The CEO of Myspace tells us why he just sold the company to Time Inc
Michael Seto/Business Insider
Viant is a big ad tech player, founded by brothers Chris and Tim Vanderhook. Viant also owns the Specific Media ad network and an "Advertising Cloud" that connects with a database of more than 1 billion registered users.
We caught up with Viant cofounder and CEO Tim Vanderhook over the phone shortly after the deal was announced.
He explained why Viant chose to sell to a magazine company, how Myspace is about to be revitalized through the distribution of Time Inc. content, and why the doomsayers on the ad tech sector have got it wrong because more "traditional" media players - TV, magazine, and radio companies - are about to flood into the ad tech space.
Business Insider: How did the deal come about?
Tim Vanderhook: Viant was out raising money. We started raising money the end of Q1 last year, Q2 I would say, and we started looking at what we need in our business to continue to grow. What we still need to address the weaknesses of our business in the marketplace.
As we went through that process, we were talking to a number of private equity groups, but then we started to shift our focus. Money is fine and there's lots of private equity groups with available capital, but really what we needed was a strategic that we could pair up with.
We always felt like we had better data than anyone else, this incredible first-party dataset. We had great programmatic technology in an ad tech stack that's end-to-end that's been built over a decade and modified to be for people-based data. But one of the big things we saw that we were missing was quality content, or premium content.
We engaged with Time Inc. about six months ago when we had our first discussions with them and they were looking for a partner that could activate their first-party data that they have and were looking for a platform that they could get behind to really target ads in the same way that Facebook and Google are using registration data. They have the dataset, but they didn't have the technology platform to be able to activate against it. We had our own dataset and the technology platform, but we're missing the quality premium content on where the ads show up on exchanges that are out there today.
It really was an incredible win-win from us being able to use to combine Time Inc.'s data set with Viant's dataset, we now have the size, scale, and accuracy that Google and Facebook have from a first-party data perspective. But we have married that with high-quality content that is being produced on a daily basis across the incredible brands that Time Inc. has. We think the combination of data and premium content really raises the bar on the whole ecosystem and changes the entire landscape compared to third-party cookies, or anonymous segment cookie data that you're targeting in an open exchange that has very low viewability.
We think this is what the industry needs. Time Inc. was excited about it and so are we.
BI: That said, you did have a content platform already by way of Myspace. You were and still are a media owner. If the private equity money was there, why did you choose to sell to a media owner rather than take on more cash and build a premium content destination yourself through Myspace?
TV: Myspace is an incredible amount of first-party data where you have user accounts, and users are uploading photos and sharing them, and we manage 15 billion photos for 1 billion users online, people have written blogs in the early days of Myspace that we still host and manage, young and aspiring artists are uploading audio on a daily basis to Myspace as a platform to reach consumers, and video too.
Myspace is different. When I say premium content I'm really talking about storytelling, high-quality editorial that's representative of Time Inc. Myspace is a great publishing platform, it has incredible potential to distribute content across its network and in the social graph that exists across there
One way we've talked about historically is leveraging the email addresses that we have at Myspace and being to re-active and re-touch with consumers. But the key when you do that is having quality content that a consumer wants to read. And by being able to plug in Time Inc.'s content into Myspace as well and start pushing it through, we see synergies.
BI: So in summary: Why try and take on money and hire in lots of journalists in order to build a media brand yourself, when there are 94-years of legacy and trust in Time's brands?
TV: That's right. I mean, look, the reality is we said we need to move from a pure-play ad tech company. We've got to have a direct relationship with consumers. It's the only way to generate first-party data and have that dataset - have a real property and real consumers that engage with you.
When the Myspace acquisition came around: You can't replicate Myspace. Can someone replicate or an invent an app in the world that reaches 1 billion users? Certainly it's in the realms of possibility but a very low probability. You also simultaneously can't just invent another Time Inc. The level of quality content, the amount they produce, the brand that they have and the consumer awareness that they have over a 94-year history can't be replicated and that's why I say Time Inc. is in a league of its own when it comes to quality content and everyone recognizes that.
BI: What happens with yourself, Chris [Vanderhook, Tim's brother and Viant cofounder and COO] and the Viant properties? Do those continue on autonomously? Do you continue on autonomously? Or are you becoming part of Time and some of these properties might be rebranded?
Frederick M. Brown/Getty Images
Frederick M. Brown/Getty Images
What the announcement means today is that our product just got simply better. If you loved the dataset that Viant Inc. was offering last year through the Ad Cloud, you're going to be even more excited now we're able to pull Time Inc's 60 properties and all of the subscriber data they have as well too. That is a huge boost and a shot in the arm for Viant in being able to grow our database to rival that of Facebook and Google. That's one area we're really excited about.
The second area is really being able to look at the premium content opportunities and being able to marry it up with that dataset. That is something that, when we deliver it into the marketplace, people are going to recognize this really was a game-changing day when Time Inc. made this decision to get behind Viant and really contribute significantly to the strength of the assets they have. It makes them a huge player in digital advertising and I think it's really going to change the way people look at Time Inc. and look at Viant.
To directly answer your question: We're not going anywhere. We're not Time Inc. employees. We are employees of Viant, which is a subsidiary of Time Inc. - I don't know, maybe I'll have to sign a Time Inc. employment agreement, I'm not sure how that works. But we have no intention of going anywhere and we report to a board of directors. Our board changes out a bit more now with Time Inc. doing this transaction.
BI: Can I ask more about the transaction itself? Was it an all-cash deal? What were the terms?
TV: Unfortunately, since Time Inc. is public company, I have to defer everything around the transaction to what they've chosen and they've chosen to not disclose any of the terms of that transaction. Any of the terms would have to run by them due to the public nature of that company.
BI: What do you think this transaction says about the ad tech market in 2016? Lots has been written by the doomsayers when you look at the majority of public ad tech stocks, and there haven't been many big exits for quite some time. Do you think this deal will help people look on the ad tech market in a different light, or do you think actually this isn't reflective of the market at all?
TV: I would say there's a couple of issues in the ad tech ecosystem in general. I think the majority of the ad tech community when you read the trades, and look at the positioning of companies, and the products, and the technology positioning, there has been a huge investment in laying the pipes and the plumbing in what you see.
Really what most companies bet on is that value creation will happen through pipes and plumbing. I think what you're seeing is that pipes and plumbing means a commodity and it's not really about pipes and plumbing - those are important - but when you have hundreds of companies that have laid the same pipes and the same plumbing that feed into exchanges, you have a commodity situation.
The value-creator in ad tech is not around the pipes and plumbing, it's around data and content. When you take first-party data, that's the highest-value data set. If you use third-party data, it's better than not having any, but it doesn't equal first-party data. I think Facebook and Google's revenue can clearly be attributed to first-party data.
I know our success in 2015, we went from 0% of our revenue being people-based revenue - it now represents 40% of our revenue in just 12 months. Marketers are flocking towards first-party data, there's a general desire and need to really leverage that.
I think beyond just data, though, you need even more, which is why we went with Time Inc. I think more ad tech entrepreneurs and companies out there today will start to recognize you really do need a partner. You can't just be an ad tech company, you've either got to be a publisher, you have to have a deep and diverse relationship with consumers, with advertisers, with data providers, all kinds of different companies that are out there. It's tough for one company to do that.
Everyone's grappling with low quality, so you're hearing a lot of talk about deal IDs and private marketplace transactions coming. What that means is it's a flight back to quality. Open ad exchanges are riddled with low quality and it's pushing marketers back to premium content. But they're not going to just go back to content without data. They still want the data, the targeting, the measurement system that the ad tech community has created. They just want their ads to show up in a high-quality environment they can trust.
And that's really what this transaction means. First-party data, high-quality premium content, and advertisers still get the benefit of everything from a data perspective but get that safety and security from 60 trusted brands from Time Inc. Of course we'll still remain independent and work with other publishers but Time Inc. is contributing its data and content to Viant to strengthen our positioning in the marketplace. That will attract more data providers, more high quality content providers to Viant and that's going to create a great place to transact.
BI: Something some marketers and agencies do worry about is this idea of walled gardens - particularly Facebook and Google, they are the media owner but they also own all sides of the ad transaction. This is where you're moving towards, it's where Verizon is moving towards. Do you think these are, ultimately, the players that are going to win? Those that own every part of the stack?
TV: Point solutions will have a tough time and you will see a consolidation of point solutions going into an ad tech stack. I think you're going to see the ad tech stack consolidated by media companies that have high reach and high quality.
But I don't predict doomsday for ad tech whatsoever. It's the exact opposite. Everyone looks at the ad tech community and says there's too many companies, there's too much fragmentation. But ad tech is the monetization layer of the internet. The model of the internet is ad-supported today. You're seeing subscription-based services like of course, Netflix being the most successful, you're seeing subscription-based services have success, but the entire internet is funded by the ad tech community.
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That's the advantage that Google and Facebook have on the entire industry. They're not a point solution, they are everything from start to finish. I think the lack of M&A we've seen today is because of traditional media companies figuring out how they participate in the transformation to digital and really thinking about what assets they need.
I think M&A is going to explode in the coming years, especially within the ad tech community. You've got a whole bunch of companies that are generating billions of dollars in advertising through traditional channels. As that transitions to digital, they're going to need the technical infrastructure, the expertise of the people, and the know-how of data management and that's going to lead to a ton of entrepreneurs in ad tech getting exits and they're going to be great prices and it's going to continue this monetization layer on the internet of ad-supported.
I think when the media companies get a better recognition of what assets they need - and it's not that they're not smart, they're just being prudent in the shift from traditional to digital about what the assets are. Even in the ad tech community, people are confused on what's going to win.
I think it's first-party data and premium content, but I think for the media companies, once they identify it, a whole host of buyers that are not considered ad tech today are going to enter the market. These are TV companies, radio companies, magazines, anyone who has hundreds of millions or billions of dollars in traditional advertising is a buyer of ad tech
So I'm hugely bullish on ad tech M&A ... to me this doomsday scenario of ad tech, because the stock market is temporarily devaluing these companies is absolutely ridiculous. The internet doesn't exist without the ad tech community and the issue I think from an investor perspective is understanding the unique value that companies bring to the table. And when they can't understand it, they simply don't buy the stock and stay away, and we're seeing that reflected in the prices today. It's a lack of understanding, not the lack of importance of the community.
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