Marketers want simple. It’s time-intensive and costly to build banners of all different shapes and sizes when they want to run a cross-device campaign,” said Eric Franchi, Undertone co-founder. “That’s the problem that needs solving.
There are essentially two paths in the lifecycle of an advertising technology/digital media business when it comes to the big questions on when to raise money.
Path A is most common, thanks to a healthy funding environment that still exists for ad tech. Have an idea, raise some money, build the tech and go to market to validate via customer sales. The ideal scenario, which happens in the minority of cases, is that the market likes it. Next step is either raising more money and becoming a pure play technology business or take the technology and combine it with a media offering and build a digital media business. The reality is that this linear path is rare and most of the time, companies get stuck somewhere trying to find a model that works on their investors’ dime.
Path B is less common. Thanks to the ubiquity of ad serving solutions that are available to “rent”, it is fairly easy to take an idea to market from the start completely bootstrapped. For example a mobile rich media play. Assuming the distribution channel is in place, a company can skip right to validation via direct sales, channel partnerships or a combination of both. And once the right formula is in place, that company has more choices: either raise money and be in a much stronger position due to that early traction, or self-fund and build out the technology that truly meets the market needs that are clear from time spent in market.
I am completely biased since Path B is the one we chose at Undertone but I believe that it leads to a more differentiated and stronger offering in the end.
Last night, as I reflected on the flurry of recent news about the Facebook Exchange (FBX) moving into the News Feed, it dawned on me that you really don’t hear much about standard display units - good old banners - in the context of real-time bidding (RTB).
Even beyond FBX, the discussion about banner-based RTB has sharply declined. AppNexus’ latest partner summit was largely about mobile. Most of the supply side platforms (SSPs) and exchanges are talking about “programmatic guaranteed/direct/reserved”.
You know when Darren Herman, Terry Kawaja and Ari Paparo and others chime in, something’s there… but what’s interesting is that opinions are split.
Some think that there’s lots of hype and that banner-based RTB is driving much of the growth. Some think the exact opposite.
What’s going on?
I think it’s going to be interesting to look at the data at the end of the year if RTB budgets grow as forecasted AND FBX scales.
Last year I posted a quick piece on the trend of big retailers and Ecommerce companies moving into digital media.
Since then we have seen things continue to play out with eBay being the most recent expansion into the market.
eBay was very visible at Ad Tech in San Francisco earlier this year.
One thing that is not discussed enough - credit to Terry Kawaja who has been evangelizing it - is this: Ecommerce is a trillion dollar business that may start driving more innovation and opportunity in digital media.
Think about it. Premium publishers such as Conde Nast’s are demand generation vehicles. Imagine if they were able capture some of the dollars generated by their efforts? What would it take to do it?
It’s an incredible opportunity.
In business there are ‘and’ markets and there are ‘or’ markets.
I define ‘or’ as markets where based on the need the customer has to choose. It’s company A or company B. For customer CRM, which feeds into marketing, accounting, workflow and all other business processes you are either going to use Salesforce or SugarCRM, for example (after a full assessment of course). Payroll processing is another example: Paychex or ADP. It would make little sense to use both.
Digital media is mostly an ‘and’ market. No matter the objective (brand vs. DR) or media acquisition model (direct vs. programmatic), a variety of media properties and partners are used to build reach and frequency, optimize, etc. Even on the technology side of things, with vendors having such varying capabilities and offerings such as DSPs, you often find that multiple platforms are being used. Probably the only ‘or’ decisions in digital are in ad serving (Doubleclick or ATLAS) and media logistics/workflow. Similar to the CRM example, the switching costs are extremely high.
The ‘and’ nature of digital means that its unique.
Mostly it means that things move faster. Planning and sales cycles, redistribution of funds, inventory management, product releases, marketing… everything moves fast.
It means that there is more opportunity for startups and new companies. People love to hate the clutter, confusion and LUMAscapes but the fact that things move so quickly, switching costs for most things are low and buyers like options is a boon for companies looking to start up and quickly gain traction and attract investment.
It also means that the rules of engagement in the field are a little different. Everyone is competing but it’s also a relatively congenial environment, particularly since with the speed of transactions and innovation partner opportunities abound.
I find that unless they have worked in an ‘and’ market it’s something that investors and execs new to the space need adjusting to. And to be honest, since I’m having trouble coming up with a single B2B example of an ‘and’ market, I can understand why. Maybe it’s us!
This week the senior management team at Undertone met offsite for our quarterly business review (QBR).
QBRs are a time to review the company’s performance as a whole, KPIs for each functional area, the annual plan, priorities, challenges, opportunities, strategy and big picture ideas. Also, given geographies and travel schedules, it is often the only time our senior team can be together in the same room for more than a few hours.
We have been doing them or a few years now. I think they are something that companies of any size can get a lot out of, but few do them. I highly recommend doing so.
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