ADOTAS – “It wasn’t like I sat down and said, ‘I’m going to go into advertising!” admits Ramsey McGrory, head of Yahoo Right Media Exchange and North American Marketplaces. “I feel like I lucked into advertising. It has quirky people, technology, psychology, creative people, technical people… It’s a nutty space, it’s a different space.”
Fresh from getting his master’s at Georgia Tech, McGrory was hired by Citigroup and completed its two-year derivatives program. Though he wasn’t a fan of the culture, he’s always kept a soft spot for the actual concept.
“Advertising is often about risk reduction or risk enhancement,” he says. “It’s not exactly the same as the derivatives market; the whole world isn’t going to collapse because I sold a CPM campaign.”
McGrory was in Citi’s highly regarded management training program on what looked like a fast track to a cozy financial executive spot when Citigroup merged with Travelers Group and Salomon Brothers. The higher-ups offered him a desk job or a year’s salary to walk away. Considering he wasn’t thrilled with the world of derivatives products, the latter appeared to be an opportunity.
However, McGrory hadn’t had a chance to contemplate how to use his nest egg when the same person who hired him at Citi (and who is still his friend to this day) called to tell him about an interesting new company that went by the name DoubleClick.
“Nine interviews later, which was the way DoubleClick always interviewed, I took an inside sales job making $32,000 base and commissions,” he says. “Because I had that package I was willing to take a risk and if it didn’t work out, a couple months I could still take off and find something else. Guess my risk/reward ratio was a lot greater then.”
Whenever McGrory interviews someone now, he always asks ‘What’s your risk/reward profile?’ Because that person may be like young McGrory and willing to trade compensation for an equity stake in a company in the hopes that lightning strikes. However, that’s not Right Media, with Yahoo as its anchor. It’s a larger company with more distinct jobs — overall more stability, but less adrenaline.
McGrory himself recently stepped into the shoes of Bill Wise, a longtime Right Media veteran who has moved on to become CEO of MediaBank. One of the last members of the old guard that’s been around before even the launch of the Right Media Exchange, McGrory is not too worried about people leaving. He told his staff when he took over the reigns to prepare for more people to exit — and accept it as a natural part of the business.
This is an industry suffering from a gap in mid-level management, he says, one that only now is beginning to be filled years after the Internet bubble burst. New companies — including those that Right Media is partnering with — are benefiting from a talent exodus from big kids like Google, Aol and Yahoo. For the most part, he notes, those are people looking for a higher level of risk. It doesn’t mean that the Right Media vision of creating a liquid marketplace is dead or even slumming.
“The success of company is if it can sustain past its founders,” McGrory says. “If you look at what RightMedia has created indirectly or directly — indirectly through competitive companies, directly through evolution, with companies building their platforms on top of the exchange — the vision sustains. It continues, it evolves, it expands.”
Bringing a Concept to Life
As the eighth man on the Right Media team, the gambit never felt like a risk for McGrory, especially since the idea came out of DoubleClick, he had worked for Right Media founder Mike Walrath before at DoubleClick and pioneering team were primarily from DoubleClick’s inside sales team. When DoubleClick sold off its media division, Walrath left with it. McGrory saw soon enough the new operation wasn’t doing anything special and followed Walrath.
In an office half the size of the tiny Italian restaurant where we’re eating, McGrory details the foundations of Right Media. The team had a vision of building a better ad server without knowing exactly what that meant. However, they did know overall the goal was to change the process of media buying.
Not all inventory is created equal — the value of inventory is a rainbow based on where, when and how a consumer receives an impression, McGrory explains. To have it all set at one price didn’t make sense, and optimization proved to be mainly a form of suppression — removing lackluster inventory that wasn’t meeting goals and arbitrarily reducing frequency. What if instead of haggling over one price for a swath of inventory, system itself did the negotiating through a decision engine removed such inefficiency?
“The question wasn’t ‘Is it bad inventory or good inventory?'” McGrory says. “It’s what parts would I be willing to pay for such that it would meet my goal?… By allowing price to vary, you as an advertiser get to bid on every single impression; I as a publisher, a seller, got you to bid on every single impression.”
In effect, Right Media was bringing the search market model to display — get enough buyers to bid on inventory or keywords and the value is determined. Say 100 advertisers are bidding on each impression, and it creates liquidity of demand — In theory, every piece of inventory can be priced at its true value, which is what the market says its worth. It took a little less than a year to build up the dynamic CPM platform.
Selling dynamic CPM was painful, McGrory laments, and he would know as he was heading the sales team as they shopped it to agencies. The concept was hard for people to wrap their heads around, and many were using a variety of ad servers at different price differentials. But the value made itself apparent, probably because the Right Media staff had faith in the idea. They were vindicated when the first DCPM campaign, an email registration company, saw a tenfold increase in registrations on the first day of the campaign.
After the initial success, Right Media met the pleas of three ad networks to license the software. Off the bat, the team noticed friction caused as the ad networks were selling inventory to each other, and because of the platform’s design, they would have to remove existing tags before trafficking into the new network.
It was clear the next step was to create an exchange where buyers could create profiles detailing their desires and ad networks could inter-operate via a link on the system, reducing discrepancies and ultimately ensuring a more efficient marketplace. Yield improvement appeared quickly for all parties licensing the software, which suggested the exchange could be scaled. Since the exchange’s launch in 2005, impressions have skyrocketed from 7 billion monthly impressions to now 9 billion daily
Somewhere around 50-60 billion impressions per month in 2007, investor Yahoo (which already owned 80%) came courting. At the time, McGrory says, Right Media controlled 80%-90% of display exchange space, but Google had bought DoubleClick; Microsoft had acquired aQuantive and Aol had scooped up Advertising.com. The thinking was, McGrory explains, if we could get the largest global web publisher to own the underlying platform and be its anchor tenet, Right Media could not only expand the capabilities of the platform, but also the vision of the company.
Check out Part II here