XTEND Seeing 50% Year-Over-Year Growth As Technology Stack Is Built Out Says CEO Orzel

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Adi Orzel of XTENDAdi Orzel is CEO of Xtend Media, an online display advertising network.

Orzel recently updated AdExchanger.com on his company's progress in the past year.

AdExchanger.com: About a year ago, you suggested that there was a growing importance to the demand-side platform model and exchanges in XTEND media's business.  Where do you stand today in this regard?

We work very hard to increase activity on all existing exchanges (Right Media, Google, Appnexus, OpenX, etc,), and media buying has become a bigger part of our business model as an ad network. I think that the pure DSP model is endangered. The Invite Media deal created a valuation cap for those companies and with the pressure on their margins, most pure DSPs will look to be bought in the next 1-2 years. I like the Appnexus model for offering a combination of a DSP and ad exchange, and I also think more ad networks offering DSP services will start to appear. The pure DSP business model will find it hard to prevail.

Are real-time biddable inventory sources important to your model?

Yes, for both our brand and direct response advertisers. I saw tremendous growth in the amount of non-guaranteed inventory available in 2010, and I think this will continue to grow. International inventory is lagging here, but I think it will change in 2011. Definitely RTB is now more relevant to our brand business, but this activity in our performance business is catching up.

How is XTEND Media business today? Can you provide any details on revenue momentum, profitability, clients? Any year-over-year comparisons?

2010 is a great year for XTEND. As a private company we don’t expose definitive numbers, but I can share that XTEND grew approximately 50% YOY in both revenue and profit and our network serves every month over 20 billion ads across the globe. Entering our 5th year of business, this is significant growth. In our performance activity, we’ve increased synergies with our sister company Adsmarket and recently we’ve announced a reorganization and expansion of our group that will boost our performance business next year.

In the brand business, we’re offering brand safe and premium channels in our network, currently focused in the USA, UK, Germany, Spain and France. We will roll out our premium channels in more markets in the coming months. We are seeing a very positive reaction to that business unit as demand grows for quality inventory at reasonable prices combined with advanced media optimization solutions. A lot of that activity comes from brands looking for performance metrics beyond the click. They see our value proposition interesting as we integrate an additional layer of optimization not always available in their direct media buys, or automated exchange buys.

What are you doing about innovation at XTEND Media? Any strategic shifts upcoming or underway?

We’re in the process of building our own technology stack. Now that we have a very solid data analysis solution, our focus is on building a system that will create better work efficiencies and optimization as we are active across multiple media platforms, and eventually drive stronger performance for our advertisers and publishers. It will be an integrative platform that will work well with other systems we use such as the Adsmarket platform, Right Media Exchange, AppNexus, DoubleClick, and others. The key issues we’ll tackle will be around media optimization which is the core competency of the XTEND business.

Is there enough inventory to reach audiences in all geographic locations using exchanges and aggretators?

Besides the Right Media Exchange which is the only global platform, DoubleClick ADX is pushing large volumes relatively in the different regions, although it’s a portion of what they have. The other platforms are rolling out territories moderately. We start to see more supply in Western Europe from the global exchanges, mainly UK, but also Germany, France, Spain and Italy. There’s also improvement in South America inventory availability. However, other regions are still dormant. Even where we see improvement, the volumes are relatively small to the size of the markets as we understand it. To deal with this, we focus a lot on relationships with local players within the regions. There are some interesting local exchanges / marketplaces developing across Europe that we work with, and I think this will continue. Local players will be dominant in the non-guaranteed local markets, while international platforms will focus on global .com inventory and global media conglomerates’ inventory.

For your performance marketing clients, do you find it important to continue to have direct-to-publisher relationships - i.e. a publisher network?

Our publisher relationship is a strong asset for us. We focus on publishers that deliver strong performance metrics for our clients, and where we can generate high ECPM. In the brand safe and premium space, direct publishers relationships are important to drive demand. There’s more competition on that front than what we saw 2 years ago, although in many cases the promise is far from the delivery when it comes to the yield management platforms and SSPs. For many of our publishers we act as if we are an SSP, as we combine our internal demand, plus demand from 3-4 exchanges and other ad networks. As far as we can see we are quite competitive, but we’re also buying and working with all the SSPs and YM solutions to expand our reach.

In general, do you see pricing models evolving? Are view-throughs important to the performance marketer?

CPM is still the king when it comes to brands. As brands focus on buying brand safe and premium websites, the justification of charging CPMs for a network inventory is there. We actually see higher CPMs across many markets in the last 2 quarters.

I also see a lot more “brand-performance” campaigns where we need to manage a hybrid model. The agency buys at CPM or DCPM, and we’re measured towards both the average CPM price, and the effective CPA goal. I see DCPM and 2nd price auction models taking a more dominant part of this world. Clients will look to bring the advantages of RTB pricing into non-RTB environments, and this something that XTEND can do very well for them. Post-View is very dominant across the German market, most of the performance display business in Germany is based on that. It has some penetration in other markets but not significant. I think post-view is a bit problematic and has to be managed carefully, but in Germany it allows advertisers to see their ads on top tier websites while paying CPA, they seem to favorite that model.

Tell us about your local ad tech community.  What's it like? Strengths, weaknesses?

The Israeli market is very advanced when it comes to the online marketing companies. We have networks, ad-serving companies, contextual targeting, data platforms, and also interesting publishers and advertisers that work globally from Israel. It is a very tight community where we all know each other. In XTEND we work very closely with companies that should have been considered our most “fierce” competition for example, DMG and Ybrant Digital. Part of it evolved around personal friendship.

However, the main reason I think is centered on the fact that we don’t see Israel as our market, rather, the world, and we are all motivated to become a force in the global market. A lot of small startups in Israel enjoy the fact that there are some large media companies here where they can test their newly developed concepts before going overseas.

A year from now, what are some milestones you would like to have seen XTEND Media accomplish?

We’re always aiming for rapid growth in this ever-changing market. In 12 months from now we want to have a strong premium display offering available to our brand clients and agencies directly and through the different exchanges. We are launching our office in Spain this week and we plan to look at more regional expansions in Europe. Last but not least, we’re looking at other mediums like mobile as a great growth opportunity for our group in its entirety and XTEND will take a major part there.

Follow Adi Orzel (@adi_orzel) and AdExchanger.com (@adexchanger) on Twitter.

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