Fiksu Leveraging The Algo For Mobile Marketing And Downloadable Apps Says CEO Adler

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fiksuMicah Adler is CEO of Fiksu, a mobile marketing technology company.

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AdExchanger: How did Fiksu get its start?

MA: Going back about six and a half years now, I was a full‑time academic as a professor of computer science at the University of Massachusetts in Amherst, in an area of expertise around algorithms, combinatorial optimization, analysis of randomness and a number of things that might sound somewhat esoteric but actually ended up being very relevant to the stuff that we're doing here today.

I had a non-standard path through academia in that I went through the whole tenure process. I got tenure and as soon as I got tenure, I left and haven't been back since. What happens when you get tenure is that you typically get a sabbatical. I used the sabbatical to found a company which I would describe as ad search engine arbitrage -buying up ad space on Google, Yahoo, MSN and six other search engines. Basically, we were getting more money out of the clicks than we were paying for them. This company called CourseAdvisor was doing this in the for‑profit education space so it could also be described as search to .edu lead gen.

We took a technology and algorithmic approach to the marketing side of things and I brought in a team of 16 PhDs to work on the core algorithmic search engine marketing technology. We built a pretty phenomenal system for search engine marketing and sold the company almost exactly two years after the launch to the Washington Post.

Along the way, I founded a second company called Adverplex, which does similar things - not just in the for‑profit education space but across a number of verticals. About three years ago, I caught the mobile bug and did a little bit of looking at the size of the industry and how big the industry was going to go and how pervasive mobile was going to be throughout our lives and our commerce. The numbers that came back in the research that I was doing were just absolutely astounding - how big and how important mobile was going to be. Basically, I dropped everything else I was working on and decided it's time to get into mobile.

So, what problem is Fiksu solving?

The problem that we solve is helping app marketers generate large volumes of downloads – and not just downloads, but loyal users for their mobile applications. We do it very cost effectively. In a word, it is discovery. We have a unique and powerful solution to the discovery problem.

What can you say about Fiksu’s target market?

There's no single type of company that is better or worse suited for us. It's anyone that has an app and a willingness to spend money on marketing that app. If you're three guys in a garage and you don't have a marketing budget, that's not interesting to us. If you're just trying to grow the business organically and virally without spending money on marketing, there's nothing for us to do in that case. But as long as you have a willingness to spend your marketing dollars for your app, we'd love to work with you.

That said, the customers that end up being our best long‑term customers with the best long‑term relationships with us are those that have a clear notion of what the value of the user is. And I'm not talking about a download because downloads can vary greatly in terms of what the quality of that download is, but somebody that's actually engaged with the user, what we typically refer to as a loyal user.

Is there a B2B application or is it all B2C in your opinion?

We as a company work B2B but we help the second B in that, if you reach C. So we're B‑to‑B‑to‑C. In other words, we would work with Groupon to help them reach their customers. We haven't done any B‑to‑B‑to‑B type deals. Really we would be much less effective in that kind of a scenario. It is helping them reach consumers.

What about a competitive set right now?

There's certainly no one doing exactly what we're doing. I think there are people trying to move into the space. I'll give you the closest to competitors that we see out there. We definitely do see agencies doing media buying in the mobile space.

Can you share a use case on how your platform works?

The short version is that in terms of the use case, there are lots of apps, and marketers behind those apps, that want to grow their audience. They want to get people to download the app and engage with it. As the mobile app ecosystem has grown, what's happened is that there are more channels and companies that you can go to in order to acquire users. So you can go a company like AdMob that's a mobile ad network, place ads on their network for your app, and hope that people will click on those apps, and as a result of that click, download and engage with your app.

There are other sources of downloads such as incentivized download providers like Tapjoy. There are real‑time bidding exchanges, such as Nexage, MoPub and Smaato. Basically, what's happened over the last couple of years is that the mobile app promotion ecosystem has gotten very complex -  a lot of different types of players, have different ways of purchasing applications.

What we are is a platform that sits on top of all of that complexity. What I mean by that is that instead of you as an app marketer trying to work with dozens of different sources for downloads, what you would do is you would work with us and we would be a single point of contact into all of these different sources of downloads, the entire mobile app ecosystem. One‑stop shopping.

Then, what we do is there are some logistical things that we do to make things easy. It's a single access point for reporting and single technical integration. So instead of having to integrate with every ad network, you can integrate with us and we'll plug you into all of the different ad networks.

In addition to that, there's a fair bit of algorithmic technology that goes into making the buying process as efficient as possible. Specifically, we work with the individual sources of traffic to make sure that the traffic that we buy from them is as efficient for the application as possible. There's a good amount of technology doing what we call "real‑time allocation," which makes the decision as to which source to buy traffic from at what time and at what cost, as well as making sure that we're doing so in a way that leads to the best quality traffic.

Then, finally, we pay a lot of attention to the impact of the traffic we buy on the app store. In other words, as you buy traffic, that purchased traffic can raise your rank within the app store, in search results, category lists and the top overall lists. The higher you are in the rankings, the more people will find you without clicking on the ads and without you actually paying directly for those users. What that does is it helps defer or helps reduce the incremental cost per download, because you're getting all of these free downloads in addition to the ones you're paying for. What ties the whole thing together is that we're not just generating downloads. We're generating loyal users. So we both track, report and optimize around loyal usage as opposed to just downloads.

What is a loyal user?

It depends on your app and what you're trying to achieve with your app. The default, if you will, if you don't have anything more specific, is we'll track launch counts and say that this user has launched the app at least a certain number of times. Maybe it's 10 times. Then, they're fully engaged with the app at that point.

We put those kinds of users into a different bucket than someone who just launched the app once, was not enamored by what they saw and was never seen again. So we are able to generate loyal users not by making any changes to the app but by placing ads in those places where the clicks that you get on the ads are more likely to turn into loyal users than other places.

Stepping back a little bit, what kind of trends are you seeing in the mobile display space, whether it's app or mobile web based?

There are a few things. We are seeing a maturing of the industry. It's become big in the last couple of years, but it has been the Wild West. The three specific examples of this kind of maturing that we're seeing are a significant movement towards better automation of processes. Even more specifically, within automation there is definitely a movement towards exchanges, real‑time exchanges, real‑time bidding, supply side platforms and demand side platforms. Exactly what we've seen not that long ago, even on the web, is starting to happen in the mobile space. That's one thing.

A second thing is we're definitely seeing brands, established advertisers engage with mobile in a real and active way. Until fairly recently, they have been advertising in mobile but it's been as an experiment.

The third indication of maturity is just the way that privacy is being handled and the awareness around privacy. There have been a lot of discussions of late about UDIDs, private information and tracking. I don't think any of those questions are fully resolved or fully answered but I do think that everybody in the industry is aware that they are issues. They know that there are certain things that we do need to be careful of.

What can you share about some of the attributes of effective marketing campaigns that generate these tens of thousands of app downloads?

At the end of the day, one big thing is clear: metrics. It's always difficult to be successful if you're not clear on what you're trying to achieve. That is something that we saw change in 2011, where people became more aware that there should be a clear objective and we should be measuring whether we're achieving those objectives.

In order to do so, the tracking piece and attribution piece are crucial. “I spent this amount of money on these downloads. How did they do for me? Did they convert into loyal users or were they just completely worthless?”

There is a huge degree of variability in quality of traffic, too. When you speak about conversions in some other spaces, it's very much the case that all conversions are treated equal. If your definition of a conversion in the mobile space is a download, there's actually a huge degree of difference within the quality of a download, specifically if we talk about the propensity of a download to convert into a loyal user. We've run hundreds of campaigns for a broad variety of different types of apps. What we've seen consistently for all of these campaigns is that the quality of traffic, the propensity to convert from a download into a loyal user between the best source of traffic and the worst source of traffic, varies by an order of magnitude, almost across the board.

We've seen few examples where that isn't the case. If you're buying traffic from one source, that conversion rate might be three percent; on another source, it's 30 percent. It's that big of a difference. So if you're A) not clear on what you want to achieve and B) tracking it for a deeper metric than just the download, you have no hope of being successful.

So the term "demand‑side platform," is that type of service part of your technology?

Traditionally, demand‑side platform has referred to a platform that buys from exchanges on behalf of advertisers and does real‑time bidding on these exchanges. As part of our offering and part of our ability to tap into a broad variety of traffic sources across the mobile ecosystem, we do have a demand‑side platform in that traditional sense, in the real‑time bidding exchange sense. Certainly, I would say that a portion of what we do incorporates a DSP in the traditional sense. I would go a step further than that in saying that we have a pure DSP product, but we go broader. We will buy traffic from any source that's attributable and cost‑effective for our clients.

Many of these traffic sources do not have real‑time bidding capabilities yet. So if your definition is a bit broader and is on the demand‑side, working with advertisers and helping them buy traffic in an algorithmic automated way, then yes. The full product is a DSP and certainly that's the place in the ecosystem that we set. I'm sure you've seen these block diagrams of the advertising ecosystem. They've done the same thing for mobile. The bucket that we typically get placed in is exactly the DSP bucket. But in some ways we're a broader offering than just a traditional DSP.

So how do you make money?

We actually look a lot like a DSP as well, in that we just charge a fee that's a percentage of media spent.

Then if you're charging a percentage of media spend, how does the incentive work?

Yes, that’s a good question because that model actually doesn't directly incentivize us to be incredibly cost effective. The way that the incentive works is that we start off with a small test with a client: "Don't commit to something long‑term. Try this for a bit and let's see what the results look like." What we have found universally across all the clients that we've worked with is that they'll see that the results are much more cost effective than they would be without us in the mix, even including the fee that we add.

The incentive is that we want to do a good job for our clients. We know that our clients won't stick with us if we're not doing a good job. The results are great. In fact, we're working with all of our beta customers from a year and a half ago. So you're right, there's nothing about the cost structure that directly incentivizes us. It's more the business model that incentivizes us.

So where do you stand today in terms of employees, profitability, funding?

We’re currently about 80 employees, including a couple of contractors. In terms of funding, we had some angel funding. We did take one institutional round, which was led by Charles River Ventures, and that was November of 2010. There was about a bit over $5 million in that round. We are not currently looking for more funding.

Thinking out maybe 12 to 18 months from now, what milestones would you like to see the company to have accomplished?

Where I would like to be a year from now, if not sooner, is for anyone who thinks about promoting in the mobile space, the first thing they think of is doing it with Fiksu, regardless of whether they end up working with us or not. There's definitely this thought about market leadership.

For people who know the space, we've gotten there. But the challenge is that there are 100 new companies entering mobile marketing every week. So you have to keep re‑educating the space. I’d expect, let's say 18 months from now, that we'd probably be, in terms of headcount, easily twice the size. If you look at the size of the mobile space, the mobile app space, even going out further than that, if you're looking at 2015, the projections that I see for that year are that the size of the app ecosystem. It will be tremendous: 100 billion downloads per year, $100 billion industry. It's a significant piece of the economy. We'd love to be a big piece of that and help our partners be big pieces of that as well.

By John Ebbert

Follow Fiksu (@fiksu) and AdExchanger (@adexchanger) on Twitter.

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