RAJEEV GOEL: Obviously RTB and yield optimization has grown up in the indirect segment of the world. Then we started thinking about private marketplaces and programmatic direct. In private marketplaces, we regularly get feedback from the trading desks and the demand-side platforms (DSPs) that they spend more money with us in the private marketplace environment than they do with any other inventory provider. We're very large from a private marketplace perspective, which is publishers selling direct to advertisers and agencies while transacting over RTB. The next flavor of that is programmatic direct, which I think the IAB is calling "automated guaranteed." Frankly, I think nobody's in love with that term but it'll work for now.
This is truly focused on workflow automation as opposed to transaction automation. That is the next big area of focus within the ecosystem and we're driving that over the course of this year.
Do you have anything in the marketplace right now for workflow automation?
We do have publishers that are using our platform for pricing, packaging, and distribution of their inventory to advertisers and into the trading desk arena. That can be either RTB or non-RTB, but it's still early stages.
Do you see that as a very different product initiative isolated from the rest of your R&D?
I don't see it as totally isolated, but the focus is different. The way I would describe that evolution is that the industry has been focused on transaction automation for the last six or seven years – RTB predominantly. Now there's a shift around the workflow component. How can I help buyers and sellers connect directly and understand the value of audience and media and then transact in a relationship-driven way that brings the best of direct sales to the forefront while automating a lot of the back-office operations, the mundane and repetitive tasks that are time-consuming and error-prone?
It's being driven by the agency, isn't it?
It's being driven equally by both. There's a misconception by some folks that programmatic direct means I can get rid of my sales force as a publisher. We do not see it that way. We think it's a direct sales proposition where the publisher is selling direct to the agency. But the back office components of it can be significantly automated to bring out much higher levels of efficiency in operations.
What are your hiring goals?
We have the largest team in the industry that's focused purely on publishers, and we're still hiring. We have about 175 people in product and engineering, including probably 100 in India, and 100 in all other markets. We'll grow our team by about 200 people this year.
To what extent is PubMatic an Indian company?
I think of us very much as a global company. Our strategy is to source talent for everything that we do wherever the best talent in the globe exists.
It's something I learned at SAP. They did a lot of consumer-focused innovation in Silicon Valley in Palo Alto, which is where I lived. Most of the security infrastructure was built in Israel, where there's obviously a heavy military-industrial complex. And a lot of that core architecture was done in Germany. They had a very advanced model of saying, "We're going to take the best capabilities, wherever they exist around the globe, and we're going to build our teams accordingly." I took that approach with PubMatic from day one.
If you look at our management team, it's representative of that philosophy. About 50% is based in our headquarters in Silicon Valley, 25% in New York, 10 to 15% in London, and 10 or 15% in India.
The media world is very global by nature. You have agencies that are rolling up into four or five different global holding companies. When an agency says, "We're going to roll out internationally," one day they're in one market, and the next day, literally they're in 20 markets. Six months later they're in 50 markets around the world.
To partner with somebody like that, you need global capabilities. Look at the publisher, somebody like NBC or Huffington Post. These guys are global in nature. Whether they have operations around the globe or not, they also have audience that's coming around the globe. You need to be able to help them with the media relationships and media execution around them.
What do you offer to the demand side? I think there's some confusion in the industry about that.
We do a lot of work for media buyers. We have account managers and we build technology to help the trading desk, the DSPs, the networks integrate into our platform and efficiently access audience and inventory that they're looking for, and that is something that I started very early on when we were pre-RTB, when we were first integrating with the networks.
Do you charge fees to the buy side?
Yes. We have technology and paid solutions for media buyers.
Do all media buyers pay the same fees exactly, or are they negotiated?
They vary based on different capabilities that buyers are accessing.
Would you go so far as to say that there's a media margin?
We don't take a position in media. You can think about it as a technology fee to the buyers, but again, I think the important thing to keep in mind here is our model is publisher-driven or business publisher-driven and that's obviously the thrust of the business.
What can you say about the IPO option for PubMatic?
I can't say anything, frankly. It's very much an option that is open to us. But beyond that, I don't really have any comment on specific plans.
How many publisher customers do you have?
What can you say on mobile supply?
We started investing in mobile about three and a half years ago. In 2012, 5% of our customers used us for both desktop and mobile. In 2013, that number was 25%. Our view is that publishers are going to want one platform provider that does desktop, mobile, video, programmatic direct, indirect, native, all of those things.
We have deep capabilities in mobile Web and mobile app. We continue to invest heavily in that arena because obviously our publishers are seeing phenomenal global traction and mobile growth.
Do you have an opportunity around the app ecosystem? There seem to be a growing number of pure play exchange companies focused on apps.
Most traditional publishers are struggling with mobile in that today the mobile advertising ecosystem is very much game advertisers advertising on other games. It's Candy Crush and that kind of stuff, which tend to perform very well in either social media like Facebook, or in other gaming environments.
If you're a Meredith or a Condé Nast, you're neither of those. You're neither a mobile gaming developer from a supplier perspective, nor are you obviously a mobile advertiser. I think we're just starting to see that catch up for the mainstream of the publishing industry – beyond the gamer industry.
More ad tech companies like Criteo and Xaxis are seeking direct inventory relationships with publishers. Is that a threat?
Typically it is a less educated publisher who will jump at that opportunity. I don't mean that in the sense that they are ignorant but they don't have the platform and capabilities in place to really value their inventory. An ad network might offer, "Hey your (SSP) is getting you a $1 CPM, I'm going to come in with $3 or $4." What publishers are starting to realize is they need to think about their programmatic strategy in the context of direct sales.
They should be thinking about it in a context of all six or seven channels. If I'm selling run-of-site campaigns at $3 or at $7, I need to evaluate that $4 offer in that context. And by the way, maybe I'm getting that deal on April 15th, which is a soft part of the year, the beginning of Q2. That deal is going to be a six-month deal. How do I make sure that I price it in the right way over the span of that deal?
That's one area where we are uniquely positioned. We have a capability called Decision Manager that plugs into a publisher's traditional ad server and can give them visibility and optimization across direct-sold, traditional, non-programmatic as well as what's coming in on a programmatic basis.
That's super important because more and more ... buyers are coming to the publisher and saying, "Hey, you know that $2 million buy that ended last year? I want to do it again and maybe add half a million in open-market RTB, but I want to execute it all programmatically because now I'm accustomed to bringing my own data into the mix, being able to change my creative on the fly, being able to do audience targeting. And so I don't want to retreat from that world that RTB has opened up for me, but I still love you as a publisher first, so I want to be able to still buy from you and buy transparently, but I want to do it on a different technology stack."
Criteo added 600 new publishers in Q1 alone. They are now at 7,000 direct publisher relationships.
I suspect part of that is they're going after the mid-market. As far as I'm aware, there's no scaled SSP play in the mid-market to the long tail. There are a variety of reasons for that.
Is the mid-market something you're interested in in the long term?
In the long term, yes. Frankly, we see many great opportunities to do more for our customers in the head of the market.
Geographic expansion. We've just had a big launch in Japan in April. We've gone from zero customers at the beginning of April to 25 publishers live in May. We see fantastic trajectory to that business.
From an Asia-Pacific perspective, we're now in Sydney, Tokyo, Singapore and India. We're covering all of those markets, with the exception of China, through those four geos. Obviously we have a significant presence in Europe, including Paris and Munich. We do business now in about 30 countries around the globe.