Zach Coelius is CEO of San Francisco-based ad tech firm Triggit. The famously outspoken Coelius took some umbrage with a recent Adweek feature. We invited him to respond:
Adweek’s recent article "Ad Wreck" chronicles the angst and frustration felt by some in our business as technology forever changes their business. However, those quoted forget what the world of online advertising looked like a few short years ago, before the latest wave of technological development led to explosive growth and opportunity for our industry and the wider Internet.
When Triggit started seven years ago, online advertising was fundamentally broken. The Web was blanketed with blinking invitations to punch the monkey, intrusive pop-ups, ugly text ads and countless scams. While a select handful of publishers prospered with high-quality advertisers and high CPMs, the vast majority of the Internet was a barren wasteland for both advertisers and publishers.
In my opinion, the cause of such disparity was actually the direct sales model on which the ad industry was initially built. That model was developed decades ago when things were simpler and audiences were consolidated by a handful of gigantic media companies. An advertiser would hire an agency. The agency would field a team of young people to buy media for campaigns. That team would get a brief and send lengthy requests for proposals (RFPs) to publishers.
Next, the publisher’s sales team would respond with gifts, lavish dinners and slavish attention. The agency’s young people would book a buy with the most effective genuflectors and send over an insertion order.
Hundreds of hours and many contracts, spreadsheets, phone calls, emails, faxes and complaints later the publisher would get paid and the resource-intensive dance would start all over again with a new set of RFPs.
Sure, the direct sales model worked pretty well when there were a half-dozen TV stations, handfuls of meaningful print publications and a few important newspapers in each region.
Then the Internet came to town. Where before there were maybe dozens or hundreds of places you could place ads, suddenly the audience fragmented across tens of millions of websites, mobile phones, online videos and games. The days of simply buying a spot on Friends to reach your entire target audience were over.
Yet the agencies and their young people kept buying ads in the same old way: trading an electronic medium by shuffling paper. No matter how smart or talented the agency’s people, the direct sales model is simply not capable of conducting buys across millions of websites.
As a result, the buys continued to be concentrated on only the handful of biggest publishers, who were able to collect sky-high CPMs through their well-paid direct sales force. The tens of millions of other websites with the same users and high-quality content, but without the scale, went ignored by agencies and were left to be arbitraged by rapacious ad networks that took ungodly margins and paid CPMs back to publishers that were in the pennies.
Besides being unfair and incredibly inefficient for advertisers, the unequal distribution of advertising spend also hurt the Internet by depriving young and innovative publishers of revenue when they needed it most.
It was within this context that advertising technology companies entered the fray to bring fairness, efficiency, scale and value to the process through automated ad exchanges and real-time bidding (RTB). Four years ago, less then 20 million ad impressions were available each day through RTB. Today that number is more than 50 billion a day, as millions of individual publishers have chosen to sell through the exchanges, moving to where they see the best value.
And while “premium” publishers may struggle to charge the same prices they did when they had a monopoly on the markets, millions of small independent publishers are making exponentially more per impression through RTB. Equally important, the automation of the buying process enables advertisers to buy more efficiently at larger scale. More of their growing ad budgets can be passed to publishers, rather than being spent shuffling paper.
By improving the infrastructure of our industry, we are laying the groundwork for future growth that will fund a more diverse, useful and prosperous Internet.