Rubicon: Why Economy Won’t Hurt Online Ad Spend

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money_tree.jpgADOTAS EXCLUSIVE — The newly minted Rubicon Project was created to bring increased efficiency to the fragmented Internet advertising space. The Rubicon Project’s Web-based, self-serve solution aims to give all Web sites the most complete access to the entire advertising market, and its smart-matching technology was designed to match each ad impression with the optimal money-making opportunity. ADOTAS sat down with founder Frank Addante to see how his company’s doing.

ADOTAS: What inspired you to create the Rubicon Project? What did you think was missing in the market?

ADDANTE: Mainly we felt that there was an intense need within the market for a neutral party that would benefit both ad networks and publishers. Online advertising is a huge $27 billion industry, but still 80% of the inventory goes unsold. This is a huge drain in the revenue publishers could be making.

A huge growth spurt in ad networks has occurred over the last few years – there were about 15 ad networks seven years ago and today there are almost 400 different networks. The link between these networks and web publishers was inefficient. There was a huge need for a manageable solution — this is what the Rubicon Project sets out to provide.

ADOTAS: How did your background prepare you to run the Rubicon Project?

ADDANTE: When I started my first company, it was one of the biggest sites on the internet. I noticed that we made most of our money from the online advertising on the site and this sparked my interest in this industry. I’ve now seen the trends and problems from both the web publisher and the ad networks so I have a solid insight on the pain points both sides feel.

I invented L90/adMonitor™, one of the Internet’s most successful advertising platforms for the Global 2000. adMonitor delivered over 8 billion ad transactions per month for over 3,000 customers and reached 65% of the worldwide Internet population. I was actively involved in sales, marketing and corporate development efforts leading to a $112 million IPO led by SG Cowen.

My background aside, the team I have is equally as stacked experience-wise. A lot of us worked together while at adMonitor, so reforming the team dynamic seemed effortless. Since then, we have recruited the best and brightest “athletes” to work for us. The team is incredibly passionate and the results show in the product.

ADOTAS: The Rubicon Project has been likened to a trading desk for publishers and ad networks. Do you think that’s accurate?

ADDANTE: That is one layer. I think we are more like a trading platform. At the core is our technology; the Rubicon Project is a technology solution. Since the communication between publishers and ad networks is inefficient, we do have a trading desk (of sorts) that overlays this, helping to make the communications more simple and efficient.

All day, every day, we have people on the phones with ad networks to help pinpoint what they need. Essentially we help bring networks what they need to fill all the ad space, which in turn makes the demand for advertisers to fill those spaces in the market higher. But it’s necessary to remember that the Rubicon Project is a technology solution first and foremost.

ADOTAS: Can you explain the process the Rubicon Project goes through in mining its data and how the results behoove publishers and ad networks?

ADDANTE: In terms of mining the data, there are three pieces of data we look at: geography, demographics and content. We take those three classifications into account when we analyze each impression. We are then able to classify micro segments from this data. For instance, we are able to tell where ads targeted to male travel enthusiasts or women in Japan will perform the best.

On the ad network side, we certify each of these micro segment using our 21-point check list, ensuring quality, safety and precise targeting. This is all part of our Rubicon Project Certified Ad Space Program. Since we have run nearly 23 billion ads through our system, that’s 23 billion segments we have scored based on our data. Our publishers have seen a 33-300% lift in revenue while doing relatively no work on the optimization side.

Also, since we look for the spots in which ads are best performing, ad networks can sell their ad space to the advertisers at a much higher cost since they have proved to bring in more revenue. When it boils down, we are helping the ad networks make more money while doing less work.

ADOTAS: You’ve said that there’s a huge Delta between the amount of time people spend online (33%) and the amount of ad budgets allocated to interactive ads (7%). How is Rubicon helping to close that gap?

ADDANTE: The answer is really simple – we are helping the industry be more efficient. It is still too hard for advertisers to spend money online and reach the audience they want. So that’s where we come in to alleviate the pain.

As our certification program matures, it is helping to solve the safety and quality issues that advertisers are leery of. We are helping to make the interactive between ad networks and publishers easier as well as taking the advertisers into account, assuring they can spend more money while attainting the reach they want.

ADOTAS: One-third to 50% of U.S. sites see traffic from around the globe – do you think advertisers have capitalized on this and if not, how do you think they should?

ADDANTE: We are seeing the international growth on the visitor side. International advertising will have the ability to capitalize on this. In fact, there was a report recently published indicating that U.K. interactive advertising spending has surpassed what is being spent on television. Clearly the U.K. has been growing really fast. We have also seen China and Vietnam grow steadily. For instance, Vietnam ad spending was nearly zero last year and now it is up to $100 million. As other countries figure out how to use the Internet and monetize their content, I believe there will be steady growth. They may be a few years behind what we’re doing in the U.S. but they will get there.

ADOTAS: How do you think the softening economy will affect online advertising?

ADDANTE: I don’t think it will. Because there is a discrepancy between where consumers are spending their time and ad spending there is a natural reconciliation that needs to occur. The audience is now, for the most part, all online. Meaning, this is where the best reach is and where the ad dollars should be spent. There might be a softening in the overall advertising spend (including creative agencies) but I don’t think online advertising will be affected. Also, because one-third to half of all site traffic comes from international traffic, online advertising as a whole is less susceptible to feeling the repercussions of the U.S. economy.

There is also less risk in online advertising. For instance, big brands are able to execute on campaigns that typically would take more money and time if produced for television. Online advertising campaigns offer the opportunity to produce content at a lower production cost and in smaller fractions.

A great example of this is Google and Overture. I believe these companies thrived (and innovated) in the last recession because they were providing services that offered efficient ways to make money online.

ADOTAS: You’ve said that you think monetizing the social media market isn’t just a matter of time – it’s happening now. Can you explain that?

ADDANTE: Just by taking MySpace and Facebook into account, they are making money and rapidly growing. Advertisers are following eyeballs which are spending time on social networking sites. While direct marketers may not see the benefit of increased spending on social networks, there is definitely positives seen for search and brand marketers. We’ve seen a lot for growth in brand advertising as a whole and, as it continues to grow, I think a lot of that growth will be attributed to social media.

ADOTAS: How many networks do you work with and what avenues of online advertising are they trending toward right now?

ADDANTE: We work with over 150 of the top ad networks. There isn’t one overarching trend in the space that I can pinpoint, but international, behavioral and vertical networks are seeing lots of rapid growth along with display networks.

ADOTAS: The Rubicon Project came out of beta just months ago. Are you where you thought you’d be?

ADDANTE: Absolutely not! We are at least ten times farther along then we thought we would be. Because we achieved so many of our goals so quickly, I joke with the team that we ran out of a plan.

When we began, we knew there was a huge problem, but we didn’t know it was as deep and widespread. The publishers and ad networks we have worked with have expressed their frustrations which in turn showed us where we needed to alleviate pain.

Also, I attribute our growth to the great team. They are able execute on all levels. They built the right product out of the gate and have proved value to the industry. In this industry, when you do good work the word spreads fast.

ADOTAS: Your position gives you a bird’s eye view on the marketplace since you can see all of the rates being paid for impressions on the premier ad networks (including Google AdSense and AdBrite). Who do you think is at the top of their game and why and who do you think is missing out on opportunities?

ADDANTE: Networks that are specializing in specific segments have the most potential in my opinion. Vertical, behavioral and international networks are going to succeed because they are able to provide the most targeted content to their customers.

In terms of who is missing out, I think anyone who has the capability to sell to advertisers is losing out on opportunities. Advertisers who are not spending more money online means they are wasting money on places that eyeballs are not. If they are spending the majority of their budget on magazine and billboard advertising, they are missing out on the 33% of consumer time that is spent online.

ADOTAS: Where do you see Rubicon going in the next year?

ADDANTE: On our two-year anniversary in May 2009, we have an internal goal to make our publishers revenue four times what it was when they weren’t using us. This is our goal because direct sales teams are able to sell advertisements for eight times what the ad networks can. If we get to four times, we are halfway there. Meaning, we are helping the networks make more money and thus helping the market grow stronger.

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