Thursday, April 16, 2009
Interview with Tom Shields, Yieldex
Yieldex (www.yieldex.com) provides software applications that help online publishers manage their advertising inventory. The company's DynamicIQ and BusinessIQ solutions allow publishers to better understand—and thus better deploy—their premium inventory in order to maximize their CPM (cost-per-thousand page impressions). Among the firm's leaders are: Doug Cosman, the former Matchlogic employee who founded Yieldex in 2007; and CEO Tom Shields, who helped create the Internet's first ad servers as co-founder and CTO of NetGravity. Recently, we spoke with Shields about Yieldex, its technology and its direction.
What exactly is ad inventory forecasting and visualization?
Tom Shields: One of the challenges major publishers face right now is managing their inventory. They have large amounts of impressions, and those impressions can be sold in many different ways. Some are highly valuable, some are much less valuable. And they may have thousands of advertisers who want to purchase that inventory.
So, the challenge is how to maximize their revenue. Virtually everybody who is trying to solve this problem is trying to do it with home-grown tools, or the ad-serving companies themselves—DoubleClick, Microsoft—are providing some very rudimentary tools.
Basically, publishers are using spreadsheets to try and figure it out and it's just not working very well. What you need are tools for good forecast and good visualization.
For example, you may have two advertisers who are bidding on the same inventory, but they don't realize it because they are bidding on it in different ways. One advertiser is targeting 24-year-old males, the other a sports home page. You might not realize that there's a high degree of overlap between those two and you might accidentally sell the same inventory twice.
Our software exposes those overlaps. We enable publishers to visualize how inventory overlaps and where there's going to be a challenge. When you can visualize these things, a picture's worth a thousand words. You can see immediately how campaigns conflict and what to do about it. That's the visualization tool.
Our forecasting tool enables publishers to try and predict the future. It's a scenario-analysis tool capable of “what if?” scenarios. It assists with pricing analysis and provides information that is used within a lot of different parts of the organization.
How do Yieldex's solutions differ from those offered by your competitors, such as the Rubicon Project, AdMeld and PubMatic?
Tom Shields: Actually, we don't compete with what those guys do. In fact, we are in conversations with all of them. They'd be great partners for us.
Tom Shields: Rubicon, AdMeld and PubMatic are all in the business of optimizing performance ads against inventory that publishers are not able to sell themselves. So, if a publisher, like an ESPN, is unable to sell its inventory, then it might give that inventory to a Rubicon or PubMatic. The typical CPMs for this are in the $1 or $2 range.
However, when ESPN can sell that inventory on its own, it typically gets much higher CPMs, in the $10-$20 range.
That's where we come in. The inventory that we manage for our customers is the premium inventory. We help them maximize and understand the value of their premium inventory.
So who would your ideal customers be?
Tom Shields: Our ideal customers are major media companies, major online publishers. These firms do their own ad sales; they have their own direct ad sales force.
Any luck landing one of those?
Tom Shields: We've already announced Martha Stewart as our first major customer.
How much has inventory management changed from what you were capable of, say, 10 years ago, when you were with NetGravity?
Tom Shields: It's light years ahead. Quite frankly, we didn't have the technology or the computer horsepower to solve [the inventory management problem]. Some of our customers are serving millions of ads per month and have tens of thousands of advertisers.
That's something you couldn't do that long ago. Doug Cosman's invention is this core of fundamental algorithms representing this huge amount of data in a way that we can visualize, optimize, and play “what if?” games essentially in real-time.
It's this technology that won us the Amazon Web Services Startup Challenge, in which 1,000 startups competed for a $100,000 prize.
Aside from the cash, has winning the award done much for Yieldex?
Tom Shields: It has. It's been a great asset because it helps people understand that the technology we have isn't just a “me, too!” report writer. This technology is brand new and has capabilities that have never before been seen in the marketplace.
Could you tell us about your investors?
Tom Shields: Our primary Series A backer is Sequel Venture Partners. Our Series B was lead by Madrona Ventures Group with participation from Amazon.com.
Any plans for future funding?
Tom Shields: No. We raised $8.5 million with our Series B, so we're pretty well funded at this point. We won't be fund-raising at this time.
Before letting you go, it seems Yieldex recently relocated its headquarters from the Boulder suburb of Louisville to New York. Why the move?
Tom Shields: Many of our major publisher customers are headquartered in New York. As we ramped up sales, marketing and customer deployment, it made more sense to have those employees located near our customers, and to call that our headquarters. We still have the majority of our employees in Louisville and are planning to grow both offices.
How much of the company's operations are still in Colorado?
Tom Shields: Our entire development and operations teams are still located in Louisville, which, at this time, makes well over half the company, and we have plans to continue to grow these teams in Colorado.