Michael Barrett knew he had an uphill battle from day one. On the morning of his appointment as CEO of Millennial Media, the first mobile-ad network to go public, the stock was showing a 69% decline since its March 2012 debut.
The spiral wasn't through. In the first quarterly statement under Mr. Barrett's watch, the company reported disappointing earnings, as its central business of powering app-install ads was severely dented by the rising mobile forces of Facebook and Google. Millennial Media's stock fell another 42% in one day.
During the earnings call, Mr. Barrett was frank about the company's position. He also laid out his vision for a shift in the business' focus toward automated buying and away from reliance on app-downloads and banner ads. The former is familiar terrain for the 52-year old: The last company he led, the ad-tech firm AdMeld, was acquired by Google for $400 million in 2011. (After seven months at the search giant, Mr. Barrett moved to a brief stint as chief revenue officer for Yahoo then took a year off, before joining Millennial Media in January.)
Mr. Barrett took a significant step in that direction last month, when he recruited Marc Theerman, a former AdMeld colleague, from his role as head of mobile platform sales at Google. Mr. Theerman now serves as executive VP-business strategy for Millennial Media; his arrival gave the company's stock a slight boost. The stock reached $4.21 in after-hours trading on Monday, down 82% from its IPO price. At least three Wall Street firms have downgraded the stock since its first quarter results.
In an interview with Ad Age, Mr. Barrett detailed the company's plans to reshape its strategy, as well as its role against the growing behemoths in the mobile-ad business. The interview has been edited for brevity.
Advertising Age: After selling AdMeld to Google, you probably didn't need to take another job. Why join Millennial Media?
Michael Barrett: I have three teenage daughters -- so I did, both for getting out of the house and a burn rate. By design, I took a year off. I had the good fortune to be able to sit on a few boards, do some investing. I saw, one after the other, ascending companies. And every one of them, in talking to them, the overhanging question was, 'And what about mobile?' 'Oh, yeah, we're working on it. We'll be mobile-first by the end of the year.' That kind of thing.
You were just seeing it on the consumer side, on the publisher side, how fast the adaption was on smartphones and tablets. Millennial always had a strong reputation. But, to be honest, I had thought, 'This is ad-network 1.0. You know, that's not a huge appeal.' But when I started to take a look at all the assets that they had and the platform strategy -- that was embryonic at the time -- that really became a huge appeal.
It's really hard to differentiate yourself and your services to the supply side, to the publisher. Because ultimately, everyone's got the same kind of algorithms. What I saw with Millennial was this media business -- $300 million plus -- and a nascent platform business, and the combination of the two is insanely powerful. We're in the first stage of that metamorphosis -- but that's the real appeal. We have all the pieces necessary to build a really important mobile platform company.
Ad Age: Mobile ad dollars are increasingly shifting to four major players -- Google, Facebook, Twitter and Pandora. [eMarketer estimates that Millennial Media will claim 0.7% of mobile-ad revenues this year.] How can you compete?
Mr. Barrett: They're certainly doing well in mobile, there's no question about it. From my experience, one thing gives me comfort: if ever there was going to a player that was going to run the table -- and suck all the oxygen out of the room -- it would have been Google on display; they owned everything.
And yet, there's a crazy explosion of innovation in all these companies that exist finding these opportunities, even though this behemoth should have closed all the doors. You're going to find that that's the case in mobile -- there's going to be a handful of outsized winners, but there's going to be so much [ad inventory] supply.
This concept of us not owning our inventory is valuable to buyers and sellers alike. Facebook says, 'Tell us who you want to find. Don't worry, we'll find them for you. And we'll tell you if we hit them.' By and large, it works fine. But it doesn't make you any smarter the next time you do this -- off Facebook or somewhere else. So, the idea of an independent, open alternative that scales, we feel resonates, and we certainly hear it from our clients.
Even though there will be turbulence, if that tide keeps rising, which it will, the big guys will help figure it out for everyone. It just makes it a more attractive medium for advertisers. The total addressable market is so huge. You know, we can chug along at 5% of the market; in most cases, you wouldn't be elated about that. In mobile, we could plant the flag and claim victory.
Ad Age: You've recently introduced features for cross-screen tracking and attribution. What can you offer advertisers in cross-screen as a mobile company?
Mr. Barrett: With our SDK [software development kit] embedded in these apps, we have a whole lot of data exhaust. We've been able to create a sizable pool of deterministic matches -- this is a person that we now track with a cookie, online and on mobile. Every day, we're doing those kinds of campaigns. Facebook has a method to do it -- it's their log-in.
It's a helluva lot easier moving from mobile, what we have, to online than having all these cookies and trying to figure out what the person looks like on mobile. We're in a very leveraged position to take advantage of that. It's a significant piece of the revenue now. In the coming months, we'll open that up and make it part of the transaction stream in the exchange. That will give us a nice differentiation.
Ad Age: In April, Facebook took this same approach -- of spreading its SDK widely -- when it launched its own mobile-ad network.
Mr. Barrett: Look, I don't think you're ever going to win an argument that we're going to beat Facebook in reach. If they're far behind today, check back in 12 months. Who wouldn't want to take a Facebook SDK.
Our argument isn't, 'Uh-oh, we get knocked out.' It's: 'Somebody's going to get knocked out; it ain't gonna be us.' There's always going to be the mainstays SDKs -- Apple's, Google's, Facebook's, ours and Twitter's. And after that, you wouldn't want to be the sixth guy trying to crash the party.