300 million in revenue in fiscal year 2024.”

Missing from her bon mot was the fact that just two years earlier Oracle's adtech business was generating $2bn, a precipitous decline.

According to Forrester’s Allibhai, “The precipitous drop in revenue from $2bn in 2022 to $300m in 2024 suggests a gross miscalculation on Oracle’s part.”

Oracle is not the only company to have seen revenue reversals. Criteo CFO Sarah Glickman earlier this year said the company expects to drop $US30 million to $40 million in revenue in the second half of 2024. It's likely to be an informed estimate, given Criteo has been one of the most active adtech firms involved in testing out Google's new tech tools. But this decline pales in comparison to the Oracle reversal.

It was not a tier-one ad tech business.

“Oracle was never a major player in adtech but very much an 'also ran,'" Allibhai told Mi3. "With neither demand- nor supply-side platforms – as Google, Microsoft, and Amazon each have – and no large audience to draw on (as Meta, Disney, and Netflix do), it’s hard to see the advantages an adtech team would enjoy from being part of Oracle – for example, what appreciable network effects the owners of Datalogix would realise from acquiring Grapeshot, a programmatic brand safety tool.”

His colleague, Xiaofeng Wang, also noted Oracle’s weakness in the B2C space relative to its peers. 

“Oracle hasn’t performed as strongly in the B2C martech space," she said. “They are also divesting from B2C marketing automation (Responsys), which hasn’t been as robust as its B2B marketing automation tool (Eloqua).”

Forrester’s Liu meanwhile noted that Oracle's advertising business took major hits on multiple fronts. These included:

• GDPR driving Oracle to pull AddThis out of Europe and eventually the globe,
• the death of the third-party cookie rendering DMPs (including BlueKai) ineffective,
• walled gardens getting more restrictive about their data and how marketers can use it,
• and growing consumer privacy awareness.

“These are the four forces Forrester calls data deprecation, and because of the size and scope of Oracle's advertising business, Oracle was directly impacted by every single one.”

To stay in the game Oracle would have needed to invest significant resources to retool its acquisitions to function in a world where consent is increasingly required and data brokers face scrutiny and regulation, she said. (Oracle was one of the brokers namechecked by the ACCC locally in its ongoing data broker probe.)

“And given Oracle's shaky track record – it couldn't make AddThis compliant with the GDPR, and it has the legal baggage of the Datalogix class action lawsuit – it would have faced a steep uphill climb to not only innovate quickly but also convince the market its solutions are viable,” added Liu.

The Forrester team views Oracle’s decision as unsurprising given they laid off a significant portion of the people supporting the advertising business in 2022.

That said, per Allibhai, "it is surprising to see how quickly the Oracle advertising business declined. In some ways, it is a case study in how quickly and significantly the foundation of digital advertising has shifted in recent years.”

Adtech chickens come home to roost

Oracle is hardly alone in its adtech retreat.

As Allibhai told Mi3, “Salesforce also recently divested of Habu, the data clean room solution, after sunsetting their own data management platform. Both organizations will free up financial and human capital to focus on their core competencies. The open question in Oracle’s case is whether the IP will ultimately find new ownership and enjoy a second life.”

The Forrester analysts also noted that both Adobe and Salesforce are shifting their focus from DMPs to CDPs. Oracle likewise has a CDP play. Its penetration in Australia is limited, though it has established a foothold within the university sector.

Long list of constraints

According to Gartner's Schmitt, "The list of constraints on the use of non-consented personal data is long and growing.  While scores of specific developments contributed,  a number of major milestones stand out. GDPR enforcement began in 2018. Apple began blocking third party cookies by default in 2019. In 2020, California adopted CPRA and by 2023 88% of U.S. residents were covered by proposed or passed state privacy regulations."

Schmitt also highlighted the limitations on the collection and use of location data, IP address, and device IDs are growing in many geographies around the world.

He also noted that these days Google, Meta and Amazon account for the lion’s share of the global advertising business, and the time that people spend interacting with digital media. "These businesses collect rich behavioral data sets directly from their billions of end users and have comparatively little need for third-party data. Meanwhile smaller publishers are getting squeezed by cookie deprecation, generative AI and other factors, and have very limited funds to spend on cookie-based ad tech and data solutions."

Constellation's Liz Miller meanwhile told Mi3, "The adtech space has become a massive glut of point solutions that have all bet on a single message: Are you ready for the death of the cookie? In the slow march to 'cookiepocalypse', marketers, agencies and advertising leaders soon realized that perhaps, the phase-out of tools like the third-party cookie wasn’t the death of growth and engagement."

She added: "In fact, I would argue that all of the headlines over cookies gave marketers and creatives a new opportunity to rethink storytelling in a transmedia landscape where advertising, brand, engagement, and story each needed to learn what a new future could be … and that future was still profitable! Nobody died. Businesses and brands didn’t die. Adtech, however, might be a different casualty. It’s like when the Great Chicken Sandwich Wars didn’t end up with a US chicken chain going bankrupt … instead, it gave people an opportunity to put their own spin on fried chicken which can be documented with the rise of new formats of fried poultry goodness like Korean Fried Chicken and chains like Jolibee."

Miller also sees a silver lining in Oracle's decision. "For Oracle, and this might be the biggest factor, they are known to follow customers more than fads … so my take on this is that their customers were no longer looking to Oracle for adtech innovations and instead looking at the bigger picture – CX and growth strategy drivers like CRM and CX solution advancements."

A bridge to ‘madtech’

Over a decade ago, Oracle spent several billion dollars building a 'madtech' stack. Notable acquisitions included:

• 2012 – Buying Eloqua marketing automation platform for US$871m
• 2014 – Completing US$1.5 billion acquisition of campaign management platform, Responsys
• 2014 – Spending US$1.2 billion on Datalogix, the marketing analytics firm
• 2014 – Acquiring BlueKai DMP for US$350-$400m
• 2016 – Buying audience tracking technology provider, AddThis, for an estimated US$200m
• 2017 – Acquiring media measurement-verification company, Moat for an estimated US$850m
• 2018 – Purchasing AI data engine, DataFox
• 2018 – Acquiring brand safety and contextual solutions player, Grapeshot, for US$325m
• 2022 – Buying Adi Insights, a workforce management solution

However, as recently noted, the Oracle announcement underlines the difficulties faced when trying to merge the worlds of adtech and martech. 

They have different customers and very different business models. Martech has also avoided the kind of regulatory scrutiny around privacy that ultimately has brought the adtech sector to heel (although that may change in Australia under the new approach being proposed by the Attorney General’s Department.)

However, IDC's, Roger Beharry Lall says he is more bullish on the notion of martech/adtech becoming a more unified omnichannel – though it may take some time. 

As evidence, he flags the recent launch of “Real Time CDP Audience Activation” which allows a marketer to extend their reach out to third party connected TVs (CTV) or retail media networks (RMNs) for remarketing and lookalike promotions. 

“Similarly, a smaller example might be Bloomreach’s (and many other martech apps) support for advertising through Facebook, Google, Instagram, Snapchat, TikTok, etc., directly from within their platform – marrying insights from email/SMS marketing campaigns with broad promotions.”

He told Mi3, “With the authenticated audiences that CTVs and RMNs provide (and the shoppable experience that can be enabled), it’s only a matter of time before we see brands/agencies trying to launch more integrated campaigns that jump from a digital ad to a direct marketing outreach.”

Some might argue it's already happening.

Beharry Lall acknowledged the limitations of so-called “madtech” - but sees potential for convergence.

“It’s certainly not perfect, and [there are] lots of tactical ‘gotchas’, but I do think there is a desire out there – from the brand/CMO perspective at least – to connect these worlds.”

Constellation Research's Miller however disagrees. "Adtech and martech were never intended to be the same thing let alone replaced by the other. I think as a market we have been waiting for a collapse or a convergence. And we have seen solutions that have become commoditised or obsolete try to rebrand as something else."

The shift of DMPs into CMPs is a prime example she says, while adding, "They are not the same at all."

Per Miller: "Adtech is adtech. It is technology for advertising. Martech [is] for marketing. While advertising is a subset of marketing, it is not a replacement for or synonymous with – and I think sometimes that is easy to misunderstand from the outside of the market."

As to Oracle’s news, IDC's Gerry Murray said, “This has been in the cards for a while based on their data acquisition techniques with the BlueKai DMP and Datalogix.”

But he also noted how regulatory issues are making it harder to repurpose consumer data into use cases that are out of context from data collection.

“That is why clean rooms are currently in vogue. But as AI lands on edge devices we will all eventually be using something along the lines of an agent-based "shopGPT" for programmatic buying which will obviate much of the consumer data and analytics needs of sellers. 

Gartner's Schmitt, likewise discounts the madtech idea. "There are certainly key points of intersection between marketing and advertising, such as the use of first-party customer data as the seed for lookalike models, suppression lists or campaign measurement. However, the broader narrative that martech and adtech are converging has never held up especially well to scrutiny.  At the end of the day, ad tech runs on data about people’s behaviors, their media consumption, and advertising exposure."

Per Schmitt, "Advertisers, by definition, do not control this data.  As a result, it is not easy to access, process, or integrate the data in a uniform, efficient and scalable way – rather, they must depend on a patchwork of third party vendor technology and data."

A new disruptor

Oracle's ad tech reversals may be spectacular, but brands and publishers have felt their own pain, whether that be through lower CPMs for publishers and poorer response rates and ultimately revenues for brands. More recently AI has emerged as a new disruptive force leading to tumbling search referral rates for publishers and growing uncertainty for brands about the previously most predictable channel in adtech – Google search.

Miller said gen AI will likewise shape the nature of the adtech sector.

"In the medium term, the power of prediction will meet the power of personalisation. That is GenAI’s opportunity in advertising. The real winners will be those who employ people with wild creativity and zero fear of technology who can deploy AI, including GenAI in ways that totally transform where and how advertising impacts the total customer and market experience."

Others, however, are less convinced the AI-powered targeting and surfacing of content now being deployed by the likes of Google and Facebook is such a great thing for marketers.