Interview with Michael Shehan, SpotXChange

Last month, Denver-based SpotXchange (, an online video advertising network, announced a $12M venture funding round from H.I.G. Ventures. To get the details on the firm, we talked with Michael Shehan, the firm's founder, to hear more about what the company does.

Where do you fit into the online advertising market?

Michael Shehan: We're a video advertising network. However, we're a little different from the other ad networks out there, in that we operate an auction-based ad network. Essentially, that means for every single call from publishers for advertising, for pre-roll video ads, in-banner video, or other video ads, we auction that off to a competing set of advertisers. Those advertisers bid on various elements such as geography, behavioral elements, psychographics or demographics, and time of day. The advertisers willing to pay the most for any particular element wins the auction. The advantage of our auction platform, is that it maximizes the value of unsold inventory for publishers, and it allows advertisers to target exactly who they want, do real time optimization, and enhance performance of their campaigns. We also offer the full spectrum of options, from performance based advertising, buying from us on a cost per click or cost per engagement, completed views basis, and so on.

Looks like you've been running without institutional backing until now and growing fast -- why did you decide to take an institutional round?

Michael Shehan: As you mentioned, we have been growing very fast and were operating profitably. However, we felt the market is hitting a tipping point, and there was an opportunity to accelerate our growth. About 30 percent of our revenues are generated outside of the U.S., and so far we only have one office outside the U.S., in the U.K. However, we're serving ads in 15 different countries, and plan to be serving in 30-plus over the next three to six months. The proceeds will be dedicated to opening up offices around the world, in regions like Asia and Australia, as well as an office in Western Europe, Germany, Spain, Italy ,and France. We also want to really double down on a few areas such as sales and marketing with our U.S. team, and increasing our presence In marketing. We'll also be investing more on the technology side. We feel like we're a leader, and have a lead on technology, but want to maintain that lead and continue to roll out new advertising services for publishers and advertisers.

Where is the online video advertising market nowadays, in terms of market adoption?

Michael Shehan: We've been in the market for a long time buildling SpotXchange. It's been more than five years now. Because our background is in the search space, we've been able to take technology and ideas from the search space to online video advertising. As we were approaching agencies in 2006, 2007, and 2008, we say that there was no infrastructure. People with the rights to content were very wary about putting it online, and figuring out how to monetize that content, and agencies didn't know how to articulate why online video was equivalent or better than TV. So, all those groups had to catch up. I think that finally, over the last 12 to 18 months, all of that is actually coming together. People are watching more and more video online, and recently it's been an absolute boom in terms of the money moving into online video. People went from seeing test buys a few years ago of $15,000 to $30,000, and they're now negotiating million dollar plus deals. In the past twelve months alone, we've gone from running 90 campaigns a month for TV commercials to well over 250 a month, competing for ad space in our marketplace. I think you'll continue to see dramatic adoption by major brands moving more money to o nline video, and you'll also see more of a trend where major agencies start to aggregate buys from their own trading desks.

Finally, how big is the company now?

Michael Shehan: We're around 40 folks, many of those in Colorado right outside of Denver. We also have people in New York, Chicago, and LA, as well as the UK. My guess is we'll probably be double, to 80 to 100 people, by the end of next year.