The State Of Krux: CEO Chavez On Apps, Ecosystem And Moving From Defense To Offense

State of Krux DigitalTom Chavez is CEO of Krux, an online advertising technology company.

As part of its “State of…” series of articles with industry executives, spoke with Chavez to discuss his company, his views on the space, and the state of Krux today.

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AdExchanger: From an industry perspective, it seems there’s been a lot of churning going on – companies are pivoting, executive shifts. Some companies are getting acquired. What’s been your take on this?

TC: What goes the furthest distance towards explaining all of that churn is the simple reality that there are too many hangers‑on trying to skim revenue between advertisers and publishers. This has been talked about for quite some time. What we’re starting to see are the early phases of either consolidation or just a general cleaning up in the middle of the Kawaja chart. That’s the first thought that comes to mind.

The second thought that comes to mind is that we see a lot of coming and goings in the executive ranks – publishers especially. What goes the farthest distance towards explaining that is that, first, publishers aren’t claiming their fair share of the revenue from all of the content and audience experiences that they invest so much to create. In those organizations, you see a shift now to try to right the ship and make some moves to try to fix it. I’m not sure that we see a lot of intentionality or strategy behind that. It’s more of a thrash, which is unfortunate for everybody.

But, in some cases, you do start to see the early glimmerings of some media companies now trying to figure out what they have from a competitive perspective, their strongest assets, where they can play in a broader advertising environment that has been overtaken not just by search, but increasingly automated via exchange space methods for display. Here, the elephant in the room is obviously Google. My own two pennies here is that Google has utterly just crushed it in display exchange. They took a $100 million business and have turned it into a multi‑billion dollar business in an astonishingly short period of time, which obviously puts competitive pressure on publishers who are trying to figure out if they want to play in that arena.

Increasingly, I’m not sure that they have a chance. They’re trying to hold the line and ring‑fence their direct sale business and claim full value in that sphere but going back to the publisher or media perspective, “What do I have? What is my strongest asset?” You expect me to point out that it’s their audience data. It’s data that has the possibility, now, of fueling not just advertising experiences but more interesting content, commerce, collaboration, selling and marketing experiences. The acquisition of SAS by aiMatch could be evidence of SAS’ interest in advertising, but I really don’t think so. We’re in an environment now where companies like SAS are looking at ad servers like aiMatch and saying, “You know what? That’s an interesting tunnel, an interesting bridge between companies and web experiences with consumers that aren’t necessarily tied to ads.” The ad server in the new regime becomes what you might think of as an engagement server.

Publishers now, if we unshackle ourselves from the world of just advertising and think a little more broadly, we’re just at the cusp now of advertisers, marketers, publishers and everybody starting to think about: “All right, audiences and the data that fuels those experiences with audiences is the most precious thing that’s flowing across the Internet. How do I position myself now to claim value from that whole new opportunity set?”

It’s not a widespread trend yet, and you’ve been talking about this for a long time so this is the choir preaching to the choir, but what we finally have are people making moves and changes. They’re churning and thrashing a bit as well, but ultimately, they’re getting themselves to a place where they can take advantage of this whole new data opportunity.

Can you talk a bit about how Krux has evolved over the past year?

Specific to Krux, I would say the thing that has been most astonishing to me is the interest in web data security. At times, we worried about being misperceived as a company that just does web data security. It was our insertion point. Of course, we’re coming to market with an end‑to‑end, cloud‑based management for consumer data, but web data security shot up in interest for a bit, and then it seemed to subside. In the last year, what we’ve seen is a lot of companies ‑‑ not just publishers, by the way, but a lot of companies with websites ‑‑ saying, ” I have a data leakage problem.” They’re rapidly getting their heads around it. I guess it sounds a little strange, perhaps, to hear me express surprise. We thought that it would be an interesting way to get the party started. It turns out to be a much deeper‑seated, broader‑based trend than we anticipated.

Is there enough dollars with web data security for Krux to create a thriving company, or do you need to reach out into other areas?

We’ve never conceptualized web data security as a standalone business or even a humongous revenue stream in the short-term or the long-term. At the end of the day, we’re going to have an infrastructure that starts with defense, but moves quickly into offense. You start by protecting this asset so that you have the opportunity to monetize it downstream, but of course we’re in market now with what we believe is the only true cloud‑based DMP solution, unified tag management, comprehensive monetization framework that is tied to not just advertising, but supports content, commerce and collaboration more broadly.

We have a distribution method here. We’re working with partners that we’re very excited about. We’re a global company but we’re getting a lot of leverage through partners in Europe and elsewhere that allow us to reach out and support customers who are grappling with the same issues in different geographies. Then, of course, a big part of the news that we want to share with you today is the self‑serve offering and being able to support small websites with a direct‑to‑the‑web offering, which is a big part of our overall strategy.

Web data security is a great way to get going. We have over 220 million uniques, in terms of the reach of our platform today. For a company that’s effectively been off the blocks for 15 to 18 months, that’s an interesting number. As I like to point out, it’s not a fly‑by‑night, random, third‑party reach unique. That is, uniques that are tied to a data security tag that companies, like the Wall Street Journal, New York Times and NBC Comcast, are not going to be taking down anytime soon..

What types of data are you going to cover, now and down the road? Is it just display data? Is it first‑party data from your publisher clients, or a connection into first‑party data marketer clients who want to buy a unique audience, which are publisher partners?

Not to be cheeky, but the answer is “yes.” It’s all of those modalities. It’s the way we come to market. This is one of the advantages of having started with a clean slate in the last 15 months so that we could truly take advantage of these new cloud technologies. Every piece of data is precious. It can be data tied to the delivery of a display ad, an inbound search referral, a mouse‑over or a click. Not just a click, but “engagement,” broadly conceived, with content across any nook or cranny of a website. It’s all of the online data, and we have a generalized event‑based framework that allows us to capture and make sense of all of that data, but on top of that, it’s the offline data as well.

You see some of these companies now looking to get leverage from offline registration and subscription data, melding it with online data so that they can build more relevant, engaging experiences in that way. Let’s not forget the cross‑screen imperative, so meshing mobile engagement and mobile data, we ultimately think we’re moving towards a world where set‑top and gaming factors in ‑‑ obviously, iPads.

Regarding your announcement about Krux Apps (read the release), what is attractive to you about the apps model, if you will? And what is an App to you?

Apple pioneered the concept, but it does become an artifact that cuts across all computation and software. The idea now of lightweight, purpose-driven applications that you can plug-in and get quick value from, -in time that is ideally measured in seconds, not minutes or months. That’s the concept behind apps and it’s not just iPads or iPhones. It becomes a broad metaphor for all of us working in technology.

In our context, we want to have the ability to serve the hundreds of thousands of websites out there who are crying out for data-driven solutions that help them create cooler, safer, faster, smarter web experiences for their audiences. The idea behind Krux Apps is to put the cookies on the low shelf and make it easy for all of those kinds of websites to get fast and immediate value from our slimmed down technologies now.  So, with Krux Apps, we’ll be able to service those who need a lightweight, direct-to-the-web method.

What’s the revenue model for the self-serve?

It’s mostly free. If you are using Krux Apps to understand your website and to drive new insight and value from data, it’s free. If you are using Krux Apps to improve or optimize either revenue or page execution, for example, then we’ll have a simple, lightweight model that allows website to gain fast value and also allow Krux to share in their success as they deploy our technology. We’re still in the early stages of fine tuning our pricing approach, but our main objective here is to take all of the friction out of the process and make it easy for people to impulsively try and deploy Krux Apps. When they’re getting value, improving revenue, page speed and audience insight, then we’ll share in a small way in that success.

And so, the apps model isn’t part of your solution for big publishers right now, correct?

The big guys need a higher touch method so they are getting a much thicker piece of technology. You’re not going to have the same kind of features in Krux Apps that you have for what we’re calling Krux Pro. The existing large, big enchilada enterprise offering is Krux Pro. It’s a fully-featured, service-rich approach. With Krux Apps, it’s lighter weight self-serve method with slimed down features. You asked about the revenue model. You get to some interesting scales here and much more profitable revenue if you can support the needs of hundreds or thousands of those websites in this fashion. That’s part of the bet that we’re making here with the Krux Apps. It becomes the Law of Small Numbers – nickels and dimes from a much larger group of publishers that are less expensive to serve on a one-to-one  basis than what you have in the enterprise game.

What do you think is in it here for big publishers? I know that this isn’t targeting them, but is there a side benefit for big publishers here that you’re rolling out to the little guy?

Absolutely. In the world we’re moving towards, if you’ve got a website, you’re a publisher. Let’s not forget the marketers out there who have big interesting websites where they’re not looking to just post marketing collateral, but they’re looking to sell and engage with their own consumers. So what Krux Apps provides is an interesting scale through the proverbial “tail” for those kinds of larger websites who want to reach and engage their consumers over time. Our concept here for what we call “Interchange” is if you are a small website and want to make some of your data available to larger websites and you want to earn revenue from that as well – but only on times, and the terms and conditions of your choosing – we’ll enable that with Interchange.

Large websites can start to use that self-serve Krux Apps channel as a way of reaching and engaging with consumers at web scale. So that is the future benefit.

There’s a lot of interest in video today. Do you see needing to focus on video?

We think video becomes a “but of course” web experience that we need to support. The opportunity for data to improve video experiences and the targeting of video experiences is at least as high as it is in display, search or any other modality. We’re in the early stages of working with a couple of different partners to deploy our technology.

At the end of the day, we don’t see that this is a fifth limb or a right‑hand turn. We’re building a data layer that can interoperate smoothly with display ads or video ads. I don’t think we have the handshake fully ironed out yet with the video ad server the way we do with conventional display ad servers, but we’re on it. And it’s an extremely solvable problem.

How big is the company today, in terms of people and offices? Can you share anything along those lines?

We’re under 100, growing fast. We have a big new office here in San Francisco and hiring. We have an office in Manhattan, a presence, through partners, in Europe, primarily London and a bit more now in Amsterdam. We don’t have offices in Europe, but I would say within the next six to nine months we almost certainly will.

What’s the difference in the opportunity when you look internationally?

It’s one of the big surprises, actually. The second largest surprise for me is that Europeans have an extremely organized, thoughtful approach to data. They’ve been thinking about it at least as hard as their counterparts in the US. The regulatory environment there obviously charges things up a little bit, and forces them to pay more attention to it than some folks in the States do.

Laying aside the privacy and security issues, they’re running offense when it comes to data. We’ve been pulled into that market, in a way, and I’m delighted to have about six to eight large, interesting customers in Europe already. It’s moving fast. They’ve got their heads around data and they’re making big, bold investments.

Looking at the regulatory environment right now, is it more radioactive than it was a year ago, for example?

The preamble I should give is I can speculate idly, but please take my chatter with a grain of salt, because there’s so much that’s unknowable here. Having said that, in Europe, the regulatory environment from my perspective is a lot more muscular than what you have in the States. I’m not convinced that a bill can get through Congress any time soon, just because there are other, more urgent priorities, but do you see the FTC and other agencies leaning in a little further. This is sort of a twist on Spock’s dictum, isn’t it?  The needs of a few don’t outweigh the needs of the many, but you have to take them seriously in this context.

In my own perspective, there’s a percentage, let’s say 5-10 percent of the American population who actually deeply cares about these issues. We need to take their needs seriously and provide the tools and the fabric, not just the policies. We’ve got lots of policies, and lots of rules. We need more tools now to really operationalize their privacy instructions and desires. Of course, that’s part of what Krux is doing, it is providing secure infrastructure that captures what consumers want marketers and publishers to know about them, and it puts that information on a cookie by cookie, ad call by ad call basis.

We’re not going to be the only company doing that, but when we look at the regulatory environment, if we can rise up, as an industry, and provide more of that tooling ourselves, I think that will give comfort to the consumers and the regulators and the legislators who are making noise on this topic and arguing – not necessarily with all of the best understanding of how it really works. It is better for us to fix this on our own with a microscope and scalpel than to have them come in with a big hacksaw and a rock. That’s my view. I think we’re making progress on that front. I really do.

What milestones are you looking for Krux to achieve in the next year or so?

We have some steep objectives here to extend our reach. We want to be deployed. We want to continue to raise the number of uniqueness that our platform supports, and we want to do that in a dramatic way, not marginal improvements, but material jumps there. We have a real revenue engine now that’s coming. There’s a direct‑sold business, there’s a partner/OEM business, and then we’re launching self‑serve. So, those three revenue streams, as they continue to grow in scale, will position us for break‑even in an extremely finite period of time.

We have geographical objectives, as well, for the year. We want to explore Asia‑Pacific. We have our first Japanese customer running on our platform.

Aside from that, the most important objective we should hold out for ourselves, is to continue to grow the team. That’s really what’s gotten us so far down the field in such a short period of time. This is my second company, and I’m resolved to keep the bar high and to keep on hiring “assassins” like we’ve been doing so far.

Follow Tom Chavez (@tommychavez), Krux (@kruxdigital) and AdExchanger (@adexchanger) on Twitter.

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