CEO Trefgarne Says Video Ad Serving Core Differentiates LiveRail From Competitors With Display Legacy

LiveRailMark Trefgarne is Co-Founder and CEO of LiveRail, a video advertising technology company. Let’s start with a little background on you. How did your consultancy lead to video advertising technology?

MT: We started LiveRail about four years ago, which came out of a consulting company that I was running in London. The founding team for LiveRail was all working there. As part of the consulting business, we were helping clients develop and plan their Internet strategy – from small, local businesses to publicly-traded companies. Soon after, we built out some of the applications that we recommended to our clients for their online advertising strategy which included building out their intranet or e‑commerce system.

So, four years ago, when Google bought YouTube, there was a “lightbulb” moment that video was moving online. It was a time when video podcasting became a big deal. It was clear at that point that there was a path to a future in which all TV gets consumed over the web and we thought there was a big business opportunity to help content creators and advertisers.

It seems like LiveRail found a niche that others have explored, and successfully so. Obviously, you weren’t a big company initially. What allows a small player to get into the video space?

The real opening was that all the advertising technology vendors in the space were built for display. Video is a medium which has range of differences from display – both technical and practical, from a business perspective.

From a technical perspective, it’s having deep integration with Flash media or video players. Even the events that we track, things like pauses, mutes and percentage, complete rates – there are a hundred and one little differences that make video fundamentally different from display.

Then, you have the business side. Instead of thinking about how we integrate with Right Media and DoubleClick Ad Exchange, we’re worried about guys like Tremor Video, BrightRoll and YuMe.

Also, on the publisher’s side, you’ve got guys like Brightcove and thePlatform. So you have technical differences in terms of what the ads are supposed to do and business differences in terms of whom you’re actually integrating and interacting with. That’s created a significant gulf between the traditional display‑centric, video ad technologies, and folks like us.

So, what do you see as LiveRail’s target market?

We’ve taken a holistic view of the markets, and video ad technology. What I mean by that is we’ve built a core platform for the video ad management that’s effectively real-time bidding‑enabled, with still that core functionality for ad serving, tracking, web analytics and all that kind of stuff. Then, we’ve built products on top of it. Effectively, the front end of that entire core technology stack – designed for each of the key market participants within the video advertising ecosystem. We view the ecosystem as the publishers, ad networks and agencies. We have clients in each of those three categories that use us as their primary ad server or ad management platform for video.

The types of customers that we go for on the publisher side tend to be those who are looking for the ad management platform that is going to manage both their direct sales, and their RTB relationships. On the publisher side, it’s increasingly for folks who do want to work with the networks and trading desks – and need technology to be able to manage those relationships. Where we tend to really succeed is publishers facing challenges and managing multiple ad networks and trading desk relationships.

What can you say about trends you’re seeing with video advertising inventory today?

We’ve witnessed an interesting trend over the last year, which is that when you look at premium to mid‑tier to pipe inventory, advertiser spending has increased faster than the inventory which is available. As a result, we’ve some of the publishers finding a way to balloon their inventory, and then try and soak up some of that excess demand. A lot of that excess demand exists because many of the premium commercial placements are sold out – so now it goes into the ad network market. Those networks therefore fulfill the campaigns, at increasingly competitive prices. And that is forcing networks to fulfill campaigns on what I call lower‑tier inventory.

Our belief is that

will continue to be stable, potentially even increasing at the premium end of the market as advertisers become more savvy around what they’re really buying, which puts pressure on networks to decrease their margins and become much more efficient. One of the other things that’s worth thinking about is to-date, the number of companies providing true verification and brand safety technologies for video. The availability is relatively low. Those that can verify have done an incredible job on display, but they haven’t yet penetrated the video market at scale.

One of the big trends we’ll see in 2012 is much better transparency for advertisers and agencies around what they’re buying. Improved technology and products will achieve this. On top of that, platforms like Liverail give those clients better insights into what they’re buying. Some of that ballooning of inventory at the low end will technically get compressed because advertisers will adjust as they understand better without actually buying.

What are you seeing with your agency partners right now?

Today at Liverail, we have actually got holding company-level agreements with two of the world’s largest agency holding companies. We’re obviously excited about extending those relationships to the other holding companies, but as you know, two of the holding companies alone make up fairly significant business. Agency ad billing is growing rapidly as they direct more of their clients’ dollars into online video. The need for efficiency has become greater, too – there’s not much reporting analytics around media buying and delivery. Post‑impression is actually providing better insights into the plan around how these campaigns are performing.

We see a rapid increase in sophistication among agencies about how they deliver, plan and track video campaigns while delivering a return on investment. But, there’s still a long way to go. Agencies are still in a learning process mode. As a result, many agencies are staying in a safe area and buying Hulu, ABC, or they’re being a little bit braver than perhaps they should and buying on exchanges without proper brand safety tools. Over the next year, we will see that balance itself out a bit more.

It doesn’t seem like LiveRail has taken a lot of funding. Are you profitable? What’s the story with the financial side?

LiveRail has raised four million dollars to-date, and there are two things that have enabled us to take such a little amount. One is that we will profit this quarter (Q4 2011), and expect to be profitable for the full year of 2012. We’ve been very fortunate that we’ve built technology that effectively does that. I look at a lot of people in this space, and unlike them, our technology does what it says it does. We don’t need to hire a million people to effectively sit in a back room and pull levers to try and effectively make up for any deficiencies in our product. We’ve built a technology stack from the ground‑up. It takes a lot of the manual work and complexity out of managing large-scale video campaigns.

Is the goal really to offer a self‑serve platform? And, do you anticipate any more need for funding?

Almost all our clients use our product on a self‑serve basis. Since we expect to be profitable for the full year 2011, we’re not actually looking to raise more capital. We’ve been growing aggressively and expect to triple revenues [in 2012]. And, we’ve done that profitably.

Yet, as with all companies in our space, we’re keeping our eyes open for funding. When there have been ways we thought we could grow more aggressively, we genuinely believe that we’ve invested. In 2012, we’re building on the investment that we made early on. We can grow based on the investment that we made in engineering, and also pump millions of dollars into hiring salespeople and having thousands of people try to sell the product that doesn’t have to do with us. We get most of our business by referral.

What are your thoughts on creative in video advertising right now? Are people still trying to shove TV ads online?

The innovation opportunity in online video is less around creatives, and much more around television. There have been a lot of people spending time and money on how we can make creative savvy and interactive. I personally believe that as you look into the future and consider the “lean back” experience, where people are watching online video on connected TVs, you’re actually minimizing the opportunity for interaction with those ads. Where the real innovation is going to come and where our industry has not spent as much thought and innovation as it should have, is the targeting side. Audience data and real-time bidding, enables us to deliver one‑to‑one messaging to TV viewers. If you think about that “lean back” experience, though, interactivity is going to play an increasingly smaller part. The emphasis on creatives is actually less important, certainly from technology and interactivity. The storytelling aspect of a 30‑second video creative is obviously still crucial, but I think in terms of interactivity and complex creatives, our industry and the ad technology industry should invest less in that, and more in targeting.

Finally, any misconception about LiveRail you’d like to straighten out?

Yes. We are a lot larger than people realize. People judge us by our funding size and don’t realize that we’re actually 50 people with 200 customers. We power some of the largest ad networks video ad sales. We fly a bit more under the radar than perhaps we should, primarily due to having less money than the competition. But our industry is too obsessed with how much money people have raised, rather than what they’re actually doing with their business.

By John Ebbert

Follow LiveRail (@LiveRail) and (@adexchanger) on Twitter.

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