The Next Ad Tech IPO: Questions For Matomy CEO Ofer Druker

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ofer-druker-matomyIsrael-based performance network Matomy on Monday signaled its intent to go public in a letter filed with the London Stock Exchange.

As we noted earlier, the company aims to raise $100 million at a valuation of around $400 million. The filing also revealed Matomy has 388 employees, and more than 1,500 clients.

Matomy's business is a three-legged stool consisting of a publisher network, an affiliate channel and a programmatic sales channel supported by a global partnership with AppNexus. Within these buckets, it supports multiple formats including desktop display, mobile and email. It hopes to become the world's largest company focused on performance-based digital ads.

The company has made four acquisitions since 2011 (Adotomi, Mediawhiz, Adperio and MobAff), and has raised $17 million in venture funding from Viola Private Equity.

Druker spoke with AdExchanger.

Note: This conversation took place before Monday's filing. It has been edited for length and clarity.

AdExchanger: What is Matomy?

OFER DRUKER: The idea behind the company was to offer a risk-free way for advertisers to reach a digital audience wherever they are, and to work with publishers on a rev share – not to pay them for the impression. All the targets are aligned through the advertiser through us and through the publishers. All of us want to generate results, otherwise nobody gets paid.

We've built a huge ecosystem with three elements. One of them is the network, the second is using exchanges to buy traffic you need, and the third is affiliates. This is a good mix because you can collect data from one area, and use it in other environments.

What problem does the company solve?

Online advertising is very fragmented and becoming more fragmented, because there are many more channels and formats where people spend their time. Six years ago there were no social networks. Video was very small and niche. Gaming was big, but it was mostly casual games with fewer advanced games than we have today. Advertisers need to be on so many platforms.

Another thing, most of the marketing departments at giant companies are not big. They're only a few people. Five or seven, not more. And these marketers have a lot of pressure from their managers to be on every platform. If you are not on mobile, social, search, email, display and affiliate, it's very problematic.

They need a simple solution. We saw an opportunity to build a multichannel approach and let clients work with us through one point of contact. It's giving them something very basic. They can match apples to apples. They understand costs in every channel and how much it costs to get a customer.

How is growth?

Matomy is growing very quickly because it creates a win-win for all partners. It's a big world, but it's a small world. If you are fair and honest with your partners, people will trust you and keep working with you and you will grow. If you are not being honest or not paying publishers on time, they will move away. I have people that [have been] working with me since 1999. We trust each other.

You will never find me saying we are "the best" or "leading." I don't believe in talking, I believe in building. We are growing top-line revenues by 20% annually. When you are growing the ecosystem, you need to be global, and you need to be efficient in how you are working in order to keep your margins and profits.

What's your acquisition strategy?

With acquisitions we are looking for four things. I call it the four C's. You need channels, capabilities, countries and clients.

When we came to Mediawhiz, for example, we saw an opportunity around email and around new verticals we didn't know. Mediawhiz is leading in the performance verticals of education, finance and health/beauty. They have top-tier clients in those areas. They have channel and capabilities expertise we wanted.

Two years ago we recognized there are three elements that will move faster than the rest of the industry. They are social, mobile and video. We moved people and built capabilities around these trends. And in some cases we made acquisitions. The last acquisition we did was Adquant, previously called Adotomi, a company that does performance media buying in social.

We will continue to grow in part through acquisitions. Most of the deals we do, we are not buying 100% of the company. We leave some shares with the people who built the companies, so they have a mutual interest in building the companies further.

Talk about the partnership with AppNexus.

You don't always need to build everything from A to Z. If you do that, you won't be able to compete. We have 70 people on the technology side, we're investing a lot there. But whenever we recognize that there is a piece of technology that is more robust – Well, there is a term: NIH. It stands for "Not Invented Here." There are a lot of people against that idea, but if you have a commodity or a system that can give you an edge, you should use it.

That's why we're connected with AppNexus and a few other companies. You need to choose your battles.

Companies like AppNexus give a lot of freedom to build unique stuff. In mobile, we chose to work with AppNexus to build an offering there as well. We believe the supply in this platform would be difficult for us to achieve independently.

What's been AppNexus’ impact on the business?

We started working with them last May. The impact on the business has been amazing. CEO Brian O'Kelley is really unique. Last Friday I sent him an email, noting four points we can improve. In other companies, if you send an email like that to a busy many like Brian, you'll get an email after a month. After five minutes I got a response, asking other AppNexus employees to resolve the issues within a week.

Things are moving quickly in both display and mobile. In 2014, we will see a jump in revenues from AppNexus, because we've already proved the concept is working and we're connecting up the platform.

Any thoughts on the survival of publisher networks?

Programmatic buying is great, but when you have your own media, your own network, it creates an advantage in the form of data perspective, and an ability to know the market and predict success. When you are buying inventory [programmatically] in liquid fashion, you are not able to repeat the location you bought yesterday because someone may outbid you tomorrow.

Two years ago, people said the ad network model would die, and the advantage of working with the network will not exist. You'll be able to buy the traffic anywhere you want, and you won't have to manage the publisher relationship.

As an ad network, when you have a relationship with the site, you can do better things. And when you are managing a network, you can export the supply you don't need to exchanges, and you can bring supply in from outside.

Any thoughts on ad tech IPOs like Criteo's?

I think Criteo is an amazing company. I'm glad to see a very successful company, that is a real company, getting into the stock exchange. It's building the confidence of bankers in our world. Before the last wave [of IPOs] – Rocket Fuel and Criteo – there was only ValueClick and a few other small companies. Investors and bankers didn't look at this industry.

The way bankers look at this industry going forward will depend a little bit on margins. Rocket Fuel's margins keep going up, Criteo's are lower.

In our business, as with any business, you have a lot of parameters you need to check. It's not just one. A company could have lower margins but be healthier in terms of relationships with customers and partners. In any industry, when the product becomes more of a commodity, margins go down. You need to become more professional to build a stable and profitable company.

One year after we launched the company, we were profitable.

Enterprise marketing software companies are looking closely at ad tech. Can you see a future where marketing tech stacks and ad tech are more closely aligned?

I think so. When we see fashion companies and other companies spending more on performance, and not just engagement, they'll need more granular data on consumers and where to reach them. I'm not sure how long this will take, but it's not too far off. You'll see more companies able to connect their CRM to media buying capabilities. Companies will want to move toward transparency and results.

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