The State Of X+1: CEO Nardone On The CMO, Agencies And Targeting Cross-Digital

The State of X+1John Nardone is CEO of X+1, an online advertising technology company.

As part of its "State of..." series of articles with industry executives, AdExchanger.com sat down with Nardone to discuss his company, his views on the space, and the state of X+1 today.

AdExchanger.com: What's your take on consolidation in the ad tech industry right now?

JN: VCs drive point solutions. In the history of technology, what happens is point solutions tend to advance very quickly because they don't have to make money - the VCs are funding them. And so there's a lot of innovation with point solutions.

Big enterprises don't move nearly as fast. And, there is this phenomenon where enterprise client dollars go into point solutions, yet they're "experiment" dollars and can't really impact the enterprise at large.

Over time enterprises start to say, "Well, in order for these things to be really useful to me, they can't be point solutions anymore."

Then, two things happen in the marketplace: either systems integrators are hired to stitch together these companies into real solutions that an enterprise can use to drive its business; or, consolidation happens as big guys begin to gobble up point solutions and integrate them into software suites. And, some point solutions merge in order to cover more of the addressable market and be more viable over the long‑term.

Do you think point solutions are going away?

There will always be new ones, absolutely, but you're going to start to see people either gobble them or see systems integrators begin to play in the marketplace. It’s an interesting point in time where it's not all the traditional systems integrator players either.

If you go talk to the big agency holding companies and ask, "Who do you worry about the most in marketing services?" You'll hear the Accentures of the world come up a lot rather than the other, competitive holding companies. That's because what they're doing is disruptive.

Whether it's buying media audit companies or marketing mix companies, they're buying things around analytics and digital enablement, and then taking stakes in the ecosystem (like Adchemy). Now, even the agencies are trying to be systems integrators if you look at what the trading desks are trying to do by pulling together multiple solutions into suites that they can then package and sell to their clients.

Classic patterns are happening. But as always the case, in each era, there's a new little twist on it. In this case it's the agencies trying to gain some advantage in an integrator role.

Considering your agency background, how is the agency doing as it relates to this technological or "marketing stack" world?

OK. In some ways, better than I would have thought. Yet at the same time, they can be wholly inadequate and not necessarily working in the interest of the client.

I typically say that there's a three-year degradation cycle when agencies buy things that are technology-based. They can keep them together for about three years, because that's the typical term of the earn‑out for the talent and the original inventors who leave thereafter. At that point, the technology asset will "rust". We haven't crossed that three years yet.

The agencies have interest in controlling the data for clients, too. Clients should absolutely not outsource the ownership of their client and prospect data and the insights which come along with it. It is the currency of the future for marketers to be successful.

Any CMO who is outsourcing that is absolutely negligent in their job right now.

So, is X+1 trying to replace a part of the agency function today?

No, we are trying to provide the technology enablement to allow marketers to do integrated, data‑driven marketing across digital channels.

But you also have direct contact with the client, as opposed to a more traditional model where agencies would be that interface. Correct?

Well, we're providing technology. The reality of most client organizations today is that they don't have the skills to implement and manage the technology. So they tend to have us help them with that. But the goal for us is not to create programs or advertising. It's to enable the marketer and their agencies to create the targeting, advertising programs, and offers and so on.

For a while X+1 was thought of as a DSP. Where is the company today?

Well, first of all, when this management team got here, we set out to build a multi-touchpoint, data-driven marketing platform. That's what the board hired me to do. It was around our POE (Predictive Optimization Engine) patent that we were going to build. POE's an algorithmic‑based decision engine. It was that patent that got me to take the job here and build this vision around this multi‑touch point idea.

The first thing that this management team launched when we got here, wasn't media. We launched the new site optimization platform. Pat D'Angelo got here as the CTO starting in June of 2008. In September of 2009 we launched with Delta (Airlines) the new website optimization platform - what we called the Open Data Bridge - and which is today called a DMP (data management platform). We didn't know it was a DMP when we launched it.

That's actually what we built first – and not media.

The next thing we built was the demand-side platform (DSP), because the vision was, "How do we take the first‑party data and profiles, and market it to those people not just when they show up at that site, but when they're off of the site, too?" -and to use the same data, profiles and analytics that we’re using for decisioning offers on the site, off site.

So, (drawing a triangle) the first iteration was the DMP called Open Data Bridge connected to a site optimization platform. The site optimization connected to a DSP. And what's in the middle, is POE, which is running multivariate analytic models in the background.

The [current] team didn't invent POE; we just said, "We have this really cool patented engine that was invented by some brilliant person, I don't even know how many years ago." If we just pointed it at a different set of attributes and outcomes, it's going to build the models for us and give us and our clients the answers. And, now we've productized all of that - built all the hooks and everything - and come out with Funnel R/F.

So would you say that we should think of X+1 as an attribution modeling company?

That's one of the things that our platform is capable of doing, absolutely. But I wouldn't call it that because it goes back to the point solution idea.

Do you like "marketing automation?"

We are getting put more and more into the marketing automation bucket. Let me take you inside a little bit of the last six months. The center of our big client relationships has been site optimization - and everything pushes out from there, including display, which is very different than other display-centric companies. We've been very site and customer data-centric in orientation.

We went live with a major telco recently which is a real game‑changer. It's marketing automation where we are now integrated into the web application server. This is no longer about putting tags on pages. This is about a direct data linkage behind the firewall, and passing data back and forth.

Are you thinking about targeting cross-digital channel opportunities for you and your clients?

We’re definitely thinking about it. We've bitten off an ambitious agenda. The decisions we need to make are around how we need to go at any one of the touch points in order to remain competitive for that touch point.

We're at a point now, where we've got seven or eight big clients that have bought into the vision. And, what we're hearing a lot of right now is that there's an insatiable demand for analytics. No matter how much we give them they want more.

Also, because we have bank and financial service clients, mobile is important. We're starting to look into that as another area of investment. We did our first mobile integration for a client recently.

So are the client engagements helping guide X+1’s company strategy?

Listening to your customers is always a good thing. We have to accelerate their vision. It always comes back to people, process, technology, data, and metrics. Those are always the ingredients that can move a marketing organization forward in today's environment.

Our problem today is continuing to affect a transition in the marketplace from, quite honestly, a lot of revenue that was essentially displaced ad network revenue. We took advantage of that.

We still have a nice, healthy revenue stream from the agency-related media, but that's not where the future of the company is.

Two or three years from now, what's it’s look like for X+1?

We probably won't be an independent company. We're tackling a big, hairy problem in terms of integrating and covering a lot of space. Ultimately it's a big company problem to solve. Somewhere along the lines somebody is going to gobble us up.

You'll also see our "Digital Marketing Hub" completely built out so that there is one platform and infrastructure. Display, website, mobile, social will all be in one place, including email.

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