AWS’ Clean Rooms Announcement Will Force Large Cloud Providers to Acquire their Way to Competition

By Bob Walczak, Founder and CEO of MadTech

Late last year, AWS made the somewhat unsurprising, but nonetheless blockbuster news that they would be providing clean rooms to “help companies across industries easily and securely analyze and collaborate on their combined datasets—without sharing or revealing underlying data.” Clean rooms are just one of the technological concepts stepping in to replace the utility of the cookie. They allow advertisers to reach highly-specific audience sets without compromising user privacy by revealing or compromising first-party data.

In the summer of 2022, Statista reported that in Q1 of 2022, Amazon Web Services controlled 33 percent of the entire cloud infrastructure market. Microsoft Azure took second place with 21 percent and Google with eight percent. Anecdotally, there is clear understanding that when you think of cloud services, often, people think of AWS. If nothing else, the American public is distinctly aware of AWS as the lead sponsor of Thursday Night Football, a recurring sports program you could only watch on Amazon Prime.

Simply stated, AWS is in a prime position (no pun intended) to dominate the clean rooms market through sheer force of their existing cloud services market share.

But what about everyone else?

Until the announcement last summer, the market for clean rooms has been growing at a steady pace, but with no clear winners. Several companies have built clean rooms on top of their existing SSPs; Disney, Roku, Pinterest to name a few. Then there are standalone clean rooms intended for audience building that sit on top of the existing ad tech for publishers, brands and agencies such as Snowflake, Live Ramp’s SafeHaven, InfoSum, Habu, Optable and many others.

Those in the business of data sharing, audiences  and ad monetization aren’t likely to shift their cloud infrastructure to meet their clean room mandate. If I’m a publisher, and my cloud and servers are already with AWS, adding in their clean room solution is a no brainer. If nothing else, I expect it to be a relatively simple install, reducing the friction of cobbling together solutions from multiple vendors, increasing my speed to market.

The one thing none of the players mentioned have is the size and existing market penetration of AWS. Herein lies the challenge, and the opportunity for other cloud service providers who want a piece of the clean room pie.

The most talked about and controversial acquisition story of the day is, without a doubt, Elon Musk’s $44 billion acquisition of the little lite blue bird. Though his personal motivations for the move are still murky, there is one thing that is crystal clear about why Musk wanted to own it. Building a brand new social media platform in the image of Twitter would be expensive, time consuming and without a clear cut outcome. Buying Twitter allowed Musk to cut the proverbial line, taking hold of an entity already with the infrastructure and name recognition to succeed.

If a cloud service provider is thinking about how to solve for clean room functionality, they’re already very late to the game. As Musk well knew, building a solution from scratch would take deep development expertise, countless man hours and the unanswerable question of whether or not the output will result in a profitable outcome. And in the environment described above, the best possible outcome for a product built from scratch might be fighting for the kibbles and bits left behind by AWS.

Stand alone clean room providers are also in trouble if they can’t adapt. Though AWS isn’t trying to replace them outright, they will need to work expeditiously to integrate with major cloud providers to build a defensible position. AWS is forcing their hand to adapt, get acquired or wither away in exposure.

The truth is, the clean room chess game is nearing a checkmate. Unless of course, a cloud provider is inspired by the story of Elon Musk’s little lite blue bird, in which case, they might have a chance at competing through an acquisition.

About the Author

Bob Walczak is the founder and CEO of MadTech, a technology and consulting practice focused on helping brands, publishers and agencies craft and implement effective advertising tech stacks and first-party data strategies.