This interview is with Frank Addante from The Rubicon Project. Frank has started multiple successful companies; one was funded by Sequoia. Some key points of the interview: Find out about the most exciting vision for online advertising I have seen this year. Discover how the Rubicon Project aims to remove most of the friction from online advertising. Learn how publishers will be able to automatically earn the highest ECPM without having to manually test thousands of CPA offers.
Full Interview Audio and Transcript
Hobbies and Interests: Snowboarding, surfing, basketball, karate.
Favourite Sports Teams: Chicago Bulls, Chicago Bears.
- Blur by Stan Davis and Christopher Meyer
- Who Moved My Cheese? by Spencer Johnson
- Wooden by John Wooden and Steve Jamison
Favourite Entrepreneurs: Richard Branson.
Company Website: http://www.rubiconproject.com
Adrian Bye: Frank, tell us about your background and then a bit about your company.
Frank Addante: The Rubicon Project is actually the sixth company I’ve started. I’ve been through two acquisitions, one IPO, one failure; or as I like to call it, a character building experience. My last company was StrongMail Systems, a venture I self-funded here in Los Angeles and moved up to Silicon Valley a few years ago. We raised about thirty million dollars, led by Sequoia Capital and its still going strong.
I moved back down to Los Angeles about a year ago, and reconnected with the team from my third company, L90adMonitor. If you don’t recall the company, we were the seventh horse in a seven horse race in the advertising space. DoubleClick was the thousand pound gorilla in the space, and within a couple of years we actually became the number two player. We had about 3,000 customers and delivered about eight billion ads per month for them which reached about 65 percent of the Internet population.
We took that company public. We raised a hundred and twelve million dollars in our IPO, reached a half a billion dollar market cap at its peak, and then DoubleClick acquired us. When I reconnected with the team that developed that product, we were looking around the advertising space and realized not a whole lot has changed in the past seven years. There’s been an overall lack of innovation applied to the space. While incredibly large; 27 billion dollars in the U.S. alone, it’s an incredibly inefficient market. I characterize it as the stock market without a NASDAQ system.
So we saw two trends occurring. First, was that website publishers were underserved. A lack of technology exists for them. Second, was the trend toward a growing numbers of ad networks coming into the space. When I was in the space seven years ago, there were 15 ad networks. A year ago there were 100. And today there are over 300 ad networks. Some of these are focused on very niche areas of the market. For example, there is a women’s ad network, a sports ad network, a gay ad network, etc. There are now networks in India and China and Japan. Many of these didn’t exist many years ago.
So what we’re doing here at the Rubicon Project is developing a service for website publishers to better monetize their unsold or remnant ad space. And the way we’re doing that is we’re actually pulling together and aggregating these 300 ad networks that exist on one side, giving them fuller access to the market. And on the other side we’ve got technology that deciphers publisher inventory based on demographic, geographic, and contextual information then understands the strengths of these networks and essentially matches up ad impressions with the networks that are best able to monetize it.
Adrian Bye: So would it be fair to say what you’re doing is along the lines of what Blue Lithium is doing?
Frank Addante: No. Actually Blue Lithium is an ad network who does a fantastic job with behavioral targeting. We’re finding that publishers are working with Blue Lithium, Tacoda, 24/7 Media. Or, they’re using networks such as Google AdSense. They’re using all these services and each of these ad networks has their own strengths. What we do is allow publishers to be able to work with all the ad networks with much more efficiency.
Adrian Bye: So, as an example you might say to the guys in the Australia CPA network, we’ll make it easy for you to aggregate your inventory with us, so you can be the best in Australia. Then, you bring in international advertisers that want that Australia traffic and can monetize it better than anyone. Would that be correct?
Frank Addante: That’s part of it. But, it’s not just focused on CPA. It’s CPA, CPM, CPC, it doesn’t matter. At the end of the day, what we’re doing is taking this publisher inventory and breaking it up into about 9,000 different micro-segments. For example, it could be a female sports enthusiasts in New York. And we use our technology to figure out which ad network is going to do the best job monetizing these female sports enthusiasts in New York.
It could be 24/7 Media this week because they might have a big ad buy with women’s Nike stores. Whereas a few weeks from now that big ad buy moves over to Aquantive, who then might do a better job monetizing that particular micro-segment. So you never know what’s going to cause a ad network to do better or worse on a particular piece of inventory. And what we’re doing is creating a free flow market where networks that perform on certain inventory get more of it. And if they’re not performing on certain inventory, then we allocate that inventory to networks that do perform well on it. Does that makes sense?
Adrian Bye: Yes, it does. It’s interesting and has the potential to really shake up the industry.
Frank Addante: You know, I don’t think so. Today’s industry is pretty shaken-up already. There is a constant churn of advertisers moving money around with different ad networks. Today they spend money among about 300 ad networks. Of course they’re spending more with some and spending less with others. But there’s more money being spread around in more places. And that creates more confusion for the publishers. And in order for publishers to really maximize the value of their ad space, they’ve got to be able to connect to all the funding sources.
Now the second piece of the equation that’s challenging for the ad networks themselves is the constant churn they’ve got in their business. Again, about seven years ago ad networks usually established either exclusive or semi-exclusive relationships with publishers. Those days are over as you know. Today it’s not uncommon for a publisher to work with five, ten, fifteen, or as many as 30 ad networks. What this does is cause a lot of volatility for the ad networks, and creates a lot of churn in their business. They’re constantly trying to maintain this balance of advertiser dollars and buys versus inventory to be able to fulfill it. And what we’re doing is actually stabilizing that equation, not necessarily shaking it up.
Adrian Bye: So, what you’re talking about doing then is commoditizing. You’ll be automating the entire process. Does that sound correct?
Frank Addante: Yes, we are automating the process, but I don’t necessarily agree with the statement that we’re commoditizing it. I think commoditization occurs when a market is saturated. And I think right now we have just the opposite problem. About 80 percent of all ad inventory on the Internet goes unsold. And that’s what’s going to these ad networks today. And when the ad networks get a piece of inventory from a publisher, they’re not able to successfully sell all of it. So there’s a portion of it they sell and a large portion they don’t sell.
A lot of people are arbitrating that excess inventory to other networks. They’re doing this because they don’t want to lose access to that inventory, and they don’t want to just throw that inventory in the trash. And so I think what we’re doing is making it more efficient. Ad networks will get more of the inventory they’re successful with. So if they’re driving high CPMs on say female traffic in the United States, then they’ll get more of that, and if they’re not really focused or doing a good job on male traffic in the United States, they’ll get less of that. So when the effective CPM comes back to the publisher from a particular network they’re doing a better job with, in areas they’re more successful, it means the ad network is able drive more dollars from their advertisers, which of course ultimately benefits the publishers. It’s really just making that process more efficient, and I think we’re a long way away from worrying about commoditization.
Adrian Bye: Your service is not so much about behavioral or any of these other types of targeting. Instead, you’re taking everybody’s advertisers and like networks or any kind of network, and then you’re doing the optimization for the publisher. And then, over time based on performance data, you get a feel for which network performs the best on different publishers’ sites. Does that sound like a more accurate summary?
Frank Addante: Yes, that is accurate. And I think an important distinction here is that we don’t know each of the individual ads. So whatever ads Blue Lithium or Dakota or AdBrite want to serve, it’s their technology that is figuring that out. Our technology simply asks, if we should send over a piece of inventory and what is the publisher getting in return? And at one point does that return start diminishing? So for example, we might send over a million impressions to a particular network throughout the day for males looking at travel pictures. At some point that network is going to decrease in performance. It might be based on the ad dollars they have in the system. It might be because they blew out a certain campaign and it’s over.
So we might start seeing ‘punch the monkey ads.’ And we know that punch the monkey ads aren’t going to convert at as high a CPM rate. And once that happens, we ask ourselves "who else do we think can also monetize this inventory?" So we send that over to somebody else because we’d rather have somebody who has ad dollars that can monetize better than just showing that ad network default ‘punch the monkey’ ad.
Adrian Bye: How hard is it to get people to sign up?
Frank Addante: We haven’t launched it yet. Right now we’re bringing on some early Alpha customers. We took it out to 50 publishers just to get their feedback. And what we found was that 48 of them wanted to sign up and use the service right away. So it was a good problem to have, but we’re trying to walk before we run. We’re trying to turn our early customers into successful case studies. In terms of implementation, typically it takes one of our customers about ten to fifteen minutes to get up and running. It’s just as easy as implementing say, Google AdSense, on your site.
[Update: Since this interview, the Rubicon Project has launched its BETA website and got over 500 sign-ups from websites on the first day.]
Adrian Bye: You could potentially have every publisher on the Internet signed up. This is pretty powerful what you’re talking about.
Frank Addante: Well first, thank you. We would certainly be very happy if every publisher on the Internet signed up for our service. And we think that in order for this to work it’s important for us to work really well with the ad networks and commit to them and not compete with them. If we do that, then we’re solving a big part of the equation for them, which is accessing inventory in a very predictable way. And we’re dealing with everyone from small blogs to large sites. And a lot of these ad networks don’t have the capacity to go out there and manage thousands of relationships with the smaller sites.
Adrian Bye: What percentage do you take?
Frank Addante: We actually haven’t committed to a revenue model just yet. We’re planning to take this thing through our alpha and our beta and have publishers see the type of value that they get from this system and work very closely with them to figure out what that should be. Our reaction though is to make it very performance based. What we want to do is be kind of like the Visa backend transaction platform for Internet advertising, to really make the facilitating of buying and selling advertising between the networks and the publishers much more efficient.
Adrian Bye: So, basically a publisher can say "Okay. Everybody’s been doing a bad job monetizing my inventory. I’m going to stick these guys in and see how it does." And there’s no cost. They just stick your tags in and then they’re off and running.
Frank Addante: That’s correct. People will be able to come to our website, create an account, be up and running that same day within fifteen to twenty minutes of trying out the service just like you like you would with a Google AdSense today. The way the system first starts working is gap filling and cherry picking. It’s looking at where things aren’t monetized and finding ways to fill those gaps and monetize them. There’s so much inefficiency that we can provide a lot of lift to the publishers simply by gap filling.
Adrian Bye: I think what you’re doing here is brilliant. It’s really good to hear someone’s figured out the right way to do this stuff. I actually published an article about this basic concept about three or four months ago. How did you get funding?
Frank Addante: We raised our first round of funding from Clearstone Venture Partners. Clearstone actually invested in Overture if you remember, and they also invested in companies like PayPal, NetZero and Carprices.com. We also decided to go with them because they right down the street from us are here in Santa Monica. The nearness in locale, combined with their experience with Overture, was something that we thought was a good combination.
Adrian Bye: Another question not related to your current company but to your previous one. You’ve taken a company public. So what happens when you go public? Did you celebrate?
Frank Addante: Interestingly enough the company was grounded and very realistic. I think we started the company on good fundamentals. We didn’t start it with venture capital. We didn’t start it sort of chasing the IPO dream. We just focused on building a great business, and it ended up in an IPO. So when the IPO came along, we looked at it as the beginning and not the end.
There were definitely celebrations. We had a celebration the day of, but it was really not much different than any other company celebration we have. We had a happy hour, but we didn’t go out and do anything super extravagant. Later we had an official IPO party where we brought all the office together from all over the world and made a night of it, but it was less about the IPO and more about celebrating our continued success.
Adrian Bye: Are there things you want to tell us about that we haven’t covered? I mean you’re looking to hire people. There’s obviously going to be a lot of networks reading this. What are you looking for? How can people help you, and is there anything we haven’t covered?
Frank Addante: Yeah, actually hiring is something that is a huge priority for us right now. We’re hiring or trying to hire great people. The culture of the company is something that’s really important to us. We’re not just looking for people with fantastic experience, but it’s people with fantastic personalities that we’re looking for. Another area of focus for us is to establish stronger relationships with the ad networks. We do feel we can add a lot of value to them by working more closely together. And then of course, publishers. The more publishers the merrier. We’d like to be able to create as much value for as many publishers as possible.
Adrian Bye: So if you’re a publisher, an ad network, or looking for a job then they should get in touch.
Frank Addante: Yes, absolutely. They can also go to our website at www.rubiconproject.com. We have a lot of information on the site, including a sneak peek of the product (click on "Watch a 3 minute demo"). We also have everybody’s e-mail address posted, if they want to connect with anyone here directly.
Adrian Bye: Anything else you’d like to add in closing?
Frank Addante: No. Thank you very much. I appreciate the opportunity. You have some great questions. I think this is a fantastic interview.
Adrian Bye: Thanks very much.
Frank Addante: Thank you.