Fast Track Interview

Adrian Bye: I’m talking today with Mark Kahn of TRAFFIQ.com. Mark, tell us about yourself and your company.

Mark Kahn: I was born and raised in New York City. After I went to Connecticut College, I worked at Club Med as a scuba diving and water skiing instructor. Then I worked in television news production at the CBS News Room during the Gulf War. I moved to News Corporation and worked in marketing and business management positions, mostly in its interactive divisions, including Delphi Internet Services. I also spent time at iVillage.

Eventually, I joined a paid search network called FindWhat that later became MIVA. I looked after the corporate development activity and acquisitions. I then ran MIVA’s business development group, which was the whole distribution network of over 2,000 partners in the United States and a similar footprint in Europe.

The foundation for my thinking of TRAFFIQ came out of that experience of being in the middle of 25,000 plus advertisers on one side, distribution partners on the other side, and MIVA in the middle. My thinking, along with the partners who started TRAFFIQ, was to create an open and transparent marketplace where buyers and sellers can interact with one another.

Adrian Bye: Being in the middle of PayPerClick at MIVA, a non-transparent marketplace, is what caused you to create an open marketplace?

Mark Kahn: It was the frustration and inefficiency I had seen between advertisers and publishers. That was really the nexus for saying there has to be a better way to do this. Buyers and sellers need more control of the buying process along with more efficiency and transparency, which was really what TRAFFIQ was meant to do. That kernel of an idea morphed into a business plan. We were successful in closing on an initial round of $7 million for funding in September 2006.

Adrian Bye: Let’s take an example. If T-Mobile wants to advertise, they can go into a fairly transparent marketplace and pick what they want to buy? It’s basically like self-served media buying?

Mark Kahn: That’s a really good description. It’s very much of a buyer and seller-controlled environment where anyone can come to TRAFFIQ. They can have visibility to see who the sellers are and who the buyers are through a feature called Request for Listing. Additionally, through this feature, buyers can say, “Here’s the media buy I’m looking to make. Sellers: let me know if you have matching inventory that meets my buying requirement.” The buying and selling activity is matched in the Exchange. Deals are consummated between buyers and sellers if the prices are met and agreed to by both parties.

TRAFFIQ serves as a big dating service between buyers and sellers. It’s built upon the fundamental premise that what buyers are looking to buy and what sellers have to sell is some combination of demographics, geography and category. For example, for U.S. traffic in the health category, my audience is mostly male, my audience’s income level is x, and the audience’s age group is y. Those attributes go deeper to ad unit size, frequency capping, and flight dates. They continue going down that attribute tree. Whatever combination of those attributes you have to sell, or your buyer is looking to buy, makes your traffic profile. That traffic profile is ultimately what you’re buying. As a buyer, you know your market and are buying the market profile that converts best for you and the products and services you are going to sell.

Basically what happens is a buyer will come to TRAFFIQ and post a Request for Listing with information on the particular type of traffic they are looking to buy. The traffic matching engine would identify sellers that meet the buyer’s requirements. The two then correspond through the system. If a deal is struck, a contract is set with certain parameters. For example, one parameter is an out clause, which is set by the buyer and seller. They have a choice of 2-day Out Clause, 3-day Out Clause, or whatever it may be. The creative is loaded into our system on the buyer side. Then, we traffic the ads to the seller, or we integrate the trafficking of the ads with the seller’s ad server.

TRAFFIQ is really an ad-enabling platform that gives back the control to the buyers and sellers. It is not a blind network. Sellers put inventory into the market, and buyers request inventory. It’s a very efficient way of going about it as opposed to filling innumerable calls or going out to ten lunches.

Adrian Bye: Who do you work with directly?

Mark Kahn: We work directly with the buyers, buyer aggregators, or media agencies. We also work directly with large publishers, such as Yellow Pages, White Pages, or Hachette Publishing. We even work with small publishers.

Adrian Bye: It’s an eBay-style marketplace. Do they leave feedback for each other like on eBay?

Mark Kahn: That’s a great analogy. A user recommendation environment exists as well. You can comment on both the quality of buyers and sellers.

The reason we have that feature came from my experience in the blind network world where the network tries to police itself, which is incredibly difficult. We felt that a better model was to have the exchange police itself by the participants who were on it. You can flag somebody as a bad seller, or you can flag somebody as a great buyer.The quality of the traffic they’re selling can also be made available to the market.

The way the buyers and sellers list inventory on TRAFFIQ is completely at their discretion. They can choose to say as much or as little as they want about what they’re selling or what they’re buying.The more you tell the market what you are selling, the higher the CPM price you are going to get.When somebody says I’m a site about health and that’s it, or I’m a site with a large male audience, nobody is going to pay a premium for that kind of buy where there is very little visibility to what they are buying.There’s a direct correlation between the more information a seller provides to the market and the higher the CPM price can go. If very little information is provided, it has the appearance of a blind network and commands remnant pricing.

Adrian Bye: What types of inventory do you sell?

Mark Kahn: We’re fully IAB compliant, so all various IAB standard ad formats and sizes are available as inventory. We also support static ads, rich media ads, or video ads. The listings on TRAFFIQ can be filtered by category, ad unit size, age, gender, education level, household income, geography, ad location, or order size.

Adrian Bye: What kind of percentages do you charge? Are they any kind of monthly fees?

Mark Kahn: There’s a fixed seller-side fee of 30 percent. There is no fee for the buyers. We provide ad serving for free if you don’t already have ad serving. Right now, we’re putting together something similar to a buyer mileage program to accrue traffic credits toward buying activity.

With our buyers, we often provide credit terms. We collect money from the buyer and remit the payment to the seller based upon what the seller delivered.

For example, let’s say I’m selling a buyer a million impressions, and I only delivered on 950,000.You’re only going to be paid for a 950,000 not a million. We serve as clearance provider, and we either default to the reporting system of the seller or the ad server they were using or ours. We track discrepancies and pay accordingly.

There’s always going to be a discrepancy between buyers and sellers in the tracking within an industry standard range of acceptance of five percent. A seller will say, “I saw a million impressions,” and you say, “I saw a million and 50,000.”

Adrian Bye: What do you do in a situation like that?

Mark Kahn: We’re the reporting engine between buyer and seller. We pay sellers based upon what they deliver. We’re really a buyer advocate in that regard. We’re not going to charge the buyer for what they didn’t get. A seller says to the market, “Here’s what I have to sell.”If you under deliver as a seller, that can hurt your performance rating and your quality scores. Also you’re not going to get paid on what you didn’t deliver.

Adrian Bye: Do ad units expire?

Mark Kahn: All ads run on flight dates, which is exactly the way traditional direct sales happen today.You may extend your flight date to cover the inventory. Also, make goods happen all the time. For example, I’ve sold you a million impressions for a week, and we paced the ads. Your ad server doesn’t want to deliver 800,000 or million impressions on day one. You want to deliver equal amounts over the course of the campaign.

If you’re under delivering, our system automatically notifies you of under delivery, notifies the buyer, and provides an option to extend or make-good on the transaction by extending the flight dates.

Adrian Bye: Can you talk about some indicators on the size of the business? You talked about how you raised $7,000,000.Can you talk about what kind of revenues you are at now?

Mark Kahn: We spent twelve months building the platform. We came out with what I would call controlled beta at the very end of the summer of 2007. We went into open beta at ad:tech in November 2007.We’ve been in the market for three and a half months. We’re nearing two billion impressions on the exchange with about a 1,000 buyers and sellers. It’s pretty well balanced between buyers and sellers.

Adrian Bye: Is that two billion impressions for a month or is that what you’ve done since you started?

Mark Kahn: Two billion impressions are available in inventory on the exchange at any given time for buyers and sellers to transact. We grow at about 20 million impressions per week, and we’re signing up 25 buyers and sellers a week. For the most part, our buyers and sellers are what you may call A-buyers with major media agencies, direct buyers, such as eDiets, and sellers such as Yellow Pages, White Pages, the Drudge Report, Timeout New York, and TV Guide. We’re starting to go after the community of the smaller agencies, smaller direct buyers and sellers.

We’re not talking about financials of the company right now because we’re in the middle of a series-B financing round. We are not profitable, but we don’t have any plans to be right now. We’re very much in an investment mode, and we’ll probably continue to do that for at least the course of 2008.

Adrian Bye: Based on the current growth, where do you expect to be in January 2009?

Mark Kahn: We expect to be cash-flow positive and generating about three million a month in gross revenues. If we grow as we are now with a 20 percent monthly growth rate, we’ll probably be in the order of 5,000 participants and 20 billion impressions on the exchange at any given time.

Adrian Bye: What about random inventories? Is there any space in that, or you’re going to be focused around the A-list branding side?

Mark Kahn: We’ve had a lot of remnant inventory aggregators sign up for traffic. It’s a hard model for them because they don’t have clear visibility into where the ads are going to appear in terms of what site and the specifics.

They can certainly list on TRAFFIQ. The question is whether you’d want to buy from them. If you look at TRAFFIQ right now, you’ll see there’s very little $0.50 or $0.30 inventory. It’s a hard model to work on TRAFFIQ. Because we reward transparency, somebody who is managing a remnant inventory stream or saying, “I’ll sell you my personal photo album’s checkout page,” is going to command very low prices.

Adrian Bye: What about buyers of remnant inventory?

Mark Kahn: The buyers will only come if there’s inventory for them to buy. If there isn’t a seller-side inventory, there’s no reason for these buyers to join.

Adrian Bye: Is there anything that we haven’t covered?

Mark Kahn: Building good technology is hard and takes a long time. We’ve been really happy with the development efforts we’ve put into this platform and where it is today. We’ve grown so fast in such a short period of time, and we’re hopeful that it will continue. We certainly see a bright future.