Ad Tech / Marketing Tech Headcount Tracker for 2Q17 -- Pivotal Research

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Ad tech and marketing tech are the tools driving operations of the advertising and marketing industries. Related companies are therefore important for investors focused upon internet-based advertising, agency services, measurement services and enterprise software. Underlying trends are therefore particularly important for investors in large public internet-focused companies such as Google, Facebook, Twitter and large technology focused companies such as Adobe and in addition to the pure-plays such as Criteo, The Trade Desk, Yext, HubSpot, RocketFuel and Rubicon Project among others. Overall, we see high single-digit to low double-digit growth, on average, with a wide range of disparate outcomes for different companies and sub-sectors. From the data, we can see that ad quality, social media management and location-based companies are among the fastest growth sub-sectors. We can also see how larger companies are generally growing faster than smaller ones.

We regularly track headcount trends totals for ad tech and marketing tech companies using data from LinkedIn because we believe that most companies – especially smaller ones – generally add to their employee base in proportion to their revenue growth. Consequently, this data provides us with a sense of relative revenue growth trends for the industry.

Excluding the companies with more than 5,000 employees (as at some level of scale companies are more likely to shrink or grow without changing headcount in the same proportions as would be true for smaller companies), our data set includes around 400 companies and covers nearly 107,000 employees. We can crudely estimate these groups of companies combine to generate $20-30bn in annual net revenue. During 2Q17, this group of companies grew by +10% year over year, slightly faster than growth observed during the prior two quarters. However, median growth rates were up by only +7%, repeating a gap that has also occurred during the past two quarters. Larger companies are generally growing faster than smaller ones.

Looking only at the largest 38 pure-play ad tech companies, we can observe growth of +11% year-over-year – similar to the rate of growth for marketing tech and ad tech combined. However, growth has certainly slowed for ad tech in recent periods. For each of the past four quarters these companies have ranged from high single to low double digits in growth vs. >20% annual growth in prior quarters. As with the broader group of companies, the gap of growth between the average and the median has widened significantly. Year-over-year growth for the median ad tech company among this group of 38 was +3% for 2Q17 after growth of only +2% in 1Q17, +6% in 4Q16 and 3% in 3Q16

Notable pure-play public companies in the sector which are growing include Criteo, which grew by +31% (a slight acceleration over each of the past three quarters' levels of growth), The Trade Desk (which grew by +51% - still strong, if slower than in prior quarters), Yext at +48% (stable vs. each of the prior two quarters of growth), The Trade Desk (which sustained 2Q16 headcount growth levels in 3Q16 and outpaced all of its direct peers by a significant margin) and HubSpot (up by +36%, decelerating slightly from prior quarters). Rubicon reduced headcount by -20% (accelerating last quarter's decline) and Rocket Fuel reduced headcount by -8% (more or less consistent with year-over-year trends for each of the past seven quarters).

Among companies tracked with more than 100 employees as of early 2016, the fastest grower during 2Q17 was Datorama (a marketing analytics company) followed by Taboola (a content recommendation company), Mailchimp (an email marketing technology company), Sprout Social (a social media management company) and RTB House (a retargeting company).

Additional commentary and data follows in the remainder of this note.


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