Can anyone articulate the value of their martech stack?

Take the size of the market: there are now 15,000 active, credible martech vendors, according to McKinsey. These providers were collectively worth $131bn in 2023 – a number that McKinsey projects to reach $215bn by 2027.

But McKinsey’s analysis finds a “widening gap between what martech can deliver and what it actually does,” with most marketers “still in the early stages of maturity” with their martech understanding and operations (if not investments).

Robert Tas, a partner at McKinsey, was part of a team that talked to over 50 marketing leaders at Fortune 500 companies. He tells The Drum that today, not one of them could quantify the return on investment of their martech stack. As for the size of those stacks? “It’s more ridiculous than you might think… It’s in the hundreds, in many cases.”

Senior marketers are likely to underestimate the number of tools in their martech stack by up to 10x, the report finds.

“As a marketer, you’re just inundated,” Tas says. “Everything says that they can do everything… You almost have a paralysis of what to do. It’s a big challenge for marketers – martech leaders, CIOs, CMOs – to navigate this malaise.”

The martech delivery gap

For Tas, the problem is one of spiraling complexity: it’s not that organizations don’t have the capability within their arsenal of martech weapons to achieve real change; it’s that an abundance of different technologies, often inoperable and handled by different teams, obstruct a clear shot at transformation.

But with almost 80% of organizations saying that they will increase their martech spend yet further, Tas’s core advice is simple: you can’t just spend your way into martech maturity. Instead, McKinsey is arguing for a paradigm shift, recontextualizing martech as no longer a “cost center” and instead a “growth engine.”

The time, Tas says, is right now. Of those 15,000 martech offerings on the market right now, 3,000 are ‘AI-native’ tools added over the last year – and the advent of AI in the space is “an opportunity for a redo almost, to really reinvigorate use of martech across the enterprise and break down silos and radically drive the business and serve the customer – which I sometimes feel like we lose our focus on.”

As with so much in this transformative moment for the marketing business, this hope quickly shades into a wider, structural conversation. In his conversations with marketing leaders, Tas has found only a “handful” even approaching the kind of streamlined ideal which only calls on a small number of martech vendors in service of real change, without spending millions on legacy systems as a “cost of doing business.” Step one in getting there? “We need executives to be accountable for that investment, just as for marketing dollars,” he says.

“We need real business cases and real business leaders to own this – that’s number one on the list. I interviewed over 50 martech leaders and every one of them said that they either don’t get enough support or it only works when they get support from a business leader in the boardroom to be accountable for it”.

Then, step two is “decomplexifying the stack” – easier said than done, perhaps, but this too comes back to ownership, says Tas. “We need to own the accountability of it. We need to treat martech investment like we treat media investment. We need to manage it. Do we really need to pay a premium for an email provider? The answer may be yes, but it’s got to prove its ROI. We’ve got to prove the total cost of ownership.”

The martech-adtech convergence

Speaking of media, Tas has another hope for martech’s AI revolution: that it will hasten a “convergence” between martech and adtech, allowing the former to be accountable for the latter. Because while adtech and martech stacks may be ‘owned’ by different teams, they have parallel problems of expanding complexity and opacity of investment.

That parallel complaint in the adtech world was on display last week at the Advertising: Who Cares? summit, a gathering of top media minds in London. Presenting findings from a workstream looking into how adtech can become an “enabler, not a ruler” in the media world, consultant and strategist Alessandro de Zanche made the case that “digital advertising cannot exist without good adtech… but digital advertising can’t exist with bad adtech.”

As adtech stacks have bloomed in size and complexity just like their martech cousins, VCCP’s Cameron Armstrong added that “everyone loses but the middlemen” – advertisers’ budgets are drained, media owners become stuck in a race to the bottom and consumers are “bombarded and fed up” with ineffective advertising. The group’s recommendations is to “shorten the chain” with “fewer hops” among suppliers, with a view to higher-attention placements that work better for the whole ecosystem.

“There will never be quality digital advertising without a quality media environment, so it’s important that we get the virtuous cycle going,” said Armstrong.

Here again, the commercial models of providers and the structure of the business around them rears its head as ripe for change. Joseph Pamboris argues that models predicated on volume can lead to “conflicts of interest” that don’t serve either advertisers, publishers or consumers. “The problem is often providers’ commercial models predicated on volume, focused on pushing more and more, not focusing on effectiveness.”

Enter martech, says McKinsey’s Tas: as that martech-adtech convergence beds in and as AI starts joining the dots, martech should become a bulwark against any further deterioration of the media-marketing virtuous cycle from the adtech side. “My martech stack needs to govern my adtech stack,” says Tas. “I need to have the data to be able to validate what my adtech is doing. If I see patterns that say my adtech is buying bad users on low-profitability customers, my martech is going to be the one that uncovers that and it should pull that into a system for me to optimize and make changes – if it’s done right. But often we rely on the walled gardens or agency partners or other intermediaries to make those decisions. That convergence needs to happen more. That’s what sophisticated, transformational martech users are doing today.”