Retargeting Firm AdRoll Plots Its Evolution

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adrollRetargeting specialist AdRoll began its life in 2007 as an ordinary ad network, looking to solve the problems of display advertising that still plague marketers and publishers. The company, which grew out of work with semantic advertising and a history of thinking deeply about artificial intelligence on the part of its founders, CEO Aaron Bell and President Adam Berke. Two weeks ago, the San Francisco company raised $15 million in funding, bringing AdRoll's total amount of investment to $19 million.

AdExchanger recently spoke with Bell and Berke. 

AdExchanger: How did you decide to make the move from ad net to retargeting provider?

Aaron: Our mission has always been to make display advertising work for everyone. Obviously, Google has scaled AdWords to a very large audience of advertisers ‑‑ big, small, Fortune 500, enterprise to local. But no one has been able to do the same thing in display advertising. Back in 2007, around the time we started the company, display was typically made up of two different kinds of advertisers. There were the biggest named brands like Doritos buying ads across premium sites. They would call Yahoo and say, "Hey, Yahoo, we want to put an ad on the front page of your sight for the next three months." Then, Yahoo would put together some rate card for them where they'd go over the prices. There was no performance element to it at all.

DR was 90 percent of the spending online, and about 10 percent of the impressions. The other 90 percent of impressions were just carpet-bombed ads across the web. The DR ads just trying to get eyeballs on the cheap -- dancing aliens, home mortgages, teeth whitening or back hair removal, that sort of stuff. And that  was the makeup of display back then. It wasn't a pretty world; it was crude. Banners got a bad name. We stuck to our guns, and we ended up working very hard on scaling display.

Adam: We started working on that mission and not long after we closed our series A round, there was a big change of events. Lehman Brothers crashed, Bear Stearns went under, and the whole economy pancaked. That was an interesting time to have raised funding.

Instead of expanding our marketing and sales, we focused on product. Looking back at the bad economy, that was truly a blessing in disguise for us. We focused on the few customers that we had. We got very close to them and asked, "In a bad economy, in this awful climate, what would you spend money on?" The answer always was ROI. They wanted to spend a dollar and make five dollars in return.

So you felt that challenge went beyond the regular abilities of an ad network.

Adam: Right. That wasn't possible for legitimate companies working in display back then. That was more of a search thing. So we started experimenting. Around ‘08/’09, we saw the rise of the advertising exchanges, that was the big game changer for us. As a technology company, we were totally fascinated with those concepts. We brought everything together and started testing this out with our advertisers.

Retargeting had just entered the industry's consciousness. It was only being used by the largest brands and agencies. No mid‑sized companies or small companies had used it yet.

We dabbled in it. We didn't know if our customers would be able to grasp the concept, but we found that they quickly did and, after just hours of running our targeting campaigns, they were seeing conversion. We thought to ourselves, "Hey, we found a killer app here, let's step on the gas." We realized  any brand, no matter how big or small, is going to be interested in retargeting.

How did you go about crafting a retargeting platform?

Adam: We focused the company on building a scalable platform for retargeting. It looks a lot like a software as a service platform. It's very friendly. It's totally automated. The pricing is incredible. It lets you do advanced things in retargeting very, very easily, and it's allowed us to grow a customer base faster than anybody else. Today, we have 5,000 active customers using AdRoll. We have the largest customer base of any retargeting company. Our name is really out there and we're finding about 500 customers a month right now.

 So the rise of exchanges made that all possible.

Aaron: It was a fortunate time for a small startup. If we did one thing right, it was to realize that real‑time buying and the exchanges were going to become the future of  display buying. And so, it solved half of the equation for us in that we no longer had to build the publisher network as well as build solutions for advertisers. You can build very deep integration with the exchanges. We were one of the first buyers on Google’s AdEx when that was rolled out. Every online business has that data on their site based on what products people look at, how long they spend on the site, what they do on the site, how long it's been since they've been on the site, et cetera. This platform became all about helping brands leverage that data set.

Some of the same problems afflicting the display market, such as the lack of creativity relative to traditional advertising, remains a problem. How do you propose to address that issue?

Aaron: If creative wasn’t part of campaign effectiveness, it would fly in the face of every possible measurement known to show how advertising works. So I think there’s been a pendulum swing in terms of recognizing the need to focus on ROI and driving actions, and that the best way to achieve those kinds of results is to make sure digital ads [have] dynamic and compelling creative. It seems like an obvious statement, but a lot of people in the industry have lost sight of that.

Adam: Our dynamic creative ad product is called Liquid Ads. We think it’s different from a lot of other retargeting products. We make integration seamless – we have a zero integration policy with our customer, which means that the client doesn’t need to do any work on their side. We have a crawler system that looks at a client’s site and focuses on product description, then delivers it back to us so we can provide overlays and tracking.

That allows us to create ads with product recommendations. It’s all automated. So the software does the heavy lifting, and that allows us to craft beautiful creative work. You won’t see us doing a rinky-dink kind of carousel ad, like you do with a lot of our competitors. The idea is to showcase the fact that every retailer we work with has great product photography. We take that photography and manipulate it, animate it with Ken Burns-like imagery and tones to make an appealing ad.

Where are your 500 new clients a month coming from? Any particular category?

Aaron: Historically, we’ve been focused on the small- to mid-sized business tier. But as our clients get bigger, we’re naturally getting more enterprise business accounts. We’re attracting Fortune 500 companies very quickly.

So now that you have raised a large round, compared to what you started with, how will that enlarge your focus? Are there new areas you want to explore in terms of products, personnel or physical presence?

Adam: We’re investing a lot in R&D, hiring the best engineers we can find. We have a lot of interest in exploring the data side. All of our customers, no matter how big or small, are sitting on a treasure trove of data. And everyone has gotten a lot better at collecting and analyzing their data. And yet, not many solutions can really close the loop, especially between online and offline, to make that data actionable. Customer visits can be the biggest driver of sales and marketing. So we’re starting to build more solutions around that.

We have 85 employees in our San Francisco office and we’re about to double the office’s size to 24,000 square feet.

Aaron: Because we have a true self-serve platform, we get a lot of in-bound customers from all over the world. So we do see opportunities internationally. And that’s all happened organically. In other words, it’s probably easier for customers to use our self-serve system from anywhere, rather than having to meet with someone face-to-face. That said, we do see some value in having people on the ground in certain key areas, so stay tuned for that.

Can you provide any details about profits and revenues?

Aaron: We've been profitable since last year. Last year we grew north of 400 percent. This year we're keeping up our hockey stick growth. A lot of that is because our business looks like a subscription model. Our customers stick around 97 percent per month, and we're adding customers quickly. Month on month, we have double digit percentage growth.

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