ARI PAPARO: Right around New Year’s we raised $15 million.
I was the last stupid person to start a DSP. Five years ago when we started there were scores, maybe hundreds, of DSPs. It’s like the Democratic primary: You hear the same three or four names but there are 20-plus others.
Did you see that skepticism in your recent round?
Most DSPs aren’t growing or are growing slowly. And the exits have been mixed.
Basically, The Trade Desk is a shining example. We like to compare ourselves against that every day. But go down and five or 10 companies are buyable but haven’t had exits. They have a good business, and maybe they’re mildly profitable but too small to IPO.
There’s a lot of stranded money and mediocre investments. So we did have an uphill battle with investors.
What are they betting on with you?
The DSP business at scale is appealing. It’s bad to be a small or non-growing business.
And for me, it’s necessary. There’s no way to get to $100 million or $150 million in revenue without meaningful backers.
As long as I can keep it a fast-growing SaaS company, I have lots of exits, including going public. Hopefully The Trade Desk is still doing great, and we can get a nice valuation.
If we were just SaaS and not in the ad tech category, there would be a different approach. Ad tech is out of favor though for many investors.
Has The Trade Desk won the indy DSP market?
The DSP market is large and competitive. Nobody has won.
There’s about $22 billion in RTB, per eMarketer. And that’s not counting Facebook or social, but true programmatic. The buy side takes 10-15%. So The Trade Desk’s revenue (forecasted to hit $650 million in 2019) is low for someone who won.
We compete head to head and win. And you can’t count out companies like dataxu, that’s focused on TV, or MediaMath, that’s been more brand-direct.
The Trade Desk is the clear leader in the agency market. But we don’t have any agency customers and have never really gone for that market.
And we have other important differentiators.
The Trade Desk is always trying to maximize take rates, and that gets them into trouble. Their take rate is about 20 or in the low 20s, but clients see margins of more like 15%. The Trade Desk is making that up on data charges and things like bid shading (a practice many DSPs include for free, but for which The Trade Desk charges a fee).
Since we’re SaaS, I want the take rate to be low. It doesn’t matter how much media you’re buying or what data you use if you’re paying a fixed rate per month to the DSP. If you want to ramp up on media or data, you do so without giving a percentage to the platform.
Do you think The Trade Desk’s scale has been a good thing for the DSP market?
Well, first, it makes sense for them to use their scale. The Trade Desk is a meaningful portion of revenue for many of their counterparties (aka data and measurement companies in The Trade Desk’s marketplace). It’s not like they’ve done anything anticompetitive.
And there was that story about them fighting in the IAB Tech Lab not to make an exemption for the Google exchange as an intermediary. (More on that story AdExchanger broke in July.) They’re fighting on the side of good there, and in general I think are looking to do the best for the wider industry.
Have you caught the TV bug like the rest of the DSP market?
We certainly are buyers from having advertisers with significant digital video investments. It’s not something we pivoted into or made a real focus, but we did find that we were buying a lot of CTV inventory.
We did some work with Tru Optik (an OTT and CTV analytics provider) and have integrations with suppliers, but we’re not betting the house the way a dataxu or other companies have.
There’s a big pot of gold at the end of that, I admit. But how far away are we from that end case? And as a tech vendor on the buy side, how much value can you add and claim in this supply chain? The publishers here control much more of the data and these deals.
I’d like to be a part of that Amazon Fire TV marketplace. And something I’m really intrigued by is YouTube TV, which is a sleeper hit with consumers and where the same ad rules apply.