Ad Pepper Media CEO Schmidt Says Affiliate Marketing Remains Biggest Growth Driver

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Ad Pepper MediaUlrich Schmidt is CEO of Ad Pepper Media, international online advertising marketers.

AdExchanger.com: When you established ad pepper media in '99 with your founding partners, did you think you'd be where you are today?  Any memorable strategic shifts?

US: When we founded ad pepper, from the outset we had the idea and concept to build an international network focusing on Online Marketing. In one of our very first sales decks we introduced DR concepts -- combining socio-demographic and online usage data by way of our proprietary ad serving technology. We were early investors in Adforce and co-founders of Adtech, so the importance of technology was always key to our strategy. What we didn’t predict at that stage were the different waves of market consolidation and how certain concepts and companies would emerge as dominant players. The landscape quickly became hypercompetitive and many of our initial competitors couldn't keep up and ultimately went out of business. We are proud to be one of the very few remaining (and most importantly profitable) international and independent networks.

What's your strategic approach today?

Our strategic approach has not changed too much over the past few years; ad pepper media universally focuses on technology and worldwide scale. We want to provide global clients with global solutions while offering specific, customized features as well on a local, regional and national level. We offer diversified formats and continuously optimize based on performance in whatever we do, regardless of advertiser size or a campaign’s scope.  This makes for happy clients who are able to best monetize marketing dollars and drive results.

Key to this strategy again is proprietary technology -- especially owning an ad server like ours where the engine targets, optimizes and generates best campaign results. In a world of enormous media fragmentation and endless inventory supply, automation of targeting and optimization is one part of the equation. The other is client service and campaign customization (whether it is in design, consulting, or multilingual creative). Regardless of advertiser goal -- branding, DR, or order fulfillment -- we are able to help.

You have a dedicated North American team led by Jonathan Slavin.  What are your expectations in that region?

Our U.S. team has had tremendous success over the past two years. The same strong reputation ad pepper media has maintained in 10+ years as a European market leader is now being equaled by our North America division with growth and attention to detail. From New York City to Los Angeles and everywhere in between, feedback from advertisers has been great. Our U.S. clients benefit on many levels from our proprietary technology, targeting solutions, and outstanding client service. The U.S. market is by far the biggest worldwide market and we expect nothing less from our team here to reflect that market size in success and continued revenue growth -- one day making the U.S. entity bigger than all the other countries combined. We have achieved an important milestone already last year when the U.S. surpassed Germany and the UK -- the other two top global markets -- in terms of revenue.

Our new product, the "Semantic Behavioral & Retargeting (SBR) Platform," is unique and has really exciting potential for the U.S. marketing community -- for branding and DR campaigns alike. Advertisers can now segment audience by expressed interest and relevant content environment. The results are outstanding in many cases and will give our U.S. team a big advantage in 2011 and onward.

Beyond display, what do you see as key digital formats to exploit going forward and why?  Does it vary by country?

We see a lot of growth in the following areas: video, ads within applications and of course in social media. We have begun several M&A activities in all of those areas in the past two years and added three new start-up investments to our portfolio; two of them are based on the West Coast and have already gained significant traction. SocialTyze offers social media campaigns and concepts and to U.S. advertisers, Brand Affinity Technologies provides celebrity endorsement strategies and technologies and has been voted as one of the hottest tech and media companies in the U.S.   We own a minority stake in those two companies and will serve as their international roll-out partner. The importance of different formats varies from market to market because each is in a different stage in the online evolution, where some markets are early adopters, others more followers, but in the long run this will level out.

In general, what's your take on the state of the ad server? It seems that given the number of years that have passed since the first ad server, there hasn't been as much innovation as in other areas.

Ad server technology is still the backbone of online media and will remain the core system. After the scaling and bandwidth issues challenged the industry, some media companies realized that the real value of an ad server lies in the data mining. That’s why Google and AOL paid considerably for DoubleClick or Adtech. I believe both acquisitions were among the smarter ones. As ad serving is a classical economies of scale business, the prices dropped to almost nothing and serious new players were not able to enter the market. But right now we see another turning point in this market.

With more open systems and platforms that are combining ad serving with third party data enrichment, media plan verification and targeting, the offering and naming might change, but whether you call it DSP, SSP, Exchange or something else, the basic functionality is still ad serving.

Over the past four years, ad pepper media built up an international well-respected ad server called Emediate. We have expanded the classical functions with semantic targeting, retargeting, media plan verification and brand protection tools where the client can choose which feature he deems suitable on a modular basis. This is the way to go.

Do the affiliate marketing and lead generation businesses remain a core part of your business? How do you see this evolving?

For the fourth year in a row, affiliate marketing has been the biggest growth driver in our company. Webgains, our affiliate platform, has achieved international status with offices in eight countries including the U.S. The model is simple and convincing -- the client pays commissions if an order has been generated. It will continue to grow alongside the ecommerce growth curve.

Lead generation is the most important preceding step in a campaign strategy. We believe, however, only in premium lead generation concepts, where individual users sign up for individual products of interest. We believe that quality lead generation and affiliate marketing will grow more and more together and through our long and broad experience in both sectors, we will be able to play a significant role here.

Is ad pepper taking advantage of real-time bidding environments? Do you see this as a game changer?

It is and we do. We are the first network in Europe that has developed its own customized real-time bidder and through that we will be able to bid on all available inventory in a much more efficient way. In theory everyone will be able to bid on the same inventory and with full transparency, we believe the following trends will get more traction: prices will drop, publishers will not be able to differentiate their inventory by their own brand, edited content will become more and more relevant and companies that can identify such inventory will be the big beneficiaries.

Have you been happy with the results of your SiteScreen ASP brand protection platform product? Why go to market with this product?

It is a cool tool, as we say. Whenever we look at the campaign analytics after we have switched on our brand protection tool (which can classify down to any visible URL) we are amazed at the results -- the unexpected performance of unknown sites and the questionable quality of so called premium sites. All brand advertisers would like to know where their campaigns are really running and how they are actually performing. The more inventory is bought on exchanges and social media platforms, the more important it becomes to have brand protection technology enabled on any campaign.

Any challenges in being a public company? Do you miss your private company/start-up days?

It is a lot of work and expensive plus the level of transparency we are required to provide is definitely not a competitive advantage.  As a public company our valuations are also calculated in a different way than many other players in the industry. We see many private companies that have not proven anything yet believe they should be valued like Google and Facebook. That said, we also see many of them disappearing faster than they arrived. Fortunately we were able to hold on to many positive elements of the culture from our early days, so corporate governance regulations are not running the business; we still use our brains.

If you were a big media, web publisher today, any key strategies that you would put in place that may be overlooked today?

From a very high level perspective, we are always looking for technologies that have the power to change existing business models and markets by applying digital processes or automation to established manual processes or non-digital concepts. As we are not inventors but more scouts, we keep the one's we find for ourselves :-).

Do you see China as the next big global market for digital?  If so, will ad pepper be there?

No one can ignore China these days; the axe of our world shifts eastwards. That said, it is a risky and expensive market that still needs a lot of development. We are already running many campaigns in China and have existing publisher and advertising relationships there, however, we are still holding back with setting up an office there as we know no western company of our size that did this and made any money. We've seen quite the opposite in fact.

Follow Ad Pepper Media (@adpepper) and AdExchanger.com (@adexchanger) on Twitter.

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