SANTA MONICA, Calif. – The digital advertising industry is poised for a strong 2025 as multiple economic indicators point toward growth, said Terry Kawaja, founder and chief executive of investment bank LUMA Partners.
“2025 is going to be an excellent year for digital advertising,” he said in this interview with Beet.TV contributor Rob Williams at the Beet Retreat Santa Monica. “And I’ve really come to this conclusion from a variety of angles.”
The U.S. economy started 2024 facing a cloud of uncertainties — including concerns about a recession as the jobs market softened and inflation hovered above the Federal Reserve’s annual target of 2% — but many of these concerns have been resolved, Kawaja said.
Within the digital advertising industry, there are even more positive developments that bode well for an upbeat 2025, he said.
“I call it ‘industry cleanup’, where the over-fragmentation of the ecosystem, which has produced some sort of negative outcomes, is being cleaned up,” Kawaja said.
A key development is supply path optimization, or the streamlining of the most efficient ways for advertisers to buy ad inventory through automated systems, or programmatically. Google ended its project to get rid of tracking cookies in its popular Chrome browser, but the tech giant is giving consumers more choice in how their activities are monitored online.
“We’ve got far bigger growth in areas like CTV [connected television] that are seeing demand from new, smaller, more performant advertisers,” Kawaja said. “Commerce media is all the rage — not just retail media on sites, but the proliferation of first-party data onto inventory across open web and walled gardens and CTV.”
Artificial intelligence technology is helping to improve the efficiency finding key audiences, among other tasks. The technology helps advertisers by analyzing large data sets and finding patterns that are meaningful for decision-making.
Donald Trump’s victory in the U.S. presidential election is likely to usher in a more pro-business administration that eases regulation and steps back from blocking mergers and acquisition activity.
“All of these things are leading to a much stronger 2025,” Kawaja said.
Dealmaking Rebound
As a banker, Kawaja has a front-row seat on how money is flowing into businesses, and how the digital advertising industry is being reshaped through mergers and acquisitions. He said deal activity is picking up, a sign of growing confidence among C-suite executives.
“We’ve just come out of a couple years of a pretty bad environment for deal making,” Kawaja said. “A good way to think about it is: ‘2023 survive,’ ‘2024 revive,’ … 2025 is ‘thrive’ and we’re seeing it in dialogue.”
Strategic deals, in which the buyer and seller are in the same industry and seek to drive synergies, are gaining more attention, a bellwether of positive sentiment.
“Deal making, it’s great for the selling shareholders, it’s great for the intermediaries involved,” Kawaja said. “But more importantly, it’s really the flywheel of innovation…It’s one thing that we as a country do better than anyone else on this globe and it’s a strategic advantage and we should lean into it.”
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