2021 was a banner year for fundraising and capital market activities for the marketing automation industry (popularly known as MarTech), which provides tech-driven solutions for enhancing and automating digital advertising and marketing functions. The ~120 marketing automation startups we actively cover at SPEEDA Edge, collectively raised a whopping ~USD 4.6 billion in 2021 (compared with USD 1.6 billion in 2020). Further, the fundraising in 2021 represents a staggering 35% of the total funds raised by the industry over the past decade, with a similar amount of funding raised collectively in the previous four years.

With the gradual recovery of the global economy, ad spending worldwide rebounded with a vengeance and is expected to reach a record-breaking USD 780 billion (a ~20% YoY growth) in 2021. Digital ad spending, which has experienced accelerated growth, is expected to record a ~30% YoY growth over the same period and account for more than 60% of total ad spend.

Ecommerce sales in the US, with the onset of the COVID-19 pandemic, recorded double-digit growth in 2020 (32% YoY growth) and continued to maintain momentum, albeit at a slower pace, in 2021 (~16% YoY growth). Paralleling this growth is the rise in direct-to-consumer (D2C) brands, which recorded a YoY growth rate of 45% and 16% in 2020 and 2021, respectively. Firms have been investing in both physical and digital infrastructure in line with these trends. This is expected to continue, as the total online sales in the US is expected to hit USD 1 trillion in 2022, with D2C brands contributing USD 151.2 billion in online sales.

These developments drive the need for a variety of marketing automation tools in order to discover, manage, and automate advertising and marketing campaigns at scale, while creating personalized customer experiences.

Worries over the use and potential misuse of customer data continued to remain a concern in 2021. The AdTech industry has come under the microscope of regulators, especially in the UK and Europe, who have become increasingly vocal about privacy-related issues. This also brought up the issue of new guidelines for the industry. The focus on privacy is expected to continue and the expected phasing out of third-party cookies from popular search engines by 2023 would make it much more challenging for firms to conduct personalized marketing campaigns.

At the same, this also presents opportunities for marketing automation startups, particularly customer data platforms (CDPs), which sidestep this challenge by leveraging first-party data to build customer profiles, along with marketing data analytics and intelligence tools that utilize emerging encryption and analytical technologies, such as edge processing. These represent potential areas for further investment and investor interest in the future. A recent example is AppsFlyer’s partnership with Intel to build a privacy cloud run on homomorphic encryption (HE) technology.

All in all, investor interest in the marketing automation industry is expected to remain robust. This is evident in the number of startups in the industry signaling their interest in going public.