Business Insider: This guy explains where the ad tech world is heading
The ad tech space is one of the most confusing industries around. To get some insight, we recently spoke with Traffiq CEO Nick Pahade.
He talked about his company, the future of the ad tech world, and why the recent merger between Donovan Data Systems and MediaBank is such a good thing.
What is Traffiq doing differently then everyone else?
We've evolved the business to being an end-to-end media management workflow platform that allows for you to execute big campaigns across guaranteed display, real-time video, paid search, mobile video, and social. The difference for us is that we're not trying to focus on areas where there's already a tremendous amount of competition and really good companies. We're not a DSP audience based buying optimization as it relates to paid search. We've chosen to work with a variety of different partners. Ultimately, we'll integrate what our clients ask for. We've built this end-to-end foundation to allow all this activity to happen within one interface.
The second piece is we've created an architecture and a platform, and I'm sure you hear this a lot, but it's truly open. It allows us to integrate any third party application, on behalf of our client base, so that's what the platform really is. We've done a variety of integrations. From there, we've built a few products that we think are interesting. We built a budget allocation engine that we're currently piloting with 10 different agencies that we think is a different approach to how guaranteed display on and RTB is currently happening.”
At the AppNexus summit last week, Felix Salmon made a splash because he was wondering if the stats the ad tech industry measure are actually valuable or is the industry saying it's valuable because you can measure these things, and then you put it into a product? What are your thoughts on that?
We agree and AppNexus is a really good partner of ours. A lot of the products that we've built sit on top of the AppNexus infrastructure. I think there is definitely a difference between very good data that's insightful versus what's out there that could be packaged together and say is interesting. There's a great debate. I look back to what marketers are doing in terms of how they are leveraging different data segments, and how affiliate marketers aren't leveraging data. Affiliate marketers are some of the most shrewd marketers out there. If they don't move the needle right away, they walk away. Are they willing to pay a premium for these data segments because it's delivering value? I still think where the industry made a mistake is that we continue to focus on the direct return, which is the very low-hanging fruit.
Do you think there are things you would like to do that you're reluctant to do because the industry as a whole is not ready?
Yeah, I think it's a difficult mindset. Every banker, analyst, marketer that I talk to, we all say the same thing, 'There's way too much fragmentation. The market is ripe for consolidation, and there are a lot businesses out there that aren't standalone businesses.' The industry is starting to move, starting with the integration of MediaBank and Donovan. Yahoo will continue to make some acquisitions as well, but I still think we built our platform in a way that lets companies that are great at what they're doing join our ecosystem. Nothing would make me happier than for them to build on top of something we've created versus having to do it ourselves. And I think that's the big difference that hasn't happened to this industry. There's no Salesforce model, where there's a true open platform versus a lot of out of the box, full closed solutions. Agencies don't want that. They've said that for a very long time, and it's one of the reasons that many of them complained about some of the legacy systems in the space. Agencies typically aren't very well centrally led organizations. Even within the same holding company, one agency chooses to work with one partner and another agency chooses to work with another partner, so rather then trying to disintermediate, we embrace that. Bring the power back to the publishers and the agencies and embrace the fact that they may want to work with 18 different systems but rather than cobble them together, are there ways we can do a deeper integration on their behalf so that they can effectively make a buy across all different things?
Where is Traffiq in 18 months?
I hope we've made significant headway and moving up the food chain with larger agencies. I recognize this uber-platform strategy is not a decision that's made overnight, so we've built our business where there's multiple entry points. There are different ways to engage with us. Holding companies aren't leaving MediaOcean anytime soon, for a variety of reasons, whether it's contractual commitments but we don't see them as competitors. We're actually very happy to integrate with them and then power other components. We're hoping to see significant headway by broader influence over the ecosystem and then wider adoption on our products and ultimately, what would make me happy, is to see agencies and marketers build on top of our tool set that we're offering the market.
What's one thing you're doing better than others?
I don't know if we're doing it better or not, but I have a tremendous amount of passion for what it is we've created and the ability to take that and create real industry transformation.
Where do you see your revenues coming from?
At the end of the day, it's based off a percentage of media spend. It's a pretty simple structure, whether it's a cost per head, or based on certain volume commitments or integration costs. As we launch products, we do look at those separately, but the majority of our revenue is coming from the demand side. There are some things we're working on right now to offer additional solutions to the publisher base but it's a little too early to talk about that.
Do you see that sell side becoming increasingly a big part of your business?
I do think there's opportunities for us, with full transparency, to offer solutions to both sides of the business.
Why is the industry so fragmented?
There's multiple complexities to that. The way advertising has evolved. From a legacy basis that's been technology or operationally led, versus creative and emotionally led, which is great. It's one of the reasons I got involved in the business 16 years ago. With that said, with the complexity that exists in the space, it's hard. I think there's been a lack of technical innovation, specifically in the billpay/workflow side of things that I think adds greater complexity and more fragmentation, but the opportunity now is here so that the industry can scale. If the industry is going to continue to scale, to the projections that Mary Meeker and other analysts continue to put out there, a lot of this needs to be simplified. Allow for agencies and publishers to do for what it is they do well and not get so emotional about some of these things that frankly don't need to be proprietary, agency secret sauce, but rather create standards so that the industry can move forward. It hasn't, for whatever reason, happened yet.
Pretty broad question but how many winners can there be with thousands of companies in the ad tech space?
I don't think there are going to be thousands of winners and I don't think there's going to be one winner. We like what's happening over at the MediaOcean side of things. Obviously Google has made a very strong position in the business, and certainly directly involved in the business. There are a lot of paid search solutions that are trying to go broader into the exchange based media. There are a lot of DSP's that are primarily focused on exchange based media that maybe you're moving into search or social, or in some cases trying to move into display. I think there's going to be a handful amount of companies that ultimately win.
Do you think it's going to be big companies like Google and Yahoo or do you think it's going to be smaller?
Yes to both. I think a lot of the holding companies are moving into this where they're trying to do more of the proprietary themselves. The opportunity there is to work with them on very discrete things. I think there are a lot of large independent agencies that don't want to work with some of the legacy systems because they're not relevant to the businesses they've created. They may rely on some of the large publishers or the ad networks or the DSP's or the Traffiqs of the world as well. I think there's a whole other subset that currently currently does nothing and rely on a variety of third parties from a service perspective. They are reliant on more platform enabling technologies to be relevant and competitive. With others, I think there are multiple ways to skin this cat and I think you're going to see different approaches. I think the industry will benefit from a certain level of standardization but I don't foresee the industry moving in a way such that there is only one solution. I think it's rare, even if we look at other industries.