Rocket Fuel CEO: 'Nerds Are In Charge' Of Brand Media Teams

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12.10.rocketfuel

Since its IPO in September – in which its share price more than doubled from $29 to $62 – media buying platform provider Rocket Fuel has pretty much shot the moon. In November, during its premier quarterly earnings disclosure, it reported top-line revenue growth of 132% and customer expansion from 406 in Q3 2012 to 938.

At the BMO Capital Markets Technology & Digital Media Conference held Tuesday in New York’s Grand Hyatt Hotel, Rocket Fuel CEO George John and CFO Peter Bardwick discussed the reasons behind the company’s growth and how it is set to capitalize on the massive changes that have hit the online advertising world.

Among other trends, John said more companies – including large CPG brands – are putting analytics-oriented people in charge of their media teams.

Here are the highlights, edited for space and concision.

What is Rocket Fuel?

GEORGE JOHN: There are few ways of describing the company. The colorful one is that Skynet became self-aware and instead of destroying you all, it wanted to sell you things. So we use thousands of computers around the world crunching nearly 40 billion opportunities a day to serve an ad to someone online, whether that’s in traditional Web banners, mobile apps, video prerolls or social ads. The goal of the machine is to understand potentially every advertising opportunity. What are the odds that this one gets a response from Mercedes, or what are the odds that this one makes you download the coupon for macaroni and cheese? Whatever the campaign is or whatever success means for that advertiser. Some might just be brand awareness: What are the odds that if I serve the ad for this shampoo right now, later in a survey you’ll say “Well yes, I did know that brand had a nice, new shampoo”? We manage about 12 petabytes globally, so it becomes this big data and artificial intelligence (AI) problem.

A normal company might have a team of data scientists building a model for Mercedes or mac and cheese. We don’t have that. We have Ph.D.s that build algorithms that by themselves tune the delivery of these campaigns over time.

PETER BARDWICK: We don’t sell ourselves as a programmatic solution. We are a solution to help people sell more cars, open more bank accounts, download more brownie coupons. We’re not a programmatic solution, we’re a solution that helps people get more ROI out of their advertising.

What is Rocket Fuel’s company goal?

JOHN: Our goal is to become a significant leader in the rest of advertising that’s left over once you concede search to Google. The rest of advertising is still a highly fragmented space still open to new winners.

How does Rocket Fuel differentiate?

JOHN: You would think customers just choose you based on results, but we’ve found that sometimes the service ranks higher than the results. We’ve invested a lot in sales and account management and analytics functions where – for free, if someone is advertising with us – we have people with good backgrounds in big data and AI. We have data scientists that don’t run the campaigns, but that are looking at broader themes and strategic insights we can give to customers.

We’ve had great results from customers who got promoted or got to present to their CMO based on the insights Rocket Fuel armed them with. So we deliver good results, but we help our customers look smart in front of their bosses or their customers.

BARDWICK: A key for us is we’re not the mobile solution, we’re not the display solution, we’re not the social solution. We use the same intelligence-driven platform for all of those. Just as machines and robots can optimize within a channel, they can optimize between channels in real time. We’re unique in the industry of having that capability on behalf of our advertisers.

Where does most of Rocket Fuel’s growth come from?

JOHN: We reported our Q3, which was 132% growth of top-line revenue over Q3 of last year.

A lot of that is [from] existing customers coming back and spending more. For example, if we hadn’t acquired any new customers over the last 12 months, we still would have still grown 78%. So that’s a pretty nice growth rate.

The beauty of advertising is that it’s cool and fun and there’s a lot of human spirit, but it’s also very rational — if you’re an advertiser running Rocket Fuel and you’re running your media elsewhere on the Web, it’s very easy to hit a button that sorts your partners by some sort of performance metric.

How does Rocket Fuel handle branding goals?

JOHN: Branding is a funny thing. Consider CPG. They’re your traditional brand advertisers. You won’t buy soap online – or maybe you will one day through Amazon. Traditionally they thought of themselves as brand advertisers because they couldn’t measure anything else. They load up on markets and see recall and affinity, measured through surveys.

With Rocket Fuel, early on we developed a product for these kinds of advertisers, where if what you really want [is brand recognition] the robots don’t care if it’s a survey where you’re clicking the box or whether you’re going to the left side of the screen and buying something. We feel that our products are well-positioned for the traditional wants of brand advertisers.

Are brand marketers becoming increasingly interested in measuring sales results?

JOHN: In the last few weeks, I’ve met with head of media of three different CPG companies.

All of them are planning on measuring 2014 media spend against sales lift objectives. It’s kind of like the nerds are in charge now. Their engineers and mathematicians are in charge of the three media teams we met recently.

The head of the analytics team is now the head of the media team, or in one case it’s an engineer they hired to run media. Even the brand advertisers are getting more nerdy and focused on results.

The purest form of brand advertising is you’re running a campaign and you want to deliver it to women 30-45, or whatever the demographics might be, and even those advertisers are getting more serious about measuring afterward. [Their] media partners claim to be delivering to a female audience, but what was the real composition? Even there you can still deliver value by having technology to optimize toward an audience composition metric.

As real-time bidding becomes a bigger portion of the market, can it maintain its rate of growth?

BARDWICK: I expect programmatic to slow down in the same way people stopped trading on exchanges and went back to handing pieces of paper back and forth for selling stocks.

The Pandora’s box is open and what we’ve seen is an acceleration of a movement toward the exchangification of advertising as opposed to the opposite.

How do different channels affect advertising goals?

JOHN: Some tend to encourage a different buying style. With Facebook, it’s funny how quickly it changed. For a while it was about likes and brand pages, and now it’s about ROI from advertising. With Facebook, the advertisers already come with a direct-response orientation – they want to measure ROI on investment.

Mobile presents some challenges because, unlike Web ads, you can serve ads on the Web and later someone will go to the page and engage in a fairly long conversion process. Often in mobile ads, you won’t on your phone, let’s say, go to Zappos and buy shoes. You’ll see the ad, but maybe later you’ll buy on a tablet or PC. So it changes the nature of the advertising demand on these devices, based on what’s trackable.

Video [tends to have] the same buyers who used to buy TV, so they come with a different mentality: I just want this audience. But with the nerds in charge, that seems to be trending pretty quickly to getting serious ROI as well.

How will video advertising evolve?

JOHN: Video is pretty key and consumers are shifting rapidly their consumption in video from traditional broadcast signals to addressable digital devices. It opens up a lot of new opportunities for advertisers. For us at Rocket Fuel, it’s again a matter of what the advertiser is trying to use that format to achieve.

There are a lot of styles of advertising that make natural, gut sense, whether that’s a 30-second spot targeting a demo or a banner ad served on a website that’s about a certain product category. Automotive websites tend to get bid up pretty high because all the car manufacturers want to run ads there.

[Likewise] video historically has gotten bid up pretty high. Advertisers trying to achieve a performance metric tend to shy away from video and go into banners and mobile, but over time I think we’ll see, as there’s so much consumer time and attention and so much more supply, video become more efficient.

How do advertisers need to evolve in order for this to happen?

JOHN: As you start looking at attributing results across formats, if you just measure video simplistically, it doesn’t look great. But you’ll find that the video brought [consumers] to your website where they started engaging. If you do it right, you’ll find that video was really contributing.

As advertisers get better at measuring the contributions of different aspects of their advertising program, this will make the performance-oriented ones want to spend more. Once they understand better the impact on results.

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