Yesterday, the blog ad network IndieClick sent an email to clients announcing that it had "chosen to disband" from Demand Media, the online content company that was once touted as the "future of journalism." An industry insider told Valleywag: "There's a shitstorm brewing in ad tech."
According to the email, IndieClick's notice of termination was effective October 16th "with the goal of ceasing all business at the end of this year." The tipster who sent Valleywag the email said, "A bunch of people had left the company already and it seemed like Indieclick wasn't doing a lot of business," especially as "regular tasty checks" suddenly dwindled down.
It's been a tumultuous month for Demand Media, the owner of content farms like eHow, whose traffic is also on a downward slope. On Monday, Richard Rosenblatt announced his resignation as CEO and chairman of Demand Media. Before the company's IPO, Rosenblatt was accused of using "magical thinking" to make Demand look profitable.
Here's how PaidContent described Demand Media's $14 million acquisition of IndieClick in 2011:
While seemingly far apart, Demand Media’s deals with IndieClick and Google are both centered around getting the advertisers to recognize it as a premium content aggregator and, the company hopes, ensure that the term “content farm” never touches it again.
The $14 million acquisition of IndieClick, which runs works with such irreverent sites as Damn You, Autocorrect and women’s culture site The Hairpin, is seen as a complement to Cracked, the 50-year-old humor property that the company bought in 2007 after it stopped publishing in print.
It's not just Demand Media. Others in the ad-tech space are feeling constricted. Earlier this month, Compass Labs, one of Facebook's preferred marketing developers, got out of the game because of "diminishing margins" in the Facebook ad business, reported Business Insider.
As the industry source told Valleywag:
There's a shitstorm brewing in ad tech. Between the platforms like Facebook and Google getting greedy and holding the keys, and the browsers like Mozilla and Chrome turning off third party cookies by default, a lot of the less valuable ad networks are going to disintegrate.
Mozilla hasn't yet turned off 3rd party cookies, "but their finger is on the trigger," added the source. Once that happens, the data that companies like IndieClick use to track consumer around the web is rendered useless.
Another ad-tech expert called "lousy margins" an overstatement:
The market is definitely getting a bit tighter so maybe some of these guys are getting squeezed out because they can't keep up, but I know from personal experience that you can still make very good margins if you're careful about the targeting, only on the "Sponsored Post" ads tho. The right-rail ads are a dog.
We've reached out to IndieClick and our questions were forwarded to some corporate communications person. We'll update the post when we hear back. In the meantime, take a gander at Demand Media's stock: