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Illustration: Rebecca Zisser/Axios

At first glance, the ad tech industry looks like it's doing fairly well. Most stocks for major publicly-traded firms — along with related marketing tech and data broker firms — experienced gains in the first quarter of this year.

Reality check: The recent collapse of Sizmek, one of the biggest demand-side ad platforms, suggests that the positive momentum behind these companies could be inflated, and that the big money bubble that's floated dozens of hot ad tech companies over the past few years is about to burst.

Expand chart
Data: Yahoo! Finance; Chart: Harry Stevens/Axios

Why it matters: The downfall of one company hurts dozens of others that are tied to it in the fragile ad tech ecosystem, creating real risk that the entire industry could face a major collapse.

"There's a perfect storm brewing. In the next 12 to 15 months, we're going to see more dominos fall. Eventually we will have maximized the elasticity of the market to sustain this and you'll see other companies go down."
Dave Morgan, CEO and founder of Simulmedia

Driving the news: Sizmek's bankruptcy declaration last month highlighted the financially instability of the ad tech supply chain.

  • Publishers on the supply-ad of the ad ecosystem have long been floating the debts of demand-side vendors like Sizmek on a monthly basis.
  • If Sizmek defaults on its debts, it could leave publishers out to dry for millions of dollars, forcing many of them and their supply-side providers (SSP) to be more cautious about working with demand-side providers (DSP) like Sizmek in the future.
  • The news has many ad tech execs wary of what's going to happen next, Digiday reports. One executive tells Digiday that this ordeal "will lead to a couple of legal fallings out between agencies and their DSPs and SSPs and publishers.”

The big picture: For publicly-traded companies, it's easy for some firms to make the rising debt by obfuscating those operational costs when reporting earnings.

  • For the many privately-held ad tech companies, the hope is that investors — mainly private equity investors — will be able to consolidate operations to reach profitability at some point and sell off the companies quickly before the bad books catch up to them.
  • Bottom line: That's becoming harder to do as privacy becomes a bigger focus in ad tech and more publishers and advertisers are demanding transparency.

Be smart: For this reason, you don't see many ad tech companies go down slowly, Morgan notes. Most fold almost overnight, pointing to a greater problem of transparency in the ad tech ecosystem.

What's next: The common thread between much of this movement is that ad tech and marketing tech are beginning to collide, which plays into experts' predictions that more consolidation within the industry is on the way.

Go deeper

Air quality alerts issued as California fires threaten more sequoias

The Windy Fire blazes through the Long Meadow Grove of giant sequoia trees near the Trail of 100 Giants in Sequoia National Forest, near California Hot Springs, on Tuesday. Photo: David McNew/Getty Images

Two wildfires were threatening California's sequoia trees over overnight, hours after authorities issued fresh evacuation orders and warnings, along with air quality alerts on Wednesday.

The big picture: Officials in the Bay Area and the San Joaquin Valley issued air quality alerts as smoke from the Windy and KNP Complex fires resulted in hazy, "ash-filled" skies from Fresno to Tulare, the Los Angeles Times notes.

Asymptomatic Florida students exposed to COVID no longer have to quarantine

Florida Gov. Ron DeSantis during a September news conference in Viera, Fla. Photo: Paul Hennessy/SOPA Images/LightRocket via Getty Images

Florida Gov. Ron DeSantis (R) announced Wednesday an emergency order allowing parents to decide whether their children should quarantine or stay in school if they're exposed to COVID-19, provided they're asymptomatic.

Why it matters: People infected with COVID-19 can spread the coronavirus starting from two days before they display symptoms, according to the CDC. Quarantine helps prevent the virus' spread.

Federal judge: Florida ban on sanctuary cities racially motivated

Florida Gov. Ron DeSantis. Photo: Joe Raedle/Getty Images

A federal judge on Tuesday struck down parts of a Florida law aimed at banning local governments from establishing sanctuary city policies, arguing in part that the law is racially motivated and that it has the support of hate groups.

Why it matters: In a 110-page ruling issued Tuesday, U.S. District Judge Beth Bloom said the law — signed and championed by Gov. Ron DeSantis (R) — violates the Constitution's Equal Protection Clause because it was adopted with discriminatory motives.