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AppNexus: '2015 was just the warm up act for what's next to come in the ad tech power game'

AppNexus is the leading independent ad tech players in the market, with the company recently launching an aggressive assault on the industry’s dominant ad stack DoubleClick by Google. Here, Michael Rubenstein, AppNexus, president, speaks with The Drum on his thoughts about the dynamics driving digital media's most buoyant sector, as well as some of the key issues facing the industry.

The shift towards automated media buying is arguably the most dominant narrative in the last two years, and the ad tech sector has seen massive consolidation in that time. With AppNexus widely expected to go public next year, the company has positioned itself as a direct alternative to Google. Below AppNexus’ Rubenstein - himself a former DoubleClick and Google employee - offers his take on the market.

The Drum: The 'ad tech power game' was a phrase you coined 12 months ago, and since then there has been many changes in the market with ongoing rounds of consolidation which has seen the entrance of companies like US telco Verizon Wireless throw its hat in the ring. What will happen over the next 12 months?

MR: I think 2015 was the warm-up act for the next round of the ad tech power game. There's two factors driving it.

Firstly, the cycle of independent ad tech companies is playing out. You had all these companies funded in 2007/08, and some of them emerged as strong companies, but lots are not working very well. The latter can't survive independently, and so I've got the feeling that a lot of those companies will have to find ways to survive or they'll go out of business.

Secondly, the internet's major players are continuing to believe that ad tech is one of the continuing new drivers for growth, and since we saw Verizon jump into the game in 2015 [with the $4.4bn purchase of AOL], we'll see many other large players will come into the game. And that's not just telcos, that's enterprise [software] companies, or it could be the other Silicon Valley majors.

Advertising is a very important part of the commercialisation of the internet, and there are many companies that are aspiring to become major players in the commercial internet, we're going to see a lot more of them make aggressive moves in 2016.

The Drum: There has been a lot of anti-Google/DfP messaging over the course of this year's AppNexus Summit. In your opinion, how does AppNexus compare to Google's ad tech stack, something your company has labelled as 1990s tech?

MR: Google didn't acquire DoubleClick and DFP to help publishers be smarter and make more money, it acquired that business to harvest the publisher inventory for its own media business. That's effectively what they've done since the last eight years or so since they closed that deal.

What we're offering is a totally different value proposition to Google. We're offering a very transparent, open technology system that is designed to help publishers take more control over their monetisation, and ultimately put more money in their pocket.

I thought the example with Pandora [a music streaming service] was a perfect example; if you can't effectively forecast your impressions, then you can't effectively sell it and monetise it.

Pandora found that a system like YieldEx is more intelligently designed to help publishers by putting more intelligence in their hands, and helping them see what they can do. That's a very different orientation to Google.

That's why publishers are so dissatisfied with Google, and DfP today. They're not getting what they want, they're getting what DoubleClick wants them to have. It's crazy that in a space as dynamic as digital advertising, that publishers haven't had a real choice. Our entry into this market offering something very credible and very strong will put them in a more powerful position.

The Drum: What help is AppNexus proposing to help publishers with migration from Google's ad tech stack, to using its own? This is a notoriously difficult process after all.

MR: We are working through that right now with some live examples with publishers, and what we're finding is that if we can show them that they'll make more money, and become more self-sustaining independent business.

DoubleClick and Google are not known for providing outstanding service - we are - and we're going to bring that to bear in addition to the technology that we offer in order to make technology migrations as painless as possible.

Publishers today know that they're not getting what they need from their ad technology stack, and they don't see that system as a cost any more. Many see it as a strategic platform upon which they are building their entire business, so it's a big decision for them.

The Drum: What are some of the specific challenges that have been encountered by some of those making the decision to migrate from DoubleClick to AppNexus?

MR: Obviously there are specific challenges, such as swapping out tags is one specific example, which is possible to do, but it does require that you go into [the ad tech stack] and these are not insurmountable challenges, it's just something that you need a reason to do.

I think the other challenge is behaviour change. Any time you bring a new technology system in, you have to train the entire organisation, and sometimes you've got an organisation that has been using the other system for almost 20 years.

So those are some of the challenges, but building strong products that are easy to use, and provide a service, then we are going to meet those challenges.

The Drum: How can AppNexus provide assurances that it is not a conflicted company - which Google is often criticised for being - as it also has products/services for both the buy - and sell-side of the industry?

MR: We've always been providing services to both buyers, and sellers, which they can both use to do business with each other more effectively. That is the foundation of the vision. The way we protect clients is that they own all of the data that gets mapped out through the course of our system.

So we don't take a position on data ownership [unlike Google, or Facebook], and we don't take a position of media ownership.

Google is massively conflicted because its business is not operating ad serving platforms, its business is operating the internet's largest ad network. It operates these technologies as a means of feeding the ad network.

So this biases, and colours the decisions it makes for publishers, so without any competition in the market, the publishers haven't had any recourse. I think you're going to see a dramatically difficult publisher ad tech market in the years ahead.

The Drum: AppNexus also recently launched its Viewable Marketplace at the recent AppNexus summit, but marketers The Drum has approached are constantly bemoaning market fragmentation in terms of measurement methodologies. How would you address such concerns?

MR: There are a set of vendors out there offering viewability and verification as a service, but it's expensive and it's not integrated with the buying and selling technology platforms.

There are two vendors out there in the marketplace [read Google and AppNexus] that have viewability measurement capabilities that are natively built-in to their ad serving systems, and offering it for free to buyers and sellers.

If something is going to become the currency, or standard, for buying and selling, then it's our view that it should be part of the buying system, and offered for free.

You shouldn't have to pay an enormous amount of money, and have to deal with a whole giant network of vendors to be able to buy and measure on a viewable basis.

So that's the significance of our viewability offering, as it's the only one on the marketplace that's offered directly through our ad technology system. This means that buyers and sellers can transact on a viewable basis, and for that to be a standard core part of the offering.

Viewability is going to be the future standard and currency for transacting on impressions. We've seen enough on the marketplace from the buy-side that this is what they want and will require moving forward.

If digital is to fulfill its highest purpose, then being able to validate, verify and transact on a viewable basis is what makes it such an accountable and exciting [advertising] medium for people.

We have a client now that was using our buying on viewable capabilities and they are seeing that their price for acquiring viewable impressions is going down [by 48 per cent] relative to other solutions they have used in the marketplace.

The Drum: If all ads will be viewable within the next five years, then what has to happen for that to be achieved?

MR: The technology exists today to do so. What has to happen is a change in behaviour from both the buy- and sell-side. Expectations will need to change, that this should be an industry standard.

We see that it's agencies and brands driving that change today. We don't see it as a technology challenge. We see it as a behaviour challenge on the part of the buyers. It's all the major agencies and big spenders that are best-placed to effect this change. It is changing rapidly and I'd say the prediction that it'll happen five years from now is actually a pretty conservative estimate. It could be two years from now.

If someone could buy viewable-only impressions, then why wouldn't they? The capability to do so exists now.

Michael Rubenstein was speaking on the sidelines of the most recent AppNexus Summit hosted in New York.