I sat down with Nexage CEO, Ernie Cormier to talk about the big players in mobile advertising solutions space.
As the mobile device space continues to mature there are still a number of wars being waged on the devices themselves. One of them is in mobile advertising. If you missed my take on the industry and MobClix, one of the lead start-ups out there, check it out before diving in here.
While mobile advertising may not be a mature space yet, it’s certainly getting crowded. Nexage, however, is in a unique position as one of the few players that’s focused on neutral mediation in mobile advertising. Find out what that mouthful means and why it’s a distinct competitive advantage in the interview below.
Ernie Cormier is the CEO and President of Nexage and has plenty of mobile, engineering, and start-up experience at Virgin Media, Nextel, and most recently a venture backed mobile gaming/consumer electronic start-up (Zeemote) that saw a successful exit in Dec ’09.
Here’s a brief recap of this complex and constantly changing ecosystem before we get into the Nexage interview:
AO Take on Mobile Advertising:
1. Mobile advertising is a rapidly growing and transforming industry. There’s still plenty of blue ocean out there.
2. Both Apple (which acquired Quattro Wireless in Jan. ’10 for $275mm and also has iAd) and Google (which acquired AdMob in Nov. ’09 for $750mm) can change the rules of the game at will. But for now, they appear to be focused on one another. As much as Jobs would probably like to, he won’t shut down other advertising networks on Apple mobile devices soon because iAd can’t fill enough impressions. Doing so would upset the developer community and hurt Apple device sales. Jobs can, however, prevent Google from getting Apple analytics.
3. If web advertising is an accurate indicator, mobile advertising is not likely a winner-takes-all industry because no one can filling 100% of ad requests.
4. Exits (and maybe funding opportunities) have become significantly more difficult because of Apple’s new developer TOS which doesn’t allow third-party mobile OS developers (Microsoft, Nokia, HP) to be able to collect data from iPhones anymore.
With all that in mind, let’s find out more about Nexage from CEO Ernie Cormier"
Andrew Bellay: Let’s start off with what Nexage is and what you do.
Ernie Cormier: First of all, we’re strictly mobile, we’re not an online play, we’re not an ad network. We wake up in the morning thinking about how to get more money for the ad inventories for publishers and developers.
And what we are doing today is essentially what the online world calls mediation or yield optimization. We’re doing that for over 70 publishers and for about 4-500 different properties. We take a piece of inventory that the publisher has sent us and we find the best price for it. We sell what otherwise wouldn’t be sold to the demand side. And we’ve got about 53 demand partners on kind of the other side of our pipe if you will – those include ad networks, demand side platforms, buyers of advertising.
For a given piece of inventory, we find the best price for it and we sell the inventories in real time. So, for a publisher or developer we basically create revenue where there wasn’t revenue before or we increase revenue for their inventory.
We do that in two ways. One is by increasing their fill rate, so if they were selling 50% of their inventory prior to engaging with Nexage, we will raise that up – in some cases two or three times – to up to 90% of their inventories being sold. And we also raise the eCPMs (equivalent cost per thousand impressions) that they get for that inventory. You multiply those two together and you get much higher revenue.
The second benefit is that we lower their costs as well. Instead of publishers having to integrate their ad servers and their ad serving strategies from multiple demand sources, we do that for them.
Right now, we’re integrating into 53 demand sources and that’s growing very quickly, just as our supply side is. And we manage all of this for the publishers. We support mobile web and applications and we do both very well. For mobile web they just need our tag and for applications they just use our SDK which is on Android, Blackberry, and iPhone. We’ll build on more platforms as we need them.
So that is our value proposition. The way that the business model works is that the demand size players – usually ad networks but also DSPs’ (demand side platform) – send us a check for the inventory they purchase and we send a check to the publishers. We are neutral, we don’t hold inventory, we don’t buy media, so we can present a very neutral face to the demand side. None of the demand side players, the ad networks, have to worry about us competing with them.
On the publisher’s side, they know that we are not trying to straddle the whole ecosystem and play both ends. In fact, we are strictly on the supply side and our business model – being a rev share – is very much aligned with their interests and we’re not playing any kind of arbitrage game or anything like that. So they can count on us.
Andrew: Alright sounds good. There’s not a whole lot of info out there on Nexage so tell me about the history of the company.
Ernie: We started a few years ago – actually on the west coast – by a guy named Devkumar Gandhi who is still with the company. The most recent incarnation prior to this was still in advertising but doing video serving and video monetization. About a year and a half ago or so he pivoted the company into the business I just described – the mediation play. That was early 2009. He did a friends and family round prior to that and put some of his own money in.
In July of 2009 he did a series A, and as part of that series A he moved the company to Boston which is where one of the individual investors lives (our Chairman, Mike Baker, who used to run Enpocket now is CEO at DataXu) and where one of our institutional investors, Grand Banks Capital, is based. Our other investor is BlackBerry Partners Fund, which is based up in Toronto, Canada.
So he moved the company here and started building after the series A in July of ’09. Right now we’re at about… we literally just had another person accept today, so I’ve kind of lost track of the numbers, but we’re at around 25-26 people, and we’ll be at about 35 by the end of the year. We’re growing very, very quickly both on the supply and demand side.
Right now, we’re approaching about 3 billion ad impressions a month, in terms of volume. And as I said, growing the demand side very rapidly as well, and some really cool stuff coming up later this year. We haven’t announced it yet, but we’re happy to talk with you as we get closer to those releases. But again, they’re all consistent with the mission I described earlier, which is to strengthen the publisher’s side, to raise the value of that publisher’s inventory. And by publisher, I mean both publishers and app developers.
Andrew: Can you dive a little deeper into what is your true innovation? What is your competitive advantage over other players in the same space?
Ernie: There are a few different points. One is especially relevant for premium publishers: we spend a lot of time on our brand protection. So not only do we manage black lists just like most of our competitors, but we also have a screening capability. If you are a branded publisher – which most of our customers are – and you have some concerns for what advertising is being placed in your property, we provide tools to allow that to be managed.
Point number two is our integrated dashboard. We have the ability to manage all of your inventory and manage all of your reporting in one place. So instead of having to integrate, in some cases random spreadsheets and in other cases multiple screens, you see the results of all of the movement of your inventory on our platform. Regardless of which demand partner ended up buying it, you see all of that in one place. Our customers really like the integrated reporting and the integrated dashboard.
The third differentiator is that our business rule capability is extremely flexible. We have built this from the ground up and we’ve always been very clear as to what we’re trying to do: we’re not an analytics company, we’re a mediation play. So we’ve built it from the ground to be highly flexible on the business rules that could be set, so we can do things that others who are less of a pure play or less of a focused play might struggle with. We can do very strong channel protection. Most of our premium publishers, for example, have direct sales forces and they can’t have channel conflict so we can manage that very well for them to avoid the channel conflict. We have a lot of flexibility with our business rules, not just in terms of the black list protection, but also floor setting and rules around what gets bought and what gets placed and those kinds of things.
The forth advantage would be around our scale. Because we’ve built this from the ground up with a clear intent and mind our platform is extremely scalable and highly reliable. Right now we can scale up to about 8 billion impressions a month no sweat, and the architecture will support up to 30 billion – we’ll just have to buy a few more servers to manage that. That was the goal in mind when we designed it and deployed it. So that’s what I would say is the competitive advantage that we’d have.
The fifth, I suppose I already said it, is our neutrality. And that’s more of an issue for the demand side. There are other players out there that are ad networks, or they’re less pure plays in mediation, that frankly have a little bit of a conflict of interest in the way they do mediation. We don’t have that issue because we are not an ad network.
Andrew: So because you hold no inventory, you have no conflict of interest?
Ernie: We hold no inventory, we don’t do any media buying, we only sit on the publisher’s side of the table. We don’t arbitrage, so we’re not buying inventory and then trying to sell it at a higher price. It’s very transparent and it’s all out in the open so the conflicts are non-existent. If you’re an ad network and trying to do mediation, other ad networks would look at you and say, "well, how do I know that you’re not favoring your own ad network over ours?"
If you’re not a pure play and haven’t built your mediation engine from the ground up to be as flexible and scalable as we have, then you’ll have other challenges and other issues. A lot of our publishers are both mobile web and applications, so our premium publishers know that they come to us for a single solution, and don’t have to deal with multiple sources for mobile web versus apps.
There’s a lot more in Part II of this interview!
Special thanks to Nexage CEO Ernie Cormier and PR Manager Deb Payson for their help with this interview.
[Originally published By Andrew Bellay on aonetwork.com]