Abstract
- A shift in strategy. Oracle is exiting the advertising market to refocus on cloud services and software.
- Withdrawal from competition. Oracle is exiting the ad space as it faces integration issues with tech giants.
- Privacy is a priority. Oracle has pulled out of digital advertising due to data privacy concerns.
Oracle's decision to shut down its advertising business despite it being a significant contributor to revenue reflects broader challenges in the digital advertising industry. The move, which comes in part as revenue falls from $2 billion in fiscal 2022 to about $300 million in fiscal 2024, highlights a strategic shift away from a highly competitive, low-margin digital advertising market that is increasingly dominated by the industry's tech giants.
Oracle's advertising business, Oracle Data Cloud, faced difficulties integrating disparate technologies and systems after several high-profile acquisitions, ultimately hindering its ability to compete effectively.
The decision to exit the advertising segment underscores Oracle's recognition of the increasing complexity and evolving demands of digital advertising. Factors such as data privacy regulations, the need for seamless technology integration, and intense competition from the existing digital advertising ecosystem played a major role in Oracle's strategic shift. By closing its advertising business, Oracle aims to refocus resources and capabilities on its core strengths of cloud services, enterprise software and data management to deliver more differentiated value and more effectively leverage its existing infrastructure.
Oracle's Decision-Making Process
Oracle Data Cloud is a key player in the digital advertising industry, established through a series of high-profile acquisitions including BlueKai, Datalogix, and AddThis. These acquisitions allowed Oracle to amass a vast repository of consumer data. The business unit specializes in providing data-driven marketing solutions, leveraging its extensive data assets to provide targeted advertising, audience segmentation, and analytics services to marketers and brands. Oracle Data Cloud aimed to increase the accuracy and effectiveness of digital advertising campaigns by providing insights and tools that enable personalized marketing strategies.
Despite its potential, Oracle Data Cloud faced several challenges. It struggled to integrate disparate technologies and systems acquired through acquisitions, which hindered its ability to offer a unified solution. Additionally, dynamics in the digital advertising market were shifting dramatically, leading to increased competition from dominant players and growing concerns about data privacy and regulatory compliance. These factors ultimately led to Oracle's decision to close its advertising business and shift its focus to its core competencies of cloud services, enterprise software, and data management.
Were Google and Facebook too powerful?
Oracle's decision to exit its advertising business revealed several important marketing lessons and industry insights. First, it highlighted the fierce competition in the digital advertising sector, where even established tech giants can struggle to maintain a foothold. Oracle's exit underscores the importance of continuous innovation and adaptability in a market dominated by industry leaders such as Google and Facebook. Additionally, it highlights the need for companies to stay aligned with their core strengths and strategic vision, rather than diversifying into saturated markets without a clear, differentiated value proposition.
Oracle CEO Safra Catz said in the fourth quarter that the company “decided to exit our advertising business, which had been declining in revenue from $2 billion in 2022 to approximately $300 million in fiscal 2024.”
Layoffs are expected as a result of Oracle Advertising's closure. According to a LinkedIn post from Tom Waits, director of data science engineering at Oracle Advertising, the entire team of data science professionals is currently searching for new employment opportunities. Oracle Advertising has between 1,001 and 5,000 employees listed on LinkedIn, while Oracle Corporation employs approximately 164,000 people overall.
Declining revenues, privacy regulations, and industry changes
Pamika Horsaengchai, founder of San Francisco-based Sapiens Growth Marketing Agency, told CMSWire that some of the main factors that led to Oracle's decision to shut down its advertising business included:
- Reduced revenue: Oracle's advertising revenue has declined significantly, from $2 billion in 2022 to just $300 million in fiscal 2024.
- Privacy Regulation: Privacy laws have limited Oracle's ability to collect and use third-party data, impacting its advertising capabilities.
- Loss of access to Meta data: In 2018, in the wake of the Cambridge Analytica scandal, Meta (then Facebook) cut off third-party access to user data, which dealt a major blow to Oracle's advertising analytics.
- Changing advertiser preferences: Advertisers are increasingly using first-party data from major platforms like Google, Meta and Amazon, reducing the need for third-party data providers like Oracle.
- Legal Issues: Oracle was facing a class action lawsuit over user privacy concerns related to its advertising business.
- Industry changes: Apple’s privacy changes, such as the deprecation of IDFA (Identifier for Advertisers), have further impacted the effectiveness of third-party advertising solutions.
- First-party inventory shortages: Unlike major technology companies, Oracle did not have its own advertising inventory to effectively leverage its data.
“These factors combined made Oracle's advertising business less profitable and less competitive in the evolving digital advertising landscape,” Holsaenchai said.
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Impact on online advertising
According to a 2022 Statista report, global internet advertising revenue is $484 billion and is projected to grow to $663 billion by 2027. Digital marketing market forecasts remain optimistic but may not reflect the current world reality.
Online advertising isn't disappearing, it's simply shifting to new formats and strategies. Increasing privacy regulations, changing consumer behavior, and advancements in technology are driving this evolution. Businesses are increasingly focusing on personalized, consent-based advertising and leveraging new channels like social media, influencer marketing, and content marketing.
Kevin Marcus, CTO at omnichannel marketing platform provider Versium, told CMSWire that Oracle's decision to shut down its advertising business is in many ways a natural evolution of the ecosystem, and highlights the extraordinary competition in the ad tech space.
“In some ways, this development is similar to the meta shift after Cambridge Analytica,” Marcus said. “Small and medium-sized businesses may be able to leverage the latest AI technologies to offer better solutions and carve out a niche for themselves.”
The integration of artificial intelligence (AI) and machine learning (ML) is enhancing targeting and measurement capabilities, making advertising more efficient and effective. The advertising landscape is shifting away from traditional intrusive ad formats towards a more integrated, customer-centric approach.
Marcus said digital advertising is expected to continue to grow over the next few years, while many other forms of advertising, such as print, are expected to decline. “B2C marketers with big-ticket items may find that the high cost of non-digital advertising can be augmented by a true omnichannel strategy that includes print and broadcast, while B2B marketers may find that conferences and exhibitions still provide a significant face-to-face element that has not yet been replaced by video conferencing,” he said.
Will AI startups be the next big thing?
Oracle's move serves as a lesson in the importance of strategic alignment and focus. Companies need to evaluate whether they can compete sustainably in certain markets and consider whether their core competencies align with the demands of those markets. Oracle's decision to refocus on its competitive cloud services and enterprise software strengths demonstrates the need for companies to prioritize areas where they can deliver unique value and sustain a competitive advantage.
“Oracle's entry into the market was an unusual move for a company that has thus far ignored the sector, preferring to be a technology provider,” Marcus explains. “Integrating countless acquisitions is difficult for any company, but it's odd that they didn't try to sell the business or find a buyer. Again, this leaves a gap that could potentially be filled by the next wave of AI-enabled startups.”
The challenges Oracle faced in integrating its acquired technologies highlight the difficulty many enterprises face in achieving seamless technology integration. Successful integration is essential to provide consistent solutions to customers and maintain operational efficiency. Enterprises must invest in robust integration strategies and technologies to smoothly integrate disparate systems and enhance overall service delivery.
Digital advertising can enhance digital marketing
Brian Town, CEO and founder of marketing and branding firm Michigan Creative, told CMSWire that while Oracle's exit from the advertising industry may signal a change, it doesn't mean digital advertising should be abandoned.
“Rather, they must refine their approach, comply with data privacy laws and effectively integrate technology,” Towne said. “While they continue to leverage the strengths of digital advertising, they must also explore other avenues to connect with their audiences and ensure they have a comprehensive and robust marketing strategy in place.”
Towne emphasized that Oracle's decision highlights the increasing complexity of digital advertising, especially with issues like data privacy regulations and the need for seamless technology integrations. “These are challenges we face every day and serve as a reminder that we need to be agile and adaptable in our strategies.” Towne said Oracle's move is a reminder that the digital advertising landscape is constantly changing. “As marketers, we must stay ahead of these changes and continually adapt to find the most effective ways to reach and engage our audiences.”
Oracle's exit from its advertising business also highlights the growing importance of data privacy and trust. In the face of increased regulatory scrutiny and growing consumer awareness of data privacy, companies must prioritize transparent and ethical data practices. Companies that can demonstrate strong data privacy measures and build trust with consumers will be more likely to succeed in a constantly evolving and changing online environment.
Related article: How Quality Score Can Improve Your Digital Advertising Campaign Strategy
Final thoughts
Oracle's closure of its advertising business highlights important lessons for companies in a rapidly changing marketplace: As digital advertising shifts toward personalization, privacy compliance, and new ad formats, companies must regularly evaluate product-market fit, invest in strong integrations, prioritize data transparency, and be agile in adapting to changing consumer behaviors.
Oracle's experience shows that even industry giants must make tough choices to divest non-core businesses and focus on areas where they have a sustainable advantage. By taking these lessons in-house, companies can avoid the pitfalls of over-extension and better position themselves for long-term success by offering unmatched expertise in key areas.
