The New Rocket Fuel: Questions For CEO George John And [X+1] CEO John Nardone

george-john-nardone-rocket-fuelRocket Fuel closed on its acquisition of [x+1] Friday, transforming itself from what was primarily an ad network company into a credible platform play focused on the software-as-a-service opportunity in programmatic marketing.

The new Rocket Fuel has far more of the attributes of a "programmatic marketing platform" than the old one, providing clients with the ability to centrally manage their data and use it to message across a range of paid and owned channels. [X+1] brings these capabilities via its data-management platform (DMP), demand-side platform (DSP) and site-side optimization capabilities. These will augment Rocket Fuel's "artificial intelligence" approach to exchange-traded media buying and optimization.

For more on the deal and its details, AdExchanger spoke with the men in charge of the two companies: Rocket Fuel CEO George John and John Nardone, the former chief at [x+1] whose title is now EVP and general manager at Rocket Fuel.

AdExchanger: Talk about the fate of [x+1]'s Origin Marketing Hub vs. the much younger Rocket Fuel DSP. Do you maintain separate platforms or migrate all your customers to one and shut down the other?  

GEORGE JOHN: It's more of a blend than it is keep one, shut down the other.

[X+1]'s Origin platform is beloved by customers for the ability to put in the marketing rules that the teams would prescribe around what products to recommend in which situations, and how to make that consistent across channels. The value is around involving the people more in that process and then being able to integrate with multiple touch points, once that decisioning is prescribed.

Rocket Fuel's strength was, given a precise goal, letting the AI run with it and managing the petabytes of data that the AI works on top of. As we blend, you'll see a lot of the workflow, a lot of the user interface around decisioning and rule logic from the Origin platform. And we'll be able to leverage their existing technology for the channel integrations, the touch point integrations. You'll see that get augmented with Rocket Fuel's AI. Given the constraints that the marketing programs have, within those constraints there's just oceans of optimization to explore. We'll be able to set the AI free on that and deliver some added ROI.

This story is probably bigger than people realize. With Rocket Fuel, sometimes we have to argue with customers and say, "Look just trust the AI." A lot of them say, "But I've already got pages of workflow." We can now say, "Fantastic, we can start with that and then let the AI optimize."

JOHN NARDONE: Whenever you ask a question about technical integration, you can't answer in the absence of timelines. Of course it's going to take some time to achieve that vision of true melding of the best of both. We think we'll get there within a year, but of course our plan is to deliver value along the way. We've already identified a series of short-term and mid-term wins where we can cross-pollinate between the two platforms.

Does the [x+1] brand go away?

JN: The company is Rocket Fuel. [X+1] as a brand is going to go away.

[X+1] already supports non-RTB channels such as email and site-side optimization. Is Rocket Fuel still at its heart a paid media company?

GJ: It's a fair question. You might be wondering: Will we be shutting down all this other funky personalization stuff? The answer is god, no.

The [x+1] solution, where we have all your customer data together and then one data decisioning engine that can talk through all of these touch points, it's the only logical way to do it.

We always thought of ourselves as a big data and AI company that happened to choose paid media as the most exciting market to enter with that technology. We would be disappointed if that were the only thing we ever did, and of course now we don't have to worry about it.

JN: Two years ago, when George and I first met, it came out that George was one of the first guys at Epiphany, one of the first web-based CRM platforms. There's a common long-term vision here.

We saw the AI as a way of dramatically accelerating the vision of a multitouch marketer. What you learn is, the more channels you plug in, the more the complexity multiplies. You get to a point where human beings can't manage the rule sets anymore. When you start plugging in five or six channels, it gets exponentially more complicated. Automation has to be brought to bear to make this manageable for complex clients.

Looking at the AI and understanding how it works, the path became clear that that's a much better way to solve the problem than any of the analytical methods we were working.

How would you describe the company?

JN: A programmatic marketing platform.

George, when Rocket Fuel lowered 2014 guidance, you cited a few trends: agencies directing more ad spend to "preferred" DSP partners or trading desks, marketers avoiding exchange buying over botnet concerns and marketers bringing programmatic in-house. How have these trends affected Rocket Fuel's strategy, and how does [x+1] play into that?

GJ: One trend we talked about was the shift to software buying from media buying. I don't think, three years from now, that everyone's got a software platform and no one buys media as a service. If you look at SaaS vs. enterprise software, the pitch was, "Why buy the Sun hardware, why install Oracle, why install a CRM system on top of that? Let us handle it for you and you can use the software as a service."

In many ways the media business that each company has, it's media as a service. If you just want to get this campaign out the door, you can call us and do that. In that world, why bother installing DSP/DMP software? In some ways you just want to get one job done.

On the other hand, if you're getting that job done several thousand times during the year, it's real and virtuous and good for a company to have more clarity around their own customer data and how that data can be used to drive advantage for them.

The trend toward software we were addressing organically. But the reason we've come together here is, it takes years to build a reputation, and even though we could've written the lines of code, the fact that [x+1] had led the way in terms of DSP and DMP [motivated us].

Take Schwab or eTrade. If someone wants to walk into an office and talk to a broker, you've got that. If someone wants to log into a website and execute trades, we can do that. We want to offer a spectrum of services. As enterprises develop their own proficiencies and use software to manage their data, we want to be the technology platform to enable them to do that. And if they want help, we're very eager to give them ideas and help with execution.

What about the negative impact of agencies' locking in with trading desks and other preferred partners?

GJ: Looking back, we had this naïve idea that if we build the best products, people will try it, love it, build more over time.

What we started to see at the end of Q2 was a deal we thought we'd bring in for $600,000 came in at $500,000. The team at the other end of the table would say, "We want to do more with you but we've got preferred partners we're trying to do more with so we're pulling back a bit."

We're reacting to it pretty quickly. That feels like a transient thing we're addressing.

What's underlying these preferred deals?

JN: Going back a few years ago when there was not a lot of expertise and very few experienced people, the only thing the holding companies could do was to create a trading desk, because they had to have an opportunity to learn and they had to concentrate the few experienced people they had to serve the larger organization.

Ultimately, the operating agencies that serve the client want to and need to control the delivery. That's a natural progression that's happened at holding companies repeatedly over the years. As some new media type comes in, they create a specialized unit to deal with it. They build expertise and reputation, and then that expertise gets filtered out into the operating agencies and eventually the centralized solution goes away.

The interesting trend, when you talk about preferred relationships, is the discussions we get called into were a little different from Rocket Fuel because we've not had as much of an agency focus. Nonetheless, what the agency says is, "We want you to build something with us that's unique, that no one else is going to have." So that at the operating agency level we have a unique competitive advantage.

That's what you'll see. It's less about "preferred" partnerships. It's more about "advantaged" partnerships that the agencies are trying to create – where they're trying to differentiate themselves by coming up with unique ways to leverage the technologies that companies like ours bring to the table.

At Rocket Fuel, we have a technology asset and platform. What do you have, Mister Agency? What data can you bring to the table? What unique analytics can we lay on top of it? And can we swizzle those things into something that is uniquely "ownable" by your agency, and is not even necessarily held by one of your sister agencies in the same holding company? They're going to want a different set of data and a different swizzle of benefits for their clients. And that's where the real discussion is now with the agencies.

George, you've already called out the enterprise sales and marketing prowess that [x+1] brings. Do you expect the selling climate to get tougher in the next year as the underlying shift accelerates? 

GJ: Media is already very competitive. We built Rocket Fuel to survive and excel in a world where there was this Darwinian pressure. We're on a media plan, our job is to be the best and therefore get more budget next time.

The software evaluation cycle is very different. It's more of an RFP process. There are feature lists prospective clients want to see. The technology we're inheriting from [x+1] is very complete at this time, and so we're excited.

JN: I'm personally looking forward to it getting a lot easier. Clients are becoming more educated. Even 18 months ago, there was still an enormous amount of buyer education. As time progresses marketers are becoming much more knowledgeable. There's a whole phenomenon called the "second-wave buyers." These are people who have used some of the other name brand early entrants who made big sales pitches. Now they're coming back, saying, "I've been working with that other DMP for three years and I haven't gotten the benefits. But I now understand what I need in a way I didn't understand before."

That's a very exciting point for the marketplace to be in.

 

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