Lijit Acquired By Federated Media: Lijit CEO Vernon And COO Knapp Discuss

Lijit and FederatedYesterday, media company Federated Media announced the acquisition of Boulder, Colorado-based ad network and publisher technology company Lijit. Federated CEO Deanna Brown offered in a release, “Our combined relationships, proprietary tools and conversational marketing services will be invaluable to publishers and advertisers alike.” Read it.

Lijit CEO Todd Vernon and COO Walter Knapp will become the EVP of Technology and SVP of Platform Revenue respectively at Federated, and Lijit CTO Manny Puentes will become Federated’s VP of Technology. Additionally, Lijit board member Seth Levine of Foundry Group will now be part of Federated’s board.

Vernon and Knapp discussed the deal with What was the initial trigger for the deal on Lijit’s side?

TODD VERNON: Well, as I said in my blog post, [Federated Media] approached us at the end of Q1 with the idea of partnering, which we had talked to them about previously. It’s a pretty logical deal because they’re such a strong powerhouse in terms of a direct sales force and we’re programmatic. So, you wanted to add the direct sales component to your business?

TODD VERNON: Yes, we had always thought we needed to go there someday – and we went there a little bit last year only to find out that we really needed to pay attention to what we were good at – the engineering side of the business. When [Federated] showed up, it seemed like a pretty natural thing to do, but we’re a pretty big company as far as invested capital. It had to be a pretty significant deal for everybody to have the [right] outcome and to do some exciting stuff down the road. What do you guys think – is this the model for the way some ad networks might exit?

WALTER KNAPP: Both of our businesses were oriented in helping publishers, first and foremost, and we’re unlike any other ad network in that we have relationships with roughly 70,000 sites. Those publishers use us for not only monetization of their sites, but they also use us for analytics and for our on‑site search tools.

They look at Lijit as more of a business partner. Where we make a lot of money is off the ad network optimization and RTB (real-time bidded) exchange aspect of our business. But, it’s more about partnering with publishers to help them with what they’re trying to accomplish, and Federated has a very similar tack.

They do a lot of conversational marketing, content placement -that’s what I call Federated Media Publishing.

When you look at the combined scale, we were pushing 220 million global uniques and more than six billion ad impressions on a monthly basis now. This is just Lijit numbers. You take that and you combine it with the Federated footprint and their numbers, and all of a sudden, you’ve got the largest publisher network from a reach and scale perspective next to AdSense.

TODD VERNON: The way I think of it is – you asked if it was sort of a model… I think of us, and certainly the combined company, as an enhanced supply-side platform because it’s more than ad inventory. As Walter said, it’s the entire engagement of a publisher. Now, with the two together, it’s the engagement of every publisher in the “Independent Web.” It’s a pretty major deal. Has Lijit been thinking at all about the programmatic buying side of the guaranteed world and bringing it to your network?

WALTER KNAPP: Yes. Our CTO Manny Puentes has taken the reins on this. We’ve been spending a tremendous amount of time with the guys at MediaMath and Turn talking about exactly that – how to do it. It doesn’t necessarily exist today for a lot of reasons. Federated Media is arguably the best direct sales force in the business, and then we have the exchange platform. What’s interesting is there is an opportunity to bridge the gap. We’re probably a month into those conversations now with those big DSP (demand-side platform) partners.

TODD VERNON: And I agree with our DSP partners in terms of a reserve or a forward market more than a futures market. You’re right. It’s the ability to secure variables that prior to now, only were available to be purchased by a direct, advance buy. But if you can use those exact same variables and you sit, like we do, in a persistent way on the site. And you have the exchange platform like we do, it’s pretty easy to make the logical connection to be able to do a forward or reserve market.

Certainly, with guys like John Battelle and FM’s relationships with brands and ad agencies, it’s a pretty high level conversation. I think you’re going to see a lot of us in 2012 in this area. In the near term, how will Lijit technology going to be leveraged by the Federated network of publisher relationships?

WALTER KNAPP: There’s a whole chain of product things we’ll be doing over the next year, but I think one of the opportunities of interest is being able to do private exchange work into the FM (Federated Media) inventory. Programmatic-wise, lots can happen into that inventory, but in a controlled fashion and at appropriate prices and so on. That doesn’t really exist today, but it’s an easy thing for us to do from a technology point of view and a great product from a FM sales force point of view. How does this deal speak to audience buying?

WALTER KNAPP: Audience buying has been somewhat void of the content. I think of the things that were exciting to people at the onset: “Hey, I can just buy the audience, and I don’t care where they’re at on the Internet.”

The fact of the matter is where they’re at is important, and content and placement matters.

I think that’s definitely what we and FM believe. And, that’s part of the strategy with private exchange – you can buy an audience, but you can also buy adjacent to meaningful content that’s important to the brand message and what you’re trying to accomplish. You noted in your press release that you’re going to hire an additional 30 to 40 employees. Is it safe to say that you were going to hire those people without the transaction?

TODD VERNON: A few months ago, we blew through a million dollars a month. We’ve continued to grow at 30 to 50 percent month over month. We had $10 million of cash in the bank. We were just clicking on all cylinders. Yes, you’re right. That was in our plans. We were going to 75 people in the next several months anyway. Can you speak to the value of the deal? How much was it?

TODD VERNON: All I can say is that’s a very significant deal for Colorado, probably one of the top deals in the last 10 years. Can you at least say if it’s a cash deal, cash and stock?

TODD VERNON: It was a stock deal, and we actually wanted it to be that way. Finally, what would you say is the key takeaway for anybody looking at this deal?

WALTER KNAPP: I’d say that with the combined organization, we’ve created arguably the largest reach and scale network of Independent Web publishers. That’s an opportunity for media buyers and certainly an opportunity for other publishers to join the platform.

TODD VERNON: It was the goal of this deal to raise the combined entity into that world of “must‑buy” media. When you’ve got to do a large media campaign, it gets to the size and scale that you’re in that top three or four.

By John Ebbert

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