The ABC of DSP

DM: So Victor, Adfonic has undergone a few changes recently. Tell us how the business has evolved over the past 18 months. 


VM: Well we turned five just a couple of weeks ago, and we have seen the market evolve over that time. We originally launched as an ad network for publishers and advertisers, and then last year, we  repositioned as a smarter buying platform, based on our Madison DSP (Demand Side Platform) technology. 

The reason for this move was our view that with more inventory going through exchanges, programmatic buying was going to become the dominant way to buy mobile display in the future, and that the traditional mobile ad network would suffer. 

Ad networks are in a difficult place. They need to deliver strong eCPMs for publishers and strong results for advertisers, and it’s difficult trying to juggle both. So we opted for the demand side, which is not so much about buying inventory, but about delivering reach, engagement and results. So there’s a sense in which we don’t really care about the inventory; we just want to connect advertisers with relevant users and maximise engagement through data-driven algorithmic buying, largely done via the exchanges. 


DM: So how does it work on an operational level? 


VM: We run a managed IO (insertion order) model where we get the IO and build the campaign, the algorithms optimise it and then you get the analytics that are available through the platform. Alternatively, you can licence the platform, and we currently have 15 partners who licence it and take on the work of building the campaigns and trafficking them. Our technology still does the work behind the scenes, but there’s less effort from an ad ops perspective. 


DM: So who are these partners? 


VM: We initially targeted the trading desks such as Xaxis, who are wholly owned by the media agencies and have a need to licence a mobile DSP, and we have had some success with those. 

We have also had success with some of the independent trading desks, and with a number of direct clients. These are big advertisers who want to be in full control of what they do. They have a lot of data, and they can use that data to instruct the algorithms on how to acquire new customers. 


DM: What sort of advertisers are we talking about here?


VM: Any with a lot of data, mobile operators, financial services companies for example.


DM: And having made the move you made, are you confident you took the right decision? 


VM: Oh yes, we are seeing a real shift from the traditional way of buying media towards data-driven programmatic buying. Over 50 per cent of online inventory is now bought by RTB (Real-time Bidding), and we are seeing that shift happen in mobile as well. The black box ad network, where you have no idea where the ad is being served, is a dying model.  


DM: But isn’t that the way it works with programmatic buying?


VM: Not at all. There is full transparency in terms of the exchanges we use and the apps and sites within those exchanges. That said, we actively discourage advertisers from choosing specific publishers to advertise with, because we want to let the algorithms do the work. We are less concerned about the inventory than we are about reaching the right person. The time that the ad is served and where the person who sees the ad is matters more than the site or app they are using at the time. 

The black box model may work for CPA advertising, but for brand advertising, it’s dying a death, and even for CPA advertising, the DSPs should do a better job than the ad networks in delivering against it. 


DM: So is there still room for the premium ad network model, where the ad network sells inventory on behalf of specific publishers?


VM: Yes, although even for premium inventory, a lot of this goes through the RTB exchanges, and I see this trend continuing. 


DM: How do publishers feel about programmatic buying? Do they get annoyed that it drives prices down? 


VM: It’s not so much about price, as about buying the right impression for a specific campaign; this is what programmatic buying allows you to do. The publishing world is not annoyed, because their inventory is being valued more for what it is. 


DM: How much of your inventory is in-app and how much is on mobile sites? And who are your advertisers? 


VM: We see a healthy mix of mobile web- and app-based inventory, around 60 per cent apps, 40 per cent mobile sites. As for the advertisers, it’s a pretty healthy mix. As the DSP has evolved and become more sophisticated at audience buying, brands have started to engage with us, so whereas 18 months ago, the split would have been around 95/5 per cent direct response versus brand, it’s now getting closer to 50/50. Brands are recognising that through programmatic buying, they can engage with their audiences really effectively. 


DM: And in terms of sources of inventory, where do you stand with, say, Weve, for messaging-based campaigns, and with Facebook, which is obviously the hot new kid on the block in mobile advertising terms? 


VM: We don’t do anything with Weve in terms of messaging, but we are helping them to launch their display proposition, through an exclusive technology partnership. As for Facebook, and indeed Twitter, we are looking to bring them online as a source of inventory. 


DM: And where do you see this all heading? 


VM: I see more and more inventory being made available through the exchanges on an RTB basis, including more premium inventory. As a direct consequence of that, I see programmatic buying becoming the de facto way of buying mobile. In fact, I think mobile will exceed online in terms of the proportion of inventory bought that way. And tied into that, the use of data will become more prevalent for cross-platform user tracking and targeting, so that advertisers can engage with customers and prospects across all digital platforms, including smartphones, tablets and smart TVs. That would be a very compelling proposition; we know no one has cracked it yet, but that’s what we’re focused on. 


DM: And finally Victor, can I ask you about Paul Childs, one of the co-founders of Adfonic who left the company at the beginning of the year and has since joined MoPub. Can you tell us what was behind that? 

VM: Paul is a great guy who was instrumental in helping to launch and develop the business. It was the right time for him and the business to go separate ways. We remain good friends.

Victor Malachard is CEO of Adfonic