Josh McFarland is CEO of TellApart, an online media buying platform.
AdExchanger.com: Is TellApart a demand-side platform?
JM: Our core business is in helping e-commerce companies unify, manage and predictively analyze their customer data — all within a “customer database in the cloud.” Of course, what good is a beautifully manicured customer list without a way to drive more revenue from it? From that angle, we are a DSP-OTS… demand-side platform on the side. Yes, we have built one of the best media buying systems out there — but we use it internally to power our display ad applications like Transactional Retargeting.
What problem is TellApart solving?
TellApart helps e-commerce companies drive incremental revenue through the analysis and use of their own customer data. E-commerce CMOs are finding that search, comparison shopping, and their email lists have all reaching the point of massively diminishing returns. They look at display ads and think, “why haven’t we been able to make this channel ROI positive?” We help them use their customer data to do exactly that. And over time, you’ll see us move into all types of marketing channels and programs — all underpinned by this core idea of using customer data to make better informed decisions.
I’m a firm believer that a majority of display ads in the near future will be targeted using one form or another of what the industry today generically refers to as “retargeting.” For the sake of definition, let’s agree that the technique of retargeting is simply the ability to get an impression in front of a user you’ve seen before.
For ads which target bottom-of-the-funnel behaviors (ex. cart abandonment), we refer to this as Transactional Retargeting: bringing the user back and facilitating their conversion completion. For users who are not currently engaged in a buying process but who are still part of a retailer’s customer database (previous visitor or buyer), they too can be “retargeted,” but I prefer to think of this as a form of audience targeting. And finally, audience targeting can also include the ability to reach potential new customers who have never visited a particular retailer’s site… but who have been modeled to have a high propensity to be interested nonetheless, given their activity on TellApart clients’ sites. For TellApart, it’s the notion of predicted Customer Quality that guides who has the potential to be reached via this last group.
What is your target market and how do you differentiate?
We service large and mid-size e-commerce companies, and today we mostly focus on online retailers. While the overall vision for our customer data platform is much farther reaching, the first application on this platform — Transactional Retargeting — competes primarily with Acerno, Dotomi and Criteo. In an effort not to be overly hand-wavy, let me say this first: we differentiate ourselves via our business model (below) and our results. And that alone tends to speak volumes for our clients.
How do we get these results that allow us to pursue such an aggressive model? Team and technology. As a largely ex-Google team, we get this ads stuff cold: my co-founder and I launched the AdWords API, which today touches well over half of Google’s revenue, and my last 1.5 years there were spent creating the building blocks of Google’s new display ads initiatives. Our team’s technology is similarly without compare: continuously self-retraining models, a massive cloud-infrastructure architecture that keeps our costs insanely low despite the amount of client data we hold, and one of the most efficient ad servers in production.
Please discuss your revenue model and how it works.
For our Transactional Retargeting application, we get paid a percentage of the incremental revenue that is driven by *clicks* on retargeted display ads. This is the most pure form of CPA, and this model allows advertisers to stop paying for fraudulent view-through conversions. We have other applications which we will be announcing over time that will have other innovative business models too, but in all cases you will see us always try to align our incentives with our clients as closely as possible. The best businesses are like Google AdWords; the advertiser knows when they put $1 in the machine, $1.25 will come back out.
What trends are you seeing among your clients today?
Though our vision applies to any ecommerce business (subscriptions, virtual goods, lead gen, etc.), we are currently focused on the Internet Retailer 500 companies. If you look at the evolution of advertisers on search, it was lead gen, followed by ecommerce, then brand marketers. In this second coming of display, it’s been lead gen then brands. Online retailers are noticeably absent from a medium that should be a major part of their marketing; we intend to change that.
Working with this group of companies has been amazing because they are exceptionally smart, they know their metrics to the penny and they don’t typically use agencies. Working with in-house teams means that our integrations are fast, we get instantaneous feedback on our performance, and when we win, we become an irreplaceable part of their revenue stream.
What is your view on RTB? Is it essential to your business?
Reatime bidding is increasingly essential to our business because everything we do on the modeling side is at a per-user level. The more granular we can define user cohorts, the more highly performing the campaigns. RTB allows for an evolution of targeting that allows… to quote Tim Armstrong when he was running Google Sales, “precision at scale.” It’s not necessarily the “real time” nature of the bidding so much as it is the ability de-average targeting into “per user.” That said, we also make non-RTB campaigns work incredibly well.
Given your recent piece against charging for view-thrus, it makes sense that you’re pursuing a click-based CPA business model. But, isn’t that risky?
Anytime a campaign is done on a click-CPA basis, it’s risky for the vendor because we bear the cost of driving users but have no control over what happens after that. But if you believe the advertiser is always optimizing for visitor conversion (which e-commerce companies are), then incentives can be perfectly aligned. And when you remove risk for the buyer, you find the conversation is like discussing a partnership, not a sales call.
What insights can you share about where Google is headed, having worked there for so many years?
Google is going to win in display ads to a degree that I don’t think most people, even those in the industry, realize. As major buyers of inventory from exchanges, networks, yield optimizers and direct publishers, we run retargeting campaigns on each that are apples to apples. And right now, Google has the best apples.
People dismiss the Google Content Network as being full of low quality long tail publishers, but I’m telling you — it’s got inventory that performs better than anyone else. And, by the way, it’s expensive stuff; this isn’t about trolling for cheap impressions. So I think Google’s success will be positive for all sides: we platforms who appreciate Google’s technology leadership, buyers who want highly performing inventory, and publishers who expect to be paid well for their content & audiences.
And, I want to make a prediction that you can hold me to 18 months from now: Google will enable search retargeting for display ads and it will be awesome. This is purely my opinion and is based on zero inside knowledge, and if Larry Page reads this, he will probably slap me himself for such blasphemy. But I see the signs!
How is TellApart funded? Do you anticipate seeking venture financing in the near future? If so, what might be the catalysts?
We recently announced our $4.75MM Series A financing, led by Greylock Partners and don’t anticipate taking any more funding for a good while. Indeed, some of the best companies in the world (ex. Google) have only needed to visit the VC well once!