In part II of this interview with mobile advertising solutions provider Nexage, I dig deeper into the growth numbers and Nexage’s place in a bright mobile web future.
Don’t miss Part I of this interview with Ernie Cormier, CEO of Nexage and be sure you’re caught up on the industry as a whole.
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.
Let’s jump right back in where we left off:
Andrew: Is there anyone else in the same space? Do you have any direct competitors that offer this type of single solution?
Ernie: Yeah, the most direct competitor that has this kind of a server side solution is AdMarvel, which is now part of Opera since December or January. The other pure play is Smaato. But they’re mostly in Europe and we don’t really see them too much in the states. There are others that we’ve run across, there are a couple of ad networks, that kind of have mediation engines. I don’t mean to slam anybody, I hope we all succeed. But they’re not pure plays the way we are. Then there are a couple of other companies like Ringleader Digital for example, who have done mediation, but aren’t focused on it anymore.
Then you have companies like MobClix who have done a lot of app instrumentation and app analytics. Now they have their exchange, which is a little bit different from mediation in that you really have ad buyers going directly on the exchange and managing their own buys, where ours is more of a streamlined, business logic driven process. So, we have inventory that we make available to the ad buyers, and they can make it part of their media plan, as opposed to an exchange which is part of a hands on experience.
Andrew: Earlier you mentioned something about managing channel conflicts. Can you talk more about that?
Ernie: Sure. Let’s say you’re a premium publisher. If you’re Associated Press, one of our very good customers who is extremely innovative and aggressive on digital media and mobile especially, then you’ve got a direct sales force out there selling some of your inventory at, let’s just say $X CPM. You don’t want to be taking the inventory that doesn’t get moved through that channel, and then selling it somewhere else at half of that price. The sales people will get aggravated if they are calling on a buyer and the buyer says, "But I can buy that same inventory through Nexage or through somewhere else for less." That causes major channel conflict.
So when Reuters or AP or anyone else comes through us, they have the option to “go blind” or “partially go blind” and that gives us some flexibility there. So basically the ad networks on the demand side can buy the inventory and get a lot of information without necessarily knowing where the inventory is from. So that way, if a publisher or developer wants to go blind, they can. Obviously, it’s less value. If you’re a premium publisher you get the most money if you go transparent and don’t go blind. But if you want to avoid channel conflict, you can tell us to go blind and your sales guys won’t get all upset. And again, this is across both the mobile web and applications.
Andrew: Let’s talk a little bit more about market size. I think we are kind of using the same Gartner report that is suggesting 15 billion dollars in mobile advertising in 4 years, up from maybe 1 billion in 2009. What do you see as your potential piece of the pie going forward over the next few years?
Ernie: I’ve learned to take the analysts numbers and aggregate them. Some are saying the US mobile advertising industry is half a billion this year, and by 2010 it will be worth a couple billion. It gets down to what you’re counting, how far do you extend the ecosystem? What’s really nice about it, however, is that no one is saying the market is going to shrink. And no one is saying the market is going to go flat. The only disagreement right now is how it’s going to grow.
We certainly believe that the macro market is growing very fast. We believe our position in the market is also going to grow very fast. We think we have a strong value proposition and a very straight forward sales proposition. Our revenue model is very clear, and our roadmap looking forward is very clear – All around the mission that we’ve already talked about.
While we don’t try to project what we think our revenue will be publicly, we do think that we will be able to grow our revenue and volume very fast. I personally think that some of the work we’re doing now will help to drive some numbers we’re hearing. We don’t really talk about our numbers but we certainly see evidence in our numbers and our customer base of the growth that all analysts are citing.
Andrew: Are you guys profitable yet? Can you talk about this?
Ernie: No we are not profitable yet. And we aren’t in the mode where we want to profitable. In a sector like this you almost don’t want to be profitable at this stage because that means you aren’t growing as fast as you could or should. We are in an ecosystem – and I don’t want to say that it changes every day because that would just be hyperbole – that changes every few months. So pieces in the eco system that 6 months ago were seen as quite secure, are seen as less secure today and are in danger of becoming obsolete or squeezed out.
Allocation of the advertising dollar across the pie change of the ecosystem is very much in flux. We manage our cash very carefully and we manage what we spend very carefully. But we are in a mode of growth and development and by the end of the year we will have some killer products which will bring enormous value to our publishers. There’s a bigger fight than just getting some more advertising out of their inventory but we’re going to help them fight the bigger battle of figuring out how to monetize very well created content – which as you know is really tough today.
So that’s our vision of where we want to go and our investors are very much behind that. I joined 3 months ago with the intent of executing that growth. If I wanted to drive us to cash flow neutral, or profitability, we would be in an entirely different mode. But frankly the entire business would just pass us by and we would fade away having been kind of an insignificant blip. We are focused on establishing that position, delivering that value to our customers, and growing our footprint. Our footprint is now approaching 3 billion impressions and that’s up from a couple hundred million not that long ago. So that’s our focus as opposed to profitability.
Andrew: Since you took your last round of funding – about 4 million dollars – about a year ago, does that mean that you are set for another round here in the next 6 months?
Ernie: We are fine until the end of the year, and our current investors have committed to funding us well beyond that. If it’s an internal round, I’ll be doing a Series B fourth quarter or early first quarter. We have gotten a lot of interest from outside investors already.
Andrew: Do you have a feeling for the size of that round?
Ernie: We are still doing a lot of work on that. It won’t be huge by many standards but we are still working on that.
It’s not over yet. Check out Part III of this interview soon!
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]