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OFFICIAL PRESS RELEASE

Last week one of the world’s biggest publishing companies for both online and print, Conde Nast, announced a major shift in focus — one that is squarely directed at reducing the company’s dependency on advertising dollars, which currently account for 70% of its margins. According to the New York Times, Conde Nast’s CEO, Charles Townsend, stated, “We have been so overly dependent on advertising as the turbine that runs this place, and that is a very, very, risky model as we emerge from the recession.”

Conde Nast’s point of view isn’t at all unique among the world’s largest publishers, nor is it unreasonable for them to want a more balanced revenue strategy. However, moving away from a heavy reliance on advertising dollars to greater dependence on selling content to consumers is an even riskier model. Publishers looking to charge consumers for (or more for) their content are making two bold and unproven assumptions:

Assumption No. 1: Consumers are loyal enough to your brand to overcome their desire to consume free, or highly subsidized, content.

Among Mr. Townsend’s quotes was that “people pay $180 per month for a cable bill,” which gives him some confidence that people would pay for Conde Nast content. It is impossible to ignore the glaring differences between Conde Nast and a cable company, including that cable companies have geographic monopolies, own the connection to the home, and although people generally disdain them, cable delivers hundreds of channels of content and often the home’s broadband connection. Even if Conde Nast could somehow bundle all of its offline and online content into a single offering (there is a rumor that they will try to organize all of their online audiences into an ad network), it would pale by comparison to even the smallest cable company.

Assumption No. 2: Advertising prices are going to continue to free-fall.
In contrast to consumers not wanting to pay for content, advertisers are keenly aware that they have to pay for advertising. But advertisers don’t often have the loyalty to publishers that the publishers wish they did. The days of “Mad Men” are over; we are in the age of Math Men. At the end of the day, advertisers need to see significant return on investment for their ad dollars. And advertisers will pay more, and are right doing so today, for placement with proven return on investment. This trend of higher-priced ads from publishers with a track record of ROI for marketers will continue with the advancement of advertising targeting technology.

There is a lot of innovation in targeting, particularly in the online ad space, that is providing advertisers with better performing campaigns. Advertisers can target highly valuable audiences that large publishers — like Conde Nast — might have spent years attracting. Combined with the advent of more efficient ways of buying media, like Real Time Bidding, some publishers are seeing pricing for segments of their traffic increase by more than 90%.

Publishers that understand and master how to sell this growing demand of audience-based advertising will see their ad revenue go up significantly while retaining advertiser loyalty. No one is suggesting that advertising alone will cover Conde Nast’s online and offline content costs (which are high compared to many other media companies) but it argues that online can make a more significant revenue contribution than it has in the past and almost certainly higher than the risky move of asking their readers to pick up the slack.

There is no doubt that publishers should be thinking about new strategies to make sure that they can continue to grow and be profitable — but improved advertising needs to be their major focus. Major publishers which invest in the infrastructure that will allow them to sell audience-based advertising will be best positioned to capture the growing dollars associated with audience-based advertising. Large publishing companies in particular have an advantage to better monetize their advertising by leveraging the unique audience they spent years building in conjunction with their ubiquitous brands. If they lose that audience because of charging for content, they might do more damage to their revenue than good.

How we began

When we started PubMatic in 2006, we had a vision to focus on publishers.   That’s why “Pub” is in our name.  From day 1, publishers have been our primary customer.  There are a few reasons we focused on publishers.  First, we had considerable background in being publishers ourselves, at both small and big sites, and saw some of the frustrations in managing the business day to day.  In particular, at our start in 2006, ad networks were growing aggressively and we saw publishers struggling with the real-time nature of non-guaranteed inventory.  Traditional ad serving platforms were not built to address the issue of hundreds of ad networks and exchanges all bidding different amounts in real-time for each user and impression.

Second, we noticed that while online advertising was growing by leaps and bounds, and was getting more sophisticated, very few solutions and technologies had been developed in the last 10 years that were focused on publishers.  When we looked at most of the innovation happening in the online advertising industry it was focused on advertisers and capturing more ad dollars directly from the advertiser — new kinds of ad-support content platforms, new kind of networks, new kinds of targeting technologies, etc.  But every dollar that is spent by an advertiser ends up on a publisher.  We saw so much opportunity to help publishers be more productive, efficient, and increase their visibility into their own businesses.

Third, we believed that technology was a necessary enabler for helping publishers to be more successful.    Massive amounts of R&D were going into helping advertisers.  And we wanted to invest massive amounts of R&D into publishers.  We believed that massive amounts of R&D were necessary!  All of our founders have advanced degrees in science — at our core, we believe R&D will drive superior results for customers.

Thus, PubMatic was born.

Working with the comScore Top 10

We started by focusing where we heard publishers saying they needed the most help, the non-guaranteed real-time world of networks.  We innovated.  We developed PubMatic’s impression-level Ad Auction Engine^TM to optimize a publisher’s inventory in real-time across hundreds of networks. We developed a real-time bidding (RTB) platform that allows a network to bid in real-time for inventory that a publisher wants to expose.  We were the first to provide a global platform handling multiple currencies.  We were the first to expand to Europe.   We provide local service to publishers today in seven countries around the world.  This has resulted in the majority of the comScore Top 10 now using PubMatic.  We are, frankly, humbled by that, and use that to drive ourselves harder every day.

While working with the most premium publishers in the world, and as media buying continued to evolve, we saw other opportunities to improve ad monetization and management for our customers.  Publishers started asking us about helping them manage data, keeping their brands safe, using our technologies (today we process  1 terabyte – 1,000 gigabytes – per day to create our real-time predictions) to give them insight into what is happening in their business,  and helping them get better yields in their guaranteed (also referred to as “premium” or “direct”) business.   What we were doing helping publishers with networks and exchanges, really, just scratched the surface.   This has led us to the new PubMatic Premier, a revolutionary new solution to enable publishers to holistically manage their guaranteed and non-guaranteed businesses, utilize data more efficiently, and keep their brands safe.

Growing with the new rules of revenue

Online advertising is getting more complicated.  We hear this every day.  We see it every day.  Publishers’ businesses are growing aggressively.  Five years ago, there were only a few publishers that did in excess of $20M a year in the US.  Today, there are more than 100.  Sales teams are growing.  The types of solutions publishers sell are expanding quickly (e.g., display, video, mobile).  At the same time, marketers are getting more demanding and more savvy.  They are asking for better targeting, better results, better service, better everything…  Marketers have more options across all media channels than ever before.

As most industries mature, they come to use industry-specific tools that are purpose-built for them to help them manage their business. The best publishers in the world are looking for sophisticated solutions to navigate the new rules of revenue.  Excel and intuition alone may not be the best tools to understand the value of data, price inventory, predict inventory availability, see trends, etc. To just give you a brief example, publishers are looking for answers to questions like:

• Data: How can I get more data on my audiences and sell those audiences?
• Data Control: When I sell to an ad network, what data are they getting from me?
• Yield Analytics: What products/placements are driving the best yields, pricing, and overall monetization?
• Pricing: What does demand look like based on various product attributes (site, section, channel, ad size, audience segment, etc.)?
• Inventory: How can I forecast and sell specific audiences, not just placements?
• Inventory: Can I reduce the amount of time we spent in reworking orders due to under delivery?

Why PubMatic Is leading this effort

We believe that we have two outstanding competitive advantages in helping publishers:

1. Single-minded focus on publishers.  Publishers are our business; without them we have no business.  We work with ad networks, exchanges, data partners as well, and they are very important partners, but it all starts with the publisher.  Our business is focused on making publishers successful.  Every day we come to work thinking about how to make publishers more successful!  There is no doubt in our mind.
2. Largest technical team, with a history and dedication to innovation and problem-solving.  PubMatic created the ad revenue optimization category when we started the company in 2006 and launched before anyone at the TechCrunch50 conference in September 2007.  We believe that algorithms are important to the new world of revenue for publishers, and have invested and continue to invest in that.  Our product team of 40 with 30+ PhDs and Masters degrees, with a deep understanding of publishers, works hard to deliver innovative solutions. Our record of industry firsts and dedication to results bears out in that the majority of the comScore Top 10 uses PubMatic.

We believe focus, dedication, understanding, and innovation is the key to moving this industry forward for publishers. It’s easy to come out with press releases and trumpet new things, but delivering value to customers takes more than just talking about it.  It takes real work, and unrelenting commitment.  We have been doing this for almost four years, never losing sight of the fact that we work for publishers.

We will continue to innovate for the benefit of you, the publishers, and we are looking forward to playing our part in making you and the entire ecosystem more successful, each and every day.

Though RTB offers clear benefits for publishers, including significant increases in eCPM, publishers must be cognizant of the potential pitfalls associated with this emerging media buying trend. RTB was originally conceived as an advertiser-focused solution, and publishers must take multiple issues into account in order to make their businesses successful in an RTB-enabled world.

While RTB was conceived by media buyers, thus the name “real-time bidding,” this white paper is specifically for the publishers, the real-time sellers.

Download Understanding Real-Time Bidding White Paper

By Rajeev Goel

In digital media, a new solution that promises a better mousetrap will typically draw two reactions from the industry. The ones who stand to benefit try to hype the trend, hoping to ride the wave. The old guards spread fear, uncertainty and doubt because the solution may eat at their market share.

Such is the case with real-time bidding, which became a very hot topic among online display advertising buyers and sellers in 2009, and is likely to dominate industry discussions in 2010.

Just 1 percent of all online display ads were bought on an RTB basis in 2009. That number will rise dramatically to 3 to 5 percent this year. Most of the conversation on the topic has centered on the benefits for advertisers and demand-side platforms. These entities are able to place a value on each unique ad impression, individually and in real time, using a judgment that takes into account proprietary data and technology. The result is better performing campaigns and greater advertiser ROI on those campaigns.

However, what are the benefits to impression sellers—the publishers? If buyers want real-time bidding, publishers should be thinking about real-time selling. There are some key areas to consider in real-time selling and their effect on the online publishing business model.

Revenue: There has been little, if any, publicly available data showing that publishers participating in RTB campaigns are seeing revenue lift. RTB is new and only a few companies have the infrastructure to facilitate those bids. In our early tests with select publishers and a dozen RTB buyers—roughly thousands of campaigns and billions of ad impressions—the impressions bought via RTB are monetized at CPM rates 60 percent (in some cases more) higher than impressions not monetized via RTB. This translates to better single impression value on inventory that is not sold by the direct sales force. The industry needs more volume to realize the overall sustained effectiveness for publishers with scale.

Brand control: The instantaneousness of RTB requires improvement on the granularity, timeliness and fidelity of publisher brand controls. Work flow must be set up to automatically update blocklists with new advertisers that can then be instantly communicated to RTB buyers in seconds or minutes rather than in months. Furthermore, the system allows for more premium buyers to get into the bidding game, willing to spend more for the right targeted customers.

User experience: Because RTB uses a range of contextual and audience targeting parameters in real time, the ad served is more precisely targeted, and therefore provides a better experience for the user. Additionally, because the number of times a user has seen an ad is taken into account, a wider variety of targeted ads are shown to avoid overexposure of a single brand. This can also mean more exposure to new advertisers for the publisher.

Reduced discrepancies, simplified ad operations: One of the biggest frustrations for publisher ad operations teams is dealing with discrepancies—ads priced differently from an agreed upon amount, ads not served where they are supposed to be, ads coming in through an ad network when it was originally blocked on another network. An RTB system allows publishers to know exactly where the ads come from and at what price. That cuts the amount of time spent on rectification hassles.

No ad network defaults equals speed: Frequently, when an ad network is called to show an ad, it either has none to show or chooses not to show one. This sets off a daisy-chain reaction where publishers rely on the next ad network among their partners to show an ad.

What amplifies this is that sometimes multiple ad networks default, which stresses the ad-serving system and slows the page load. The flexibility of RTB allows only the demand side to make a bid if they have an ad to show, thereby avoiding the page load issue.

Participating in RTB campaigns requires publishers to be connected to a platform that can facilitate real-time bidding. While this sounds like yet another complicated technology to learn, master and deploy, the good news here is that a growing number of ad networks, demand-side platforms and ad optimizers are doing the learning for the industry.

However, even if everyone else is already investing in this technology, it doesn’t mean publishers can stay on the sidelines. Real-time bidding is still in its infancy, but it is gaining momentum every day. Publishers can’t afford to stay on the sidelines and let somebody else figure it out.

Rajeev Goel is CEO, co-founder of PubMatic, which manages non-guaranteed ad avails for Web publishers.

Palo Alto, CA (August 24, 2010) PubMatic, which provides online publishers — including the majority of the comScore Top 10 — with the technology and services to significantly increase revenue and better manage their advertising inventory, today announced details of its 3rd annual premium publisher conference, Ad Revenue 2010 (http://www.AdRevenueConference.com). The conference, which has sold out for the past two years, will be held at The Times Center in New York City on October 7th. The conference will bring together 400 of the online advertising industry’s most recognized thought leaders to discuss how the online advertising ecosystem is, for the first time in a decade, becoming a seller’s market where publishers have the advantage over advertisers.

“Publishers are extremely well positioned to take full advantage of the demand for audience based online advertising, whether it is happening via real-time bidding (RTB), or whether they are selling that audience directly with premium CPMs,” said Rajeev Goel, Co-Founder and CEO of PubMatic. “The challenge for the publisher is putting the right strategic and operational plans in place, and that can only happen with a strong understanding of the opportunities the exist for them – and that is the education Ad Revenue 2010 will provide.”

Speakers at Ad Revenue 2010 include:

* Randall Rothenberg, President & CEO, Interactive Advertising Bureau (IAB)
* Terence Kawaja, President and CEO, LUMA Partners LLC
* Jeff Jarvis, Associate Professor, Dir. Interactive Journalism at City University of New York Graduate School of Journalism; Columnist, Consultant at Guardian News and Media
* Doug Weaver, Founder & CEO, Upstream Group
* David Moore, IAB Chairman and Chairman & Founder of 24/7 Real Media
* Kyoo Kim, VP of Sales at MSNBC.com
* Rajeev Goel, Co-Founder & CEO, PubMatic
* Bennett Zucker, SVP/GM, Data Solutions at Ziff Davis, Inc.
* Denise Colella, CRO, Audience Science

See full list of speakers at http://www.AdRevenueConference.com

Topics at Ad Revenue 2010 Will Include:

* Why the Online Advertising Industry is on the Brink of Becoming a Seller’s Market
* Equipping Publishers to Sell Audience Effectively Through Both Direct & Indirect Channels
* Protecting The Publisher’s Audience Data In The Age of 3rd Party Audience Targeting
* How Will the Advancement of Agency Trading Desks & Programmatic Ad Buying Impact the Publishers’ Direct Sales?
* Display Advertising Ecosystem Revisited: A Prospective Look

See full list of topics at http://www.AdRevenueConference.com

PubMatic will also release The Ad Revenue 2010 Report at the conference, which is a comprehensive guide to help publishers better understand and navigate the complexity of the online advertising ecosystem. The Ad Revenue 2010 Report will be available exclusively to conference attendees for a limited time before being released to the public.

Ad Revenue 2010 is an invite-only event. While Ad Revenue 2010 is focused on helping online publishers improve their advertising revenue by discussing the very latest advertising strategies and technologies that can benefit them, the conference is open to select individuals not representing publishers that can request an invite.

Find out more at (http://www.AdRevenueConference.com).

PubMatic’s (http://www.PubMatic.com) ad management technology combines an impression-level ad auction, the most comprehensive brand protection tools, and enterprise ad operations support to give the Web’s top publishers the most control over their revenue and brand. Some of the world’s most respected online publishers have chosen to work with PubMatic, including The Huffington Post, eBay, United Online, TV Guide, and the majority of the comScore Top 10.

PubMatic is privately held, backed by funding from Draper Fisher Jurvetson, Nexus Venture Partners, and Helion Ventures, and has seven offices around the world in the US, Europe, and Asia.

We’re pleased to be releasing our Ad Revenue Report for download to the public today. Hard copies of the Ad Revenue Report were originally handed out to attendees of the Ad Revenue 2009 premium publisher conference on October 8th in NYC.

The report, created to help premium publishers better navigate the ecosystem that powers their 2nd ad sales channel, is separated into three parts:

1. About the Ad Revenue 2009 conference panels and participants
2. Premium publisher trends and data
3. A detailed look at the 2nd Channel Ecosystem

The Ad Revenue Report is collaborative effort that couldn’t have been created without the help of the people thanked in the report. We hope you find it useful.

AdRevenueReport_PubMatic

Here are some of the highlights:

Ad Revenue 2009 host and moderator of this panel, Greg Stuart, asked the question that polarizes the participants right off the bat – “who owns the data?” Check out the response from Mark Zargoski, CRO, eXelate:

Owning the Data from PubMatic on Vimeo.

In the following video Greg Stuart gets straight to the point and asks, “Is there a revenue value of data (for premium publishers)?” The answer from Huffington Post CEO, Eric Hippeau, offers caution to other publishers that might be considering selling their data to third parties:

Revenue value of data from PubMatic on Vimeo.

Eric Hippeau’s response leads into another discussion on when data is the most valuable by Jeff Hirsh, President and CEO of Audience Science. This prompts Zargoski to talk about how audiences now define themselves based on their own performance rather than companies defining an audience:

Where is data most valuable? from PubMatic on Vimeo.

PubMatic’s own Jeanne Houweling, VP of Ad Network Solutions, jumps in with her take on why premium publishers should be using data from third parties:

Leveraging data for a long term revenue strategy from PubMatic on Vimeo.

And finally, we have Bill Wise, VP and General Manager, Ad Platforms, Yahoo, explaining why data needs to applied correctly from start to finish, or it’s all-for-not:

Value of data compared to inventory from PubMatic on Vimeo.

Michele Madansky runs a media and market research consultancy specializing in online media and measurement. Her clients have included Microsoft, PubMatic, MMA, ESPN, The New York Times, Martha Stewart Living Omnimedia, GSN, VideoEgg and Technorati. She holds a Sc.B. from Brown University, and an MBA and Ph.D. from the University of Chicago’s Graduate School of Business and is a lecturer at the Haas School of Business.

During her presentation at Ad Revenue 2009, she showed how Ad Networks can be effective for branding oriented marketing campaigns. Using the fact Ad Networks today rival single publisher sites in reach (70%+ reach for each of the top 10 Ad Networks vs. only 2 publisher sites above 58% reach), Michelle leveraged three separate studies by comScore, Insight Express and Dynamic Logic to make a case that ad networks have a positive brand impact.

The studies she referenced used quantitative results with control groups to determine the brand impact of ad network buys vs. direct publisher site buys. Insight Express showed ad networks had positive brand impact, and for some areas they actually outperformed direct publisher sites. Dynamic Logic’s study showed that the top 20% of ad networks delivered better results than publisher sites while the bottom 20% of ad networks were detrimental.

Michele’s presentation, which can be viewed below, suggests that with the right key drivers in place, ad networks can be an effective channel for brand-based campaigns.

Ad_Revenue_2009_Branding_on_Ad_Networks