YellowHammer And The Performance Marketing Trading Desk

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YellowHammer And The Full-Service, Performance Marketing Trading DeskWith a background in the performance marketing space with companies that included ClickHype and Linkbucks.com, YellowHammer Media Group’s Hagan Major is well aware of the intricacies of the performance ad network model. And now that the model has been transformed with audience buying across exchanges  - though direct-to-publisher deals still exist – Major and his colleagues are growing what they call a performance marketing trading desk.

Major, who is a co-founder and Chief Strategist of the 24-person, New York City-based company, describes the YellowHammer raison d’etre as the intersection of branding and direct response through the development of their ClickHype trading desk.

Major says, “There’s this false dichotomy between performance mindset and branding. You can see it play out with some traditional agencies where they are incentivized to spend the client’s money without regard to performance. On the other end of the spectrum, you have the direct response guys who are incentivized to get the cheapest CPA as they possibly can in order to maximize their profit. A lot of the time, that doesn’t really work out to the advertiser’s end goal. We’re positioning our company at that intersection of branding, performance marketing.”

AdExchanger spoke to Major last week…

AdExchanger: Do you think branding can happen through programmatic media?

HAGAN MAJOR: Yes. In fact, I would say that as the market matures, programmatic media is the most efficient way to get a branding message out, buy “on-demand” and address hard-to-find audience at the drop of a hat. It’s perfectly tailored to branding as well as performance marketing.

Do you consider yourselves similar to an agency?

The way we are positioning ourselves is as a full-service, performance trading desk. A full-service component is like an agency in that we do the creative, we do the media buying - all of that stuff that the traditional agency-side does. We also have a large technology team that’s building tools on top of all these ad exchanges to rotate creatives and give our clients full transparency.

The creative system uses situationally relevant data - external data and internal data - to determine messaging to get them sales, permutations in design, call-to-action colors, layout, that sort of thing.

What’s your target market? Any particular vertical?

We have focused ourselves and our tools on national advertisers and are trying to reach people in the local markets. We’ve found that our offering applies equally well to insurance companies, political campaigns. You name it. Really, it’s national advertisers looking to get specific messages out to local markets.

Who are you using on the technology side? The AppNexus’ platform, correct?

We’re pretty much plugged into all of the platform providers. Although I will say that going forward we’re consolidating a lot into AppNexus. We’re on Google AdX, Right Media Exchange  and Facebook. All of the big ones.

Regarding AppNexus’ app marketplace, do you have any apps that you are making available through their platform?

We certainly will down the line. We were going to do one for the last release date but it just wasn’t to the point at which we felt comfortable releasing it. Also, I suppose we’re waiting to see how it’s all going to settle out.

Can you provide a hypothetical use case around how you use a “situational” data set for a client?

Sure. We did a demo for Zappos and, at a very rudimentary level, what it would do in addition to targeting whatever datasets they were going after through products or audience preference, was pull in a weather report and show what the creative it would be like. “It’s going to snow two days from now. Here are some snow boots for you, one day shipping” - along with those permutations, it would do the same with the ad formats, for example. It’s all on a real-time basis and platform agnostic. And, we create lot of tools through Flash.

In terms of data sets and trends you’re seeing, what are you using these days? What’s most important - your own data sets, the client’s? Is it third party data?

Whenever possible, we rely on data sets from the client. A lot of the third-party data – well, it’s sort of like what I was saying earlier. [Third-party data sellers are] incentivized to make data sets bigger in spite of what it might cost [the data buyer]. For a lot of clients who are ROI driven, it doesn’t seem to work well. When we use third-party data, we’ll layer in some of our own data sets in order to boost the effectiveness.

What are some key points of differentiation for YellowHammer?

There’s a layer of knowledge that we bring to the table – of course, everyone says that, so I won’t say that differentiates us. But, the mindset we use in developing technologies on top of the exchanges, through the actual operations that our ad ops guys implement – it’s all return on advertiser spend (ROAS) focused. We try and stretch our deals whenever possible to make our clients as profitable as we possibly can, so they’ll continue to be “evergreen” clients rather than one-offs. So, it’s that mindset of creating backend advertising performance.

Can you talk a little bit about the funding your company has received, if any?  And, what about revenues?

Yes, absolutely. That’s the fun part to talk about. When we started, we had opportunities to raise capital in 2009, but we decided to self-fund because our performance and branding model really doesn’t need a lot of start-up capital. We needed more once we started building tools.

So, we were self-funded and, in our first year, 2009, we did $3.5 million in revenue. The next year it went up towards $11 million, and then the year after that, which was last year, it went up to $44 million.

Today, we are talking to people about our next moves in order to continue to fund this kind of growth. The one caveat to last year’s revenue numbers is we’re taking out [one client deal] in order to more accurately reflect our rate of growth.  If it is normalized out it probably would have been $20 million.

So, with those dollar figures - most of it is media, correct?

Right.

Can you talk about revenue beyond the media?

I will say that we have experienced 40%  growth this year. Next year, it’s anybody’s guess  According to [AppNexus CEO] Brian O’Kelley, next year, we should be growing 63% percent along with the rest of the market. I don’t know if we’ll do that, but those are the numbers that are floating around.

Because of our lack of funding, we’re forced to be cash flow positive and profitable.

Can you talk about the revenue model for your performance trading desk?

We shy away from straight-up CPL or CPA deals, but it does run the gamut. We do have some very good clients that want to grow fast and have their backend metrics locked in. We also have clients that are all for scheduled ad spend, like the traditional CMOs.

I would add to that the campaigns that are tied in to our backend system - where the client is monitoring their return on ad spend and closing buys that aren’t profitable for them or profitable enough - may use the traditional model of a percent of ad spend. But, there’s always a focus on return on ad spend.

Any plans for you to get into international markets or are you just primarily focusing on U.S. clients?

International is part of our roadmap. To that end, in 2012 we focused a lot on the U.K. and in Q1 and Q2 of next year we’re going to include countries like Germany and France, which are hopefully emerging from the financial problems that they’ve been facing. Internationally, the adoption of real-time bidding (RTB), exchanges and programmatic buying is seeing increases in those countries that are outpacing even the U.S. - we see that from our standpoint, anyway.

Follow YellowHammer (@YellowHammerMG) and AdExchanger (@AdExchanger) on Twitter.

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