Category Archives: Startup & Venture Capital

Advertising For Startups: Does Size Matter for an Online Publisher?

This post is part of a 5 day series where we lay the groundwork for a startup to generate advertising dollars from agencies or brands.  Note:  while this is focused on startups, it could apply to any company of any size.  The first post that sets up the series is located here, second post is located here, and it’s based on this presentation.

Today’s topic is Does Size Matter?

If you are a startup or a publisher, you generally often wonder at what point can you go out selling advertising against your userbase.  Does the size of your userbase matter?

Historically, size mattered.  You needed significant size because you generally couldn’t target specific audiences so you had to sell the entire media vehicle and account for wastage.   With digital targeting, specifically audience driven media, you can now target with serious granularity.  While significant targeting delivers your audience segment, the numbers are typically much smaller than a large site-direct or ad network buy, because you are just reaching a specific user base.  For publishers who are still early in development but have a vertical or niche site, then you can begin selling ASAP because even 50,000 people who are into Ferrari’s and have $5,000,000 disposable net worth are seriously worth something to someone.  If you have a way to package your audience segments, then start selling.  You don’t need to wait until you reach 100,000,000 users to generate advertising dollars.  Implement an Audience Management Platform and you’ll be on your way.

If you have a general site (i.e. portal, aggregator, etc) and can’t really segment your users, then it might be hard to sell against until you have substantial visits.

The question comes up often about what types of creative units you should accept…   Start with the IAB Standard units because they are the most common.  Any major agency is going to create using the IAB standard package and then add custom units on top of it.  If you start here with implementing the 300X250, 160X600, etc – then you can fill those units.  Just last week, the IAB released some Rising Star units which are pretty interesting as well.

If you have unique/custom units, then these are harder to sell because agencies have to create custom creative for it (production fee implications).  Unless you have substantial size and buzz, it’s hard to sell custom units (not impossible).

On Monday, we’ll discuss the evolution of the pad online ecosystem consisting of Ad Networks, Exchanges, Site Direct, Private Exchanges, etc.  It’s a topic I love and am excited to write about it.

Advertising for Startups: Day 2

This post is part of a 5 day series where we lay the groundwork for a startup to generate advertising dollars from agencies or brands.  Note:  while this is focused on startups, it could apply to any company of any size.  The first post that sets up the series is located here and it’s based on this presentationDay 1 post is here.

Today’s topic:  Where do I start?

As a startup looking to generate advertising revenue, you have a few options on how to ramp up your initial revenue.  Keeping it simple, you can hire your own internal sales staff, outsource to a rep firm, or integrate with ad networks and exchanges.  Depending on which you choose, you will end up keeping a larger percentage of the dollars (your own sales team being the ultimate).

Based on slide 5 of the presentation, hiring your own sales staff generally proves to allow the start-up to keep the highest amount of gross revenue but isn’t the simplest to setup.  Hiring your initial sales person is one of the most important jobs you can fill at your organization.  All too often, I see startups using their first “sales” hire as a Chief Revenue Officer or SVP, Sales.  I generally am against those initial hires and would rather put someone inside of the startup who isn’t afraid to roll up their sleeves and has 3-5 years of experience within a competitive or tangentially related organization.  This way, you leave open a very senior role to fill after you’ve gotten your feet wet with your initial sales… which should impact what your senior sales job descriptions are.

Outsourcing your sales to a rep firm is an interesting option as well.  I’m generally not for this as no one knows your product better than you do, but this has worked for certain companies.  I’ve heard that Living Social is working with AppSavvy in this type of setup.  As agency person, I’m not a big fan of this because an outsourced sales rep or firm is generally working with a few different companies and when they come in and meet us, they are basically trying to sell us on everything and not everything is relevant.  It can work however.  Depending on how you structure your deal, you might pay an outsourced representative a monthly fee + commission or straight commission only.  What’s worked well for me in the past is to hire an outsourced rep in an area of the country that I didn’t have a direct sales force in.  There are quite a few reps in Detroit – as much of the automotive budgets are siloed up there because of the auto industry and these reps have great relationships.

Lastly, you can work with ad networks and ad exchanges if you have standardized units.  This is probably the easiest way to turn on the revenue spigot since it’s passive selling and there are other companies out there purchasing your inventory without any work on your part.  You can get fancy with how you optimize your networks and exchanges with SSP’s (or supply side platforms such as Rubicon, Admeld, Pubmatic, and PubGears, amongst others).  Sometimes, ad networks will guarantee you a floor in which they will sell against and potentially provide you a guarantee payment depending on how popular your startup is.  As a startup, you can use this to your benefit by shopping around to multiple ad networks or SSP’s and seeing which want your business the most by the amount of guarantee they give.  Overall, I’m not bullish on ad networks, but as a startup, they can generate some dollars for publishers generally off of the bat.

Note:  the easiest ad units to sell that have scale behind them are IAB standardized units.  While not the most unique or custom, billions of dollars are transacted in them each year and their performance is going up based on all the targeting data.  More on the data side later in the week.

Friction

Anytime there is a middleman in the middle of the advertising dollar and ultimate publisher, there is friction in the ecosystem.  The friction represents a rep, network, exchange, or some other intermediary.  To most, friction is bad, but to startups, I think most can put up with some in the short to medium term.  The rationale for this is because friction allows startups to focus… having someone else handle non-core work allows the core team to focus on what they do best:  build a product, vision, etc.  When the revenue becomes significant or it’s time in the startups life to build a larger team (Series A funding, etc), then one can remove friction.

To recap, friction is a tradeoff to focus.

To recap, we covered slides 5-8 of the presentation.

I hope you found this insightful.  We’ll focus on on “size” tomorrow.

Advertising For Startups: Day 1

This post is part of a 5 day series where we lay the groundwork for a startup to generate advertising dollars from agencies or brands.  Note:  while this is focused on startups, it could apply to any company of any size.  The first post that sets up the series is located here and it’s based on this presentation.

Day 1:  Understanding the ecosystem of ad technologies and the two ways to approach agencies for ad dollars

The advertising technology ecosystem is very complex.  If you’ve never seen the Luma Partners (Terry Kawaja) slide, then I highly recommend you print it out and study it as it’s used pretty much by all the bankers, vcs, and industry folks as it’s one of the most comprehensive.  But how do you navigate this?  How do you understand the differences between demand side platforms, trading desks, sell side platforms, data management platforms, audience extension partners, search re-targeting partners, etc?

Luckily, you do not have to… at least for now.

If you are a startup who is looking to generate advertising dollars, you basically have to make a choice around what types of units to offer.  If they are IAB/OPA standard units, then recognizing revenue immediately shouldn’t be too much of an issue as the industry is built to scale quickly there.  If you are building unique units that are proprietary to yourselves, then this is OK too, but you’ll have a harder time finding your first couple of advertisers because you’ll need to educate the industry based on these units.  More on this in forthcoming days.

Whether or not you use ad technologies now, you need to at least understand that you will need to know it in the future.  You can staff up around it or outsource it eventually.  Again, it’ll be covered in a day or two’s post.

2 Ways to Approach an Agency

Historically, there was really one way to approach an agency.  It was by picking up the phone and calling and arranging a meeting.  You’d meet in person, present your wares, and if lucky, you’d be brought back and become RFI/RFP’d.  From there, you’d potentially make the media plan and all would be rosey.

Now, there’s a whole other way to make it into the agency and that’s thru the agency trading desk/demand side platform.  By doing this, you now have access to a smaller amount of money that you can get from calling the agency, but it’s growing significantly and will become the advanced media buying way for standardized units.  In just 3 years, over $200MM is spent via trading desks of major agencies and it’s probably increasing at a significant rate.  Instead of a typical sales rep calling on the trading desk, it’s much more of a business development conversation with technical integration.  Varick Media, Cadreon, VivaKi, Dataxu, Accuen and others are the major respective trading desks.

Remember though, an unhappy client can’t call a server or algorithm and have it apologize.  It will always take people to manage and oversee these campaigns.

Tomorrow, we’ll discuss where to start:  do you hire a rep firm, outsource to an ad network, or sell media directly.    Very timely as Mashable just separated from Federated Media.

Clams, Benjamins, Beans, Dollars. Your Startup Sells Ad Space, Read On…

I created a presentation about 6 months ago for a talk at the Founders Institute.  The talk was about 5 things to do/know when looking at generating advertising revenue from your startup.  I’ve personally been in a unique position to talk about this as I’ve run startups that take ad dollars from brands and I’m now on the agency side divvying up ad dollars to all different partners, including startups.  I can talk credibly from both sides of the table.

I was asked to give a presentation to the New York class of Techstars entrepreneurs and revisited the presentation I gave to Founders Institute and made some tweaks.  The presentation is divided up into 5 sections, each of which I will spend the next 5 days discussing each section in depth.  Hopefully you all find this interesting and if there are additional questions, do not hesitate to follow up with me or leave comments.

The presentation is linked to here and this will be what I’ll be going off of as I go deep into each section.  Please view it before continuing as my posts will make a lot more sense.  Note:  the presentation is a “speaking” presentation in the sense that I do much of it justice with voice overs… but you’ll get the idea as you go thru it.

Ad Revenue for Startups

Tomorrow morning’s topic:  advertising ecosystem overview & the two ways to talk to agencies (slides 1-4 including title slide)

If there is anything you specifically want to hear about, please do not hesitate to ask.

Experience Platforms Powered by Technology

Read my previous post for a good preface to this one as it’ll help with the understanding.

The 80/20 rule for products are that 20% of the product users will be vocal and you won’t here from the other 80%.  Sometimes, this is more like 95/5.

I’m going to liberally stretch this to be 80% of the owners of products don’t really care how they are built but want the product benefits.  20% of the product owners are the passionistas and want to know everything about them.

Example:  Porsche just launched the Panamera 4S Hybrid.  The Porsche forums (on line) are having serious chatter around this car – both the good and bad, but the majority of people will never see this chatter nor really care about it.  80% of Porsche buyers (maybe more) don’t care how the engine works or which hybrid system it employs, they want to drive the car from point A to B and have a great experience doing it.

This is very important for the world of digital media and technology, especially if you are building consumer applications.  Let me explain.

As more and more people come access the Internet across the world, the digital passionistas who care about every technological nuance become less and less (diluted by the growth of the Internet).  As this happens, the experience of the application of the technology needs to be more powerful than the actual technology itself.  Again, please reference yesterday’s post for more on this.

Clay Shirky says it very well:  Once the technology have sunk deep enough in the culture, the social effects built upon the technology require the technology but aren’t about the technology

One of the questions I ponder which is relevant to this is that IF the web is less and less about the technology and more about experiences, then how sustainable is any one experience when humans are naturally curious and are always on the lookout for additional experiences.  Should companies on the web craft multiple experiences for consumers under different brands and connect them together?  Think of the assets AOL has, this could be interesting.  It’s not just about any one brand any more.

Another example:  I like to vacation with my family.  While we were in Aruba a year or two ago, we had an amazing time.  Have we been back?  Nope.  We’ve picked other countries and states to visit because the world is so vast and we want to experience so much of it.

Back in December 2010, I wrote a post entitled, I Don’t Want to be Monogomous.  The post talked about how I’d like to experience other phones and access devices but I’m locked into one mobile contract for one particular phone (iPhone 4).  These types of experiences are extremely limited and might do more harm than good to consumers in the long run.

To get back to the general thesis of this post, we’re seeing big bets made recently in what I like to call “experience platforms powered by technology.”  It’s not the technology itself that’s special, but rather the experiences that are built on top of the technology.  I explain the Twitter ecosystem here and why it’s special.  Facebook is fascinating too.  Quora – unless it opens up to be a platform that provides value creation for more than one business entity, it’s not that fascinating as a platform.

In a world where digital is going to penetrate most of our media vehicles, crafting the user interface and experience (overall presentation layer) is going to be of utmost importance.  Differentiating on features isn’t going to win, but differentiating on the experience that these features deliver is going to create lasting power with consumers.  At kbs+p Ventures, this is one of our major thesis and we are on the look out of awesome innovators in this area.

This post is all over the place, apologies for the rambling!

Madison Avenue Meets Sand Hill Road, kbs+p Ventures is Born

My vision since day #1 of joining this agency has been to foster relationships with early stage technology companies, as they are the rapid innovators within the market place.  The agency world has a lot to learn from them and their rapid pace inspires much of what we do.

I have begun executing on this vision with the awesome people in the agency by hosting The Media Kitchen Digital Media Venture Capital Conference (3 years in a row), Speaker Series events featuring prominent founders and VCs, Lunch & Learns with startups, and being open to the dozens of startups and VCs that reach out each year for introductions.

I recognize the value of innovation and startups within the advertising agency landscape because I grew up on that side of town.  I got my premature grey hair founding multiple startups and raising lots of Venture Capital and both losing my shirt and winning it back.  I didn’t sleep at night because I knew that our staff had families to feed and if we didn’t hit our revenue goals, we’d go hungry.  I had been on a Ramen diet for much of the early 2000s.  It’s hard to grasp being an entrepreneur when you don’t participate in the lifestyle and career choice.

Announced today is the evolution of both the agency and myself, a step towards aligning ourselves with innovation in even a greater sense of the word.  Not only will we bring startups and fantastic entrepreneurs inside our walls for advertising related opportunities, but we’ll even take it a step further and fund them as well through our new investment arm, kbs+p Ventures.  You can view the website here.

I’ll continue to lead, inspire, and execute against Chief Digital Media Officer responsibilities with the added responsibility of sourcing, analyzing, and green lighting (along with our investment committee) seed & early stage technology driven investment opportunities that provide mutual value to both the entrepreneur and to our agency at large.

There are three areas that we look for in opportunities that aren’t dissimilar to other investment arms/funds:

  1. Team:  Are we backing the best possible people who are exploring an idea thesis?  If not, what needs to be added to the team?
  2. Idea:  We like to back big ideas that can be executed against today.  If the idea is too large and is too far out in the future, then the idea isn’t for us, kbs+p Ventures.
  3. Demonstrable Traction:  We like to see momentum.  Can you demonstrate traction that you have gained with your idea?  Do you have either an open or private beta?  Demonstrable traction shows us two things:  1) the market at some level is taking to the idea and 2) it shows us that you can execute.

I’m looking forward to backing some fantastic entrepreneurs and investing alongside my friends at various funds.  We generally do not lead investment rounds and we’re complimentary to any super angel or early stage fund.

I’m excited to bring Madison Avenue and Sand Hill Road together.  It’s been way too long for this to happen and as the advertising world is becoming increasingly digital, it makes a ton of sense.

Thanks to all who supported the launch of kbs+p Ventures!

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PointCast & UberMedia

Bill, we’ve never met but I’ve been a big fan of yours since the idealab! days.  I’d love to chat with you based on your recent media coverage around UberMedia.

I’ve been reading lots of the recent news around the acquisition of TweetDeck and your other acquisitions..  This morning, I read an interview on PaidContent which really crystalized this for me and appropriately, Chris Dixon named you a badass swashbuckler.

I don’t have such a cool name for you, but I do want to share a few things with you that I’ve been writing now for the past 5 years.  Note, this is not everything, but snippets of what I could find indexed in Google from my blog.

Here’s a snippet of what was written on PaidContent this morning:

For some of us, like you, some of these ideas of push news, push information, we’ve been there, we’ve seen them fail. I was involved with PointCast. Here’s what I think has happened. Some ideas are really, really great and fundamental, like the push power of PointCast, which Twitter is very similar to today. However, the time wasn’t right. The devices weren’t ready for it. We didn’t have mobile devices, didn’t have smartphones back when PointCast was out, The bandwidth was too low. One of the big challenges PointCast has was taking over the bandwidth of corporate servers so they blocked it. At that time, the dial-up modem was just too slow to handle the push graphics. Today, it’s ideal. The ideal circumstances are there so sometimes old ideas at the right time are really powerful and I think that’s the case today.

As many of you who have followed this blog since day 1, I’ve said that there is room for PointCast to come back.  I even attempted to purchase PointCast 3 years ago but that failed and that’s when I began building Tomzy in my private time.  Tomzy will be released in the near future once a few developers can finish up the initial alpha code.

Here are a few of my blog posts about PointCast over the years.  The media landscape is so ripe for it especially as all of our media consumption “devices” are becoming connected.

Predictions for 2006 (1/2/2006)  We’re going to see a “Pointcast” type network emerge for media.  For those who do not know what PointCast was, it was a startup formed in 1992 that provided relevant news and information to your desktop thru a push application.  See the Wikipedia definition here.  Pointcast didn’t fail due to it’s amazing product- it failed due to poor management and the timing of the marketplace.  I’d like to see Pointcast come back in some iteration that may bridge iTV, iRadio, Internet, and video games.  Do I believe that media can be 100% ad-supported?  Not all of the media, but there are certainly a mass quantity of media that can be – so lets get Pointcast up and running and support that relevant media.  (I’ve got an idea, so contact me)

PointCast & Widgets (8/29/2006):  Are we going to see a resurgence of the PointCast Network?

The Adobe Air Up There (9/27/2007):  Lots of possibilities for this platform. The number one possibility I’d like to see it enable/bring back? PointCast. If PointCast had launched utilizing the Adobe AIR platform, the technical hurdles that the developers faced in the 90s would have went away and PointCast may be the next new network. Who knows. I’d love to place a bet that a similar [PointCast] model will emerge soon utilizing this platform.

Digital Ramblings:  Long Post Warnings (12/7/2008):  Boxee is really interesting for many reasons, but the first of which is getting digital content onto my living room TV.  I can watch everything from Fast Lane Daily to TED Talks, Hulu to Netflix.  Genius.  I want to see Boxee expand to the desktop as well in terms of a content distribution system inside of widgets.  Think PointCast model.  I’d be very interested in talking further about this.

Bill, I welcome a conversation with you next time you are in NYC or I’ll fly out to San Francisco to meet with you.  You can contact me thru this form (sorry for not giving email address due to search engine spammers) and I’ll gladly be in touch.

If you aren’t Bill Gross, but are an entrepreneur who has serious aspirations around a “new” PointCast model and you can think larger than the traditional “desktop” experience, lets chat too.

Happy Saturday.

Darren

Opportunities in Advertising Ecosystem

I gave a presentation at the First Round Capital CEO Summit yesterday in San Francisco on the subject of areas that need innovation within the advertising ecosystem.  While this is a very very broad topic and I only had 45 mins or so, I had to narrow it down to a few areas to speak in-depth about.

I modified the presentation for public consumption and reformatted it from it’s original version.  The presentation is obviously a “talking” presentation with much of the context and clarity coming from my voice overs.  I tried to put a few sentences under each topic so you can get a sense of what each slide is about.  It’s short and sweet – and would love to hear from anyone who has any “solves” for these opportunities.

Here is the link to the presentation on Scribd

Opportunities in Online Advertising

I had a great time at the presentation and met some awesome entrepreneurs and CEOs.

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Why I'm Excited About This Batch of Internet Driven IPOs

NEW YORK - APRIL 02: Changyou CEO Tao Wang pre...
Image by Getty Images via@daylife

Let’s assume the Internet started mainstream adoption in 1990 when Prodigy had approximately 465,000 subscribers and CompuServe had 600,000 (fact check here).  While those numbers in themselves aren’t mainstream to a country of 300MM+ people, they do signify a large group of people who were early adopters and started to spread the love about this thing we called/call the World Wide Web.

Throughout the decade of 1990s and within the technology sector, there were quite a few companies who attained liquidity thru going public (IPO).   Others raised quite a bit of private equity and venture capital and some are still around today, others are not.

IPOs of significance to this post:  Lycos (1996), Yahoo! (1996), eBay (1998), Akamai (1999), Razorfish (1999)

During the 90s, there was lots of hype and hoopla surrounding many of the IPOs which led them to appear much larger and significant than they really were.  The major reason for this was the promise of the Internet and implied valuations and multiples for what the Internet “will be” in years to come.  These multiples made up for the revenue traction (or non-traction) that the companies had.  The companies who had revenue traction then are more likely to be around today as they had solid foundations.

Fast forward to today.  There is starting to be some talk on the various mainstream and niche news sites about the forthcoming IPO marketplace for Internet related companies such as Facebook, Groupon, LinkedIn, Twitter, amongst many others.  In talking with many investors, journalists, and entrepreneurs, they are a bit hesitant of this IPO landscape which is the opposite of my thinking.  Maybe I’m the contrarian here.

I’m excited for some of the forthcoming IPOs.  Let me explain why but before I do, lets remove any external factors outside of this blog post about the US economy, worldwide economies, etc.   Let this solely be around the Internet.

  • Internet Adoption:  In it’s most simplest sense, there are more people using the Internet today than there were in the 1990s; here in the US and in the world.  By more people using the web, there is inherently more demand for innovation.  Instead of introducing home PCs to people, we’re now introducing tablets and smartphones.  Access to the web isn’t “if” or even “when” now, it’s more about “how much” access thru multiple devices.
  • Internet Understanding:  It’s 20 years post 1990 or 11 years (an entire decade+) since 2000 and the mainstream public now knows how to use a computer and browse/surf/dabble across the web.  500 million people have logged onto Facebook and created a profile.  This was not the case 10 years ago.  Fundamental understanding and most important, comfort, with the Internet is here and more people are discovering, transacting, communicating, and planning each day online.
  • Advertising Dollars:  For the past 20 years, dollars have been allocated to the digital channel.  Search, display, rich media, video, mobile, etc all have helped grow the digital advertising pot. Currently as it stands according to eMarketer, online ad spending is roughly 15.3% (2010) of total ad spending resulting in approximately $25.8B.  This number is going to grow and help bolster digital tv, radio, print, and OOH (all of those channels will have digital backbones eventually).

So why I’m particularly excited about the idea of the Internet IPO resurgence is because there is a strong foundation for these companies to grow on top of in terms of Internet users, comfort level, and ad & product spending online.  The previous companies had very little to build atop which is very different now.  The landscape is a bit more mature which should allow for companies to go big and have a higher rate of success.

(note, I’m not bullish on all of the companies listed in this post -just using them as examples)

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My First Ohours Day Competed

For those note familiar with Ohours, it’s my friend Nate‘s new experiment with helping to connect people looking to network and connect with other interesting people.  He also coded it from start to finish as his working education to learning programming.  I thought I’d try it.

I held my first Ohours day on Friday, January 7.  I made an hour of my time available in 20 minute increments and met with three different people.  I had absolutely no idea what to expect going in and was very curious to see who would pick me.

I will leave out the names of the people I met with due to confidentiality purposes but will give some insight into the content of the meetings and my overall opinions:

  • Probably no shock, all three meetings had to do with entrepreneurship and for me to give quick feedback on certain aspects of their business (fundraising, business development, hiring)
  • The meetings underscore to me that the New York tech scene has a lack of development talent which has been written about quite a bit lately or people just do not know where to look (which seems to be less of an issue now)

Here is some advice if you are using Ohours (and feedback for the product in general):

  • 20 minute meetings are tough.  By the time you are done with intro’s, then you have 10 minutes to talk.  Not a ton of time.  I’d say minimum meeting times should be 30 minutes (an extra 10 mins means a lot)
  • Ohours should send an email with brief bio’s of each person you are meeting with.  I actually had only met one of the three people I had met with before and wasn’t able to research their backgrounds before meeting individually with them.  If Ohours could pull from the various sources online (like LinkedIn) with bio information, it would be helpful.
  • A private feedback mechanism would be helpful to see how the participants in the meeting felt about it.  It could be less about “did I like the person” but more about “did the meeting add or enrich value” (or something along those lines)

The next 2 weeks are grueling for me and laden with travel so I’ll have another Ohours in February.  It’s not posted yet on the site but will tweet it out when it eventually is posted.

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