State Of Undertone: CEO Cassidy Discusses Serving The Agency And His Company's Strategic Shift

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State of UndertoneMike Cassidy is CEO of Undertone, an advertising technology and services company.

Cassidy recently spoke to AdExchanger about his company and industry trends.

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AdExchanger.com: People think of Undertone as an ad network. Do you?

MC: I used to, but no longer.

When you ask people in the market, especially agencies or publishers, to define an ad network, I typically hear things like, "Low quality inventory, banner ads, below-the-fold ads, lack of ethics," etc.  You'll hear things about data and targeting, too –some of it is good. And, you'll hear about scale and optimization. But when you look at the definition of an ad network, and then what Undertone does, there's a clear difference.

We've had many clients tell us that they work with Undertone because we’ve built out a portfolio of publishers, which is not through exchanges, portals, and through buying ads from other people. They're hand‑selected. They're curated.

And, [agencies use our] proprietary tools and third-party research, which helps them leverage their own capabilities. We’re innovating with products and doing a lot around data, and targeting, too. We think about it not just from our standpoint, but a brand standpoint, and how can you take a science and apply it to the art.

When I look at all of those things, our business is evolving, and the network definition feels limiting.

It seems you have an important services layer, and that lines are blurring with your agency partners. Do you agree?

Yes. It's interesting because a lot of the agencies are building out network capabilities - whether they are a network in the traditional sense, or not. In some cases, that's created gaps within the agencies for other things. We've been able to help them with a little bit more of the “pure” advertising, by helping them think about concepts and innovation.

So what is the target market right now for Undertone? Has it changed at all?

We work closely with the agencies, and in collaboration with the agencies we work with the marketers. Some firms have gone down the path of, "Let's not work with agencies and let's only work with marketers, or try to."  We view the agencies as partners, not as competitors. That's been one of the reasons why our agency business is still strong. At the company level, the mandate is to have fewer partners, to have fewer working relationships.

Has there been any impact with programmatic buying to Undertone? For instance, have you lost business to the agency trading desk strategy?

When it first came out 18 months ago, it had a negative impact on a lot of people. I think it was a knee‑jerk reaction. The trading desks took a little bit of the approach that "If you're not a publisher or a direct content owner, then you're in a different bucket and we're not sure we need to work with you."

Very quickly they realized that while that works for 90 percent of providers, there is a percentage that do add value. This is where we’ve found our uptick with the agencies. In some ways, the market has started to become less cluttered.

How has programmatic buying affected Undertone's own buying strategy? I would assume that the demand-side platform (DSP) world is something you're taking advantage of?

Yes, we're integrated, and we make some of our inventory available, but our strategy for growth is not built around programmatic buying. Our strategy for growth is built around working with brands, via the agencies and in collaboration. We come up with custom, unique packages and formats that drive meaningful engagement with consumers. There's already so much competition at the bottom of the funnel. While we're focused in some of those areas, we don't think, ultimately, the win is going to be by having the newest algorithm that is repeatable and, in many cases, doesn't even work to begin with.

We're focused on more mid‑, upper‑funnel, and then driving people through the funnel.

For us, our client profile is a brand that has lots of different goals and objectives. Sometimes it's brand, sometimes it's DR.

So on the buy side, you're still using exchanges and SSPs to source inventory for your clients?

We're predominantly still buying direct to publishers. In some cases, we'll use technology when it makes sense for a publisher and for us, but more often than not, we're still contracting with the publisher directly. We're still making sure we know every individual site. We spend a lot of time looking at the site profile. How many ads are on the page? Qualitative and quantitative analysis, but then we also embrace technology when it's appropriate and when it's controllable, and when it's via an individual publisher.

I would say we're the only firm in the market who does not buy ads from Yahoo!, AOL, Google or Microsoft. None of our inventory comes from those providers.

Gotta ask - what were you thinking when you decided that buying a spot on AMC was a good idea?

This was a unique opportunity we felt compelled to pursue. The show is already generating considerable buzz around the industry and provides a platform for us to communicate our vision and brand positioning in a non-traditional and highly unexpected format. The campaign isn’t just about the TV spot, however. TV is just one component of an integrated campaign that has been active and includes tactics such as digital, print and experiential.

There's been a lot of talk around the "advertising OS," "end‑to‑end marketing solution," and then the "marketing stack." What do you think about any of those? Is an advertising OS possible? Is the marketing stack something that Undertone is driving on?

We're builders of technology, owners of technology,and product. We think a lot about R&D, and we invest quite a bit in that area. Sometimes you work backwards, and say "This is what the market needs," and then you start building the pieces. Sometimes you start building pieces and then it starts to evolve into a stack, so we have a lot of pieces that you could say are like SSP‑like, or DSP‑like, but we're not using them to the purposes as they're defined today.

Can you talk at all about revenue momentum for the company?

Without getting into specifics, no surprise, the business is doing well. It's well north of $100 million. It's growing, year over year. We've been investing a lot across the company, so for us it's about building a long‑term business. We absolutely think that there are opportunities for independent companies, or for choices outside of Google, Facebook and whatever other large companies exist. We hear it from our clients and see it in the business results.

We look at ourselves as well‑positioned to do more M&A. We've done some already, and we're constantly looking at new opportunities. We also see that there's a lot of organic growth ahead of us.

And profitability?

One strength of Undertone is we've been profitable from Day One.

Is there any need to go out and get funding, and maybe take advantage of some bigger growth opportunity?

There's no need, but there's potential interest, at some point, in pursuing that. We spent a lot of time thinking about it. Some of the results in the past, of other companies who have tried have been checkered because they've gone too broad. We're trying to go really deep with brand and ride that theme. We look at tuck‑ins. We look at bigger things.

The capital markets are pretty good right now, so there is an opportunity to do something. Are there imminent plans? No. But, is it a topic of discussion now and again? Yes.

It seems like Undertone is driving on creating a network of proprietary formats, in some ways. At some point, do you try to standardize more around what the industry is trying to get at, and hopefully tap into some scale, which is the reason for standardization after all?

You have to do both. Standardization is important, and we encourage it, but clients want innovation, too.  One of the benefits of web advertising is that it can be different. Web advertising's hard because there are more moving pieces: there are more vendors, choices, buzzwords –and the analytics are difficult. But probably one of the biggest benefits is that you can do many unique things.

We're members of the IAB and work with the group. But, we're not just living by a format that exists. We think that we're well-positioned to come up with the formats of tomorrow.

One of the biggest publishers out there, of course, is Facebook. How are you handling that as an opportunity?

It's an opportunity and a threat. I don't have the best answer as to which one - it moves a little bit. In theory, Facebook helps bring money into the market, but then the question is, "Has it gone to anybody but Facebook?" That's not an Undertone issue, that's an everybody‑but‑Facebook issue. I don't have the best answer other than social makes a lot of sense. But serving ads on Facebook that nobody sees, or getting into privacy issues - that's not the be‑all, end‑all. Clients need to do more than advertising within a social environment.

The way we think about social is, "How can we power outside? How can we create cool ads and concepts with our clients, and then help them share it, and help them do things that gain them additional buzz, without necessarily having to pay for it?" That's where there's more opportunity.

We're not a buyer of ads of Facebook. We’re not a repackaging firm. That's not what we do.

Finally, what milestones are ahead for Undertone in the next 12 to 18 months?

We think there's a big opportunity in the U.S., but we also think there's an opportunity globally, with clients. The world's getting a lot smaller.

More and more, we're getting clients asking us to help them think about the world and not just an individual country. We're going to see some global campaigns happening, through our work, which we're excited about. It's a good offering for the agencies as well. That's one mile marker.

We're big believers in this whole “one I.O.” concept. We have a lot of experience in display ads, that's our history. We created a high‑impact category and were the first ones to start selling big, large formats outside of a portal or a publisher.

We've driven adoption, not just across our platform, but across publishers. Publishers are selling more of these ads now than they were before, thanks to our evangelization. We don't always benefit from that, but that's OK. We're not trying to create a network. We're tying to create a market.

What do you mean by the “one I.O.” platform?

The “one I.O.”  concept is helping clients execute campaigns, like they're starting to do with us today, across display ads and high‑impact ads like our PageGrabber, video ads, smartphone and tablet ads. We'll extend it into television, set‑top box, at some point over the next 12 to 24 months. Ultimately, clients can't have 400 vendor choices, based on the size of the screen. It does not work. If we can help clients run a campaign across screens – that's where we're focusing a lot of our efforts.

By John Ebbert

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