Google grabbed ad-technology startup Invite Media last summer just as ad exchanges and real-time bidding for display ads were heating up. It was a necessary fit for Google's own exchange, AdX, and a boon for founders Nat Turner and Zach Weinberg, who started the company as undergraduates at the University of Pennsylvania in 2007.
We sat down with Messrs. Turner and Weinberg to talk about the future of display advertising, ad exchanges and the emerging trends in video and mobile buying.
Ad Age: You guys started a business that, despite your age, feels like one that should have been developed by ad executives who've been in the trenches a while.
Mr. Turner: It's funny. We met with a VC, and he said that "businesses like yours" are typically done by older people who knew what they were doing prior to doing it. "Why don't you go start the next Facebook?" is what he told us. But we had these great advisers who were in this space who didn't have the energy anymore to start their own thing. What we were lacking was the industry knowledge. We knew nothing. But we knew how to build things. We just needed a product to build. So a few key people early on told us what was happening in display advertising -- basically how media buying was changing.
There were a couple of options. The sell side, the AdMelds of the world; the buy side, which we ended up doing; the exchanges; and the data side. And all those things were happening at once. We decided to go on the buy side. We wanted to be close to where the dollars are starting.
Ad Age: Were you aware that there were other players in the space already?
Mr. Turner: MediaMath founded itself about six months prior to us, but the term DSP [demand-side platform] didn't come around for two years. We called it a universal buying platform.
Mr. Weinberg: But we were the only ones doing it as software. The others used human agents to do all the buying. And it was this very inefficient system. About 30% of every dollar spent was lost in overhead.
Ad Age: You say that for a software solution to really work, it has to plug into an exchange where people can bid on ad inventory on the fly. These exchanges didn't exist when you started?
Mr. Turner: There were basically two exchanges when we started. Neither of them were real time. So we had to make a bet that the exchanges would go real time. In financial markets you need an e-trade solution to access all the exchanges. In display, as long as there are two exchanges, then you need something to talk across them all. We felt that if Google does it, everyone else will do it, and all of a sudden there was a need for a broker.
Ad Age: So what's the advantage of having a broker like this?
Mr. Turner: We only take a transaction fee. We're not hiding what we're taking. It's an online brokerage system. ... Like AdMeld -- they label themselves as optimizers for publishers, but to us, they're just a supply source we can bid into. They look the same as AdX.
Ad Age: So publisher optimizers like AdMeld or Rubicon help publishers by allowing them to take the best bids on their inventory in their exchange. How does Invite help advertisers?
Mr. Turner: One of the biggest things is that now it's transparent. Now the advertisers can come in and say, "I can access 12 exchanges by creating one line item in Invite Media." Before, they would have to make 30 phone calls, employ 20 people, emailing ad tags back and forth. Asking, "How much inventory do you have?" All this back and forth. In Invite, you just create a campaign, and you can see what's available and press go and it's done.
More specifically, our system asks: What are your budgets? What's your max bid? What's your targeting? What's your flight dates? The system essentially looks at every exchange pretty much in the same way. Looks at every impression regardless of where it's coming from, and does it meet the criteria for the advertiser. If it does, it bids on it. If it wins, it serves the ad. Simple as that.
Ad Age: Lately, a number of private ad exchanges have emerged. How does that affect your business?
Mr. Turner: We already have a lot of private inventory, through Google AdX, and we have private inventory with AdMeld.
Mr. Weinberg: It's not a separate exchange. Think of it as restrictions. As a publisher, you have a piece of inventory you want to sell, but restricted to a specific group.
Mr. Turner: For example, Forbes has inventory. They would say, 'I only want the top 50 brands in the world to run ads on my site.' They'll say to Invite, 'You're more than welcome to bid on my inventory as long as it's one of these 50 people.' It's what advertisers were doing before, saying they only want brand-safe sites.
Ad Age: But aren't there are some exchanges like the one formed by The New York Times Co. that are closed to other buying systems like yours?
Mr. Turner: They have to have a real-time bidding system. Companies like us may just not be able to bid today. But eventually when they open up that system to allow companies like us to connect in, then we'll integrate like we do with any other exchange.
Ad Age: What's the advantage of fixed price?
Mr. Turner: Let's say a year ago, if I'm AT&T, and I want to go to a set of five publishers and purchase a million impressions, I'd have to go to them and sign an I/O and then whatever million they sent me, that's what I got. In the new system, you may commit to a million impressions, but then you can pick which million.
Ad Age: Which impressions?
Mr. Turner: Think of it as this impression was in Florida; this was in Texas.
Ad Age: Isn't that how advertisers buy now?
Mr. Turner: A lot of them buy impressions that meet their performance goals. An airline just wants to sell tickets on their website. It's less like TV buying -- I want to buy ESPN because it has males between 16 and 24. They want to buy any impression that generates sales for them.
Ad Age: Google announced it will be including video into AdX soon. Will other exchanges follow? And what's keeping video from becoming as full-fledged as display advertising?
Mr. Turner: The way we think about Invite, we're not specific to display. So if you have a video exchange, there will be that for mobile and rich media, our vision is to enable those new mediums in the same interface clients are using for display today. The key is the exchanges have to be there. We don't go out and procure that inventory.
Mr. Weinberg: There's a little more technology that has to be built on both sides. It takes time for the engineering to happen.
Mr. Turner: Invite has to build certain things. The exchanges have to build certain things. A lot of it is the buyers themselves. You have to have the buyers be ready to spend the money on video. And they're getting there. You have to have the money to spend, and then the publisher has to step up and say, "OK, I'll sell my video inventory through exchanges.
Mr. Weinberg: We as an industry spent 2010 getting display right. 2011 is about building infrastructure for video and mobile and rich media. And then you'll start to see that type of buying grow by end of this year, and 2012 is when it'll pick up.