Terence KawajaThe ad tech industry is still too crowded, says boutique investment bank Luma Partners in a new post.

More "marginal companies" in ad tech need to die, or get acquired, it says.

Luma is led by Terry Kawaja, an ad tech industry icon in New York. Luma produces graphics that detail the convoluted state of the ad tech industry. Its main trade is figuring out who's buying who and then consulting companies involved in the acquisitions.

Years ago Kawaja expected the ad tech business to be radically altered by M&A and failure. So far, neither has happened on the scale he expected.

Today, he's trying to figure out what's going on.

He blames the lack of failures on a vibrant VC system that keeps funneling money into companies. As for the M&A, he doesn't really have much of an explanation.

However, he thinks (hopes?) all of this is about to change based on three things he saw last week:

  • MediaMath bought Akamai’s ADS (Acerno) business.
  • AppNexus raised $75 million.
  • AdBrite closed shop.

He believes VCs are going to suddenly get more intelligent about where they put their money, focusing on bigger companies that look like they're actually going to succeed, like AppNexus. Those bigger companies, with more cash on hand, like MediaMath, are going to buy other companies.

As the VCs get smarter about where they put their money the smaller ad tech companies like AdBrite are going to die off or get bought.

The ad tech business has long been crowded with tiny shops set up in the hope of getting flipped. The money flowing into the system has been a topic of conversation for years now. Perhaps Kawaja is right, and this time things really are different. Perhaps a shake out is finally going to happen.