Lotame Replenishes Revenue As DMP Transformation Takes Hold

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Having grown an ad network business in two years to a nearly $30 million run rate in 2011, most ad technology executives would have been satisfied.  But, CEO Andy Monfried saw another future for his company, Lotame, and decided to focus on being a data management platform (DMP) only for publishers and marketers to manage data. The change meant closing down the ad network (goodbye, $30 million) to prevent the perception of any conflict of interest related to media buying.

And now, fourteen months later, Monfried says his company has been able to replace all the revenue through a license-based DMP.

Monfried spoke to AdExchanger recently about his company, its transformation and industry trends.

AdExchanger: Can you talk about the changes you’ve made on the “team” side? Has it turned to more of a product focus, for example?

ANDY MONFRIED: We went from selling media to a complete software and support business - building up our account management and professional services – something we did not have before. We hired SaaS (Software-as-a-Service) sales people, not media sales people. We also built product management around SaaS  -- that’s been the addition.

We now have a client-success team, too. Those are things that don’t necessarily exist in a media business. We’ve built them all in 14 months.

What do you think you learned from the media business that feeds into what you’re doing other here as a data management platform (DMP)?

I learned that content matters. Publishers and marketers have tremendous assets at their disposal. It’s about how to manage them and how to work with them to move their business forward.

The biggest challenge in the industry, is how to manage these things. I believe a DMP sits at the center of all of it. Whether it’s ad operations, sales, marketing, analytics and research, a good DMP is a unifying data platform.

What are the data sets that you are unifying today at Lotame for publishers?

There are five or six data points that we’re currently bringing in. There’s first party data - content off the web page or any kind of first party data that a customer owns.

You then can combine that with any third party data source such as Exelate, TARGUSinfo, Axciom, Datalogix and Bizo. Another data set is mobile - mobile, mobile apps, and mobile web.

Still another data set is any kind of offline data that a marketer has. We’re working with the Republican National Committee and Targeted Victory to do a ton of offline modeling and managing through partners to bring in the custom hierarchies in “swing states.”

Also, any kind of web analytics data like Omniture – we’re bringing that into a client’s instance of Crowd Control, our DMP.

The last data set that we’re bringing in that’s fast and furious is CRM data, which is very rich.

Regarding the bulk of your revenue, is it licensing revenue for the DMP? How does that work?

The bulk of the revenue is license fee plus usage. So, customers pay us a small license fee every month. They get a certain amount of usage credits under the minimum.

So, do you consider Lotame a marketer DMP or a publisher DMP?

We are both. We’re serving both customers. We have three or four different kinds of clients. We have major publishers, major marketers, political parties and research companies that are looking to onboard.

We also have retailers that are bringing data online and looking to build profiles from them. And, we have ad networks, too: CPX, Komli in India, Unanimis in the UK, and we just on-boarded a major ad network in South America.

Are you starting to see the marketer move things in-house as opposed to going thru an agency? Any brand teams focused on direct-to-vendor, if you will?

Yes, I am starting to see the data being managed by the direct client as the DMPs are being moved in-house - or they’re questioning whether they should be managed by the agency because it touches more than just media.

It touches all parts of their business - marketing, operations, research and internal decisions. Is an agency equipped to bring off-line purchase data on-line? Can they manage that process? Maybe.

We’re taking 20 million customer files for one client this month - all their subscribers for a magazine - and bringing them online. And then, we’re matching that third-party data against first-party data to get a holistic, cross-channel view.

We’re managing data across multiple platforms from web display, video, mobile, and tablet, too.

So, do you consider your DMP just a paid media solution amidst the “paid, owned and earned” triangle?

That’s all garbage. Media is media, data is data, content is content. For me it’s all a source of information. I challenge people whenever they use the words like paid and owned.

It all comes from the same bucket of users who want to consume information - or users who want to create information. To put up some Chinese line between the two I think is going to fall. It’s all data that can be brought into a platform, as long as it’s customized.

Industry-wide, where do you think we are with data-driven digital advertising? “First inning?” “Third Inning?”

We’re at the top of the first inning, still. The reason I say that is because the total DMP market is still sub 100 million. But for the total market of DMPs, we’re looking at a 20X increase a year in adoption.

The web publishers were driving the early DMP adoption. Marketers are now quickly coming onboard. The largest players are those with offline data, like retailers and financial services, which are coming onboard slowly. Once they do, this will lift the businesses of both marketers and publishers.

The DMP, if used correctly, will only enhance. When second party data is being transferred platform-to-platform, when cookie files are being shared across platform in a seamless way, while protecting privacy, you are going to see an explosion of highly targeted consumers on great content.  That’s what a DMP offers.

The DMP is completely moving past simply being used as an audience targeting tool.

It’s an enterprise engine that sits at the centerpiece of the operation, marketing – and it can inform the entire business.

Where are you with headcount today?

When we had the media business, we had 80 employees. We downsized to as low as about 45 as we were building back up. We’re back to 60 employees and continuing to hire on the engineering and development side, product management and client success. Those are the areas we’re expanding both in New York and Maryland.

Another interesting thing here is that 30 percent of our revenue comes from overseas. We have clients all over the world. For example, it’s so interesting to see ad networks, publishers and ISPs overseas embracing the DMP.

Finally, are you profitable? Do you need to go out and raise some more funds to grow?

We had months this year where we have been profitable. We’re back and forth. We are not out actively raising money, and we have plenty of money in the bank.

Follow Andy Monfried (@andymonfried), Lotame (@lotame) and AdExchanger (@adexchanger) on Twitter.

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