https://apps.facebook.com/techworeld/proo/?i=1050825 LexxyTech Corporations LexxyTech Corporation: Tech: Google and Facebook's dominance in advertising is overblown, says the CEO of a public ad-tech company

Thursday, 3 August 2017

Tech: Google and Facebook's dominance in advertising is overblown, says the CEO of a public ad-tech company

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Jeff Green, CEO of the ad tech firm The Trade Desk, is cheering on the industry's shakeup and says that Google and Facebook's dominance is overblown

The ad tech sector has had something of a doomsday feel to it of late.Public companies like Rubicon Project are looking for buyers, and those that are getting acquired — like Rocket Fuel — are pulling in a fraction of their once lofty valuations.

Plus of course, there's the looming sense that Facebook and Google are taking over the world.

If any ad tech company has been able to stay above the fray, it has been The Trade Desk, which specializes in helping ad agencies buy ads using software. Since it went public, the company has seen its valuation climb steadily. It debuted with a price of $18 and it is currently trading for in the $50-plus range. The firm reports earnings next week.

We caught up with Trade Desk CEO Jeff Green for an ad tech reality check. Here's an edited version of the conversation.

Mike Shields: Rocket Fuel was once valued at $2 billion and sold for $125.5 million. That raised some alarms in this industry. What do you make of what that deal signifies?

Jeff Green: Rocket Fuel had some great technology, and their CEO had a lot of knowledge. But they did not have a business model that could make money. They had 60% margins and were losing money. That was apparent in their financials. They shouldn't have been valued at that level.

Still, we see a $650 billion global ad industry that is still just transforming into programmatic. There are humongous opportunities. People should be optimistic. Investors have lost sight of the big picture.

Shields: Why has your going public gone so well?

Green: The reason we’ve done well is that we've convinced Wall Street we’re in it and we can win. We're transparent.

Shields: Is this the end of the 'black box' era in ad tech, meaning companies that boast of proprietary algorithms and methodologies but nobody can explain how they work?

Green: I don't think this is the end of the 'black box' period in ad tech. You see this with all the talk about 'artificial intelligence.' That's something of a black box. I don't think that's going away. But the standard for transparency is higher. That's become a much bigger issue in advertising. That means the era of 60% margins is over. Everybody needs to add more value than they extract.

BI: Why did that persist for so long?

Green: I don’t think it was ever OK. If marketers knew that’s what they were being charged they wouldn't have gone for it. What created the room for that lack of transparency and the esoteric nature of the industry.

We need to get to business models that are sustainable. I worry about these bad headlines. All this consolidation is actually a great thing for the industry.

Shields: What about the perception that Google and Facebook are fueling this consolidation by running away with the market?

Green: That connection that should not be made. It's funny, I don't think I’ve ever taken a meeting with Wall Street without that question being asked. Google is one of the greatest inventions in my lifetime. But, if you think about it, 70% of their P&L is about making money from Google.com. I consider them a new media company. Similarly, all Facebook does is monetize Facebook. They are a destination....Investors in, in particular, give Google and Facebook way way too much credit for being the answer to all advertising’s problems.

Yes, a bunch of logos on the Lumascape are gonna fall off or just go away, but when you measure the size of the opportunity in programmatic, we’re still in first inning. People lose sight of how much transformation is coming to advertising.

Shields: What else has you excited? What about bringing data and automation to TV ads?

Green: Yes. We've seen the amount of inventory in connected TV ads jump 10x to 20s since last year. There’s a number of things at play. Consumers are racing out the door [with cord cutting] and the TV business is a ticking time bomb right now. The content is the best it's every been. The number of ads is up and the ad prices are up. The status quo is not sustainable.



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