The average lifespan of an ad tech company is just 6 years

6 birthdayFlickr CC/American Candy Stand Cupcakes (Aust.)For ad tech companies, your 6th birthday is likely to be your exit year too.

There were 262 ad tech exits in 2015, according to research from US-based ad tech firm OpenX, which published a blog post today looking at how consolidation in the industry is expected to “continue apace” over the next few years.

Archie Sharma, OpenX’s director for corporate strategy, pooled the PitchBook database and public findings on the number of ad tech companies founded each year, plus the total number of exits (through IPO, acquisition, or simply going out of business) each year since 2001.

Sharma estimated the average lifespan of an ad tech company is just six years.

He used a linear fit model to determine that there was a “strong correlation” between the number of companies exiting in a year and the number of companies founded six years ago. Most (82%) are acquired, fewer than 5% IPO, and the rest (13%) fail and shut down.

Fewer than 5% of ad tech companies have survived past 10 years. (OpenX, incidentally, is 8-years-old.)

Sharma used the linear fit model to estimate there will be 211 exits in 2016, 248 in 2017, and 190 in 2018. In 2020 he thinks there will be just 22 exits as mass consolidation leads to fewer companies in the sector.

The estimates chime with a number of predictions from the across ad tech community in recent months, suggesting the sector is undergoing a “shakeout.”

The types of companies that will last out that big consolidation wave? Perhaps predictably, those with healthy funding and net revenue of greater than $100 million per year.

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