The Exchanges

Q Rocket Fuel acquired X Plus one. This was back in 2014. You were already talking about artificial intelligence. It was very interesting. My research team brought this up. Um, you're Bob, I assume you're building this into your model. A lot of people stick artificial intelligence and machine learning on the front page of their PowerPoint deck, and it's actually not really real. How, how are you really using AI?

A We are not really using AI today. So we're going to have our first generation of machine learning, uh, coming out at the end of this year. Um, but to this point, flash talking has been very focused on heuristic based targeting. And allowing customers to have a lot of control and to execute their, their targeting strategies based on their, their heuristics. So I know that if it's raining out on the gap and I know it's raining out where the customer is, I know I want to show products from the outdoor catalog and I want to show some It's raining out. I don't need machine learning to tell me that that's the right way to think about my targeting. Um, there are a lot of circumstances that where machine learning is very, very helpful. Um, particularly when you're doing pure performance based marketers who are only interested in a pure performance metric and are not as interested about branding or long-term customer value development. Um, so there, there's a place for

AI assessment note: “We are not really using AI today.”

Q And give me a sense of kind of scale you're at today. So how many customers are you working with?

A Um, there's a long customer list. Um, I would say that there's about 40 clients that account for 80% of the revenue. Um, and those are people like Walmart and American Express and Verizon and AT&T. Um we,, we tend to really We really focus on the big global advertisers, both in the U.S. as well as in Europe, um, where in Europe where it's British Telecom and British Airways and O-two, which is, uh, and Vodafone, which are the two largest telcos in the U.K. Um, so those are the kinds of clients that we, we focus on, not just for their size, Hashtag is a platform that's really built to meet the needs of the most sophisticated marketers who are looking to create competitive advantage by deploying their data in a very, very smart way. Smaller clients don't either have the data assets, um, Education generally to take advantage of what we do.

AI assessment note: “there's about 40 clients that account for 80% of the revenue.”

Q of, they're the ones that were in the dorm room, got the thing launched, and they've now passed ten million in ARR, and they're going, how do I get a guy like John? He just sold, money's not gonna work because he's already wealthy. He just sold his company. Like, is it a vision play? How do I get him? What was it for you? How do they get you?

A It's very much the vision thing, Nathan. Um, I, I, I truly love the business of marketing, um, and Every, at every point in my career, I've been lucky enough to do something because it excited me, not because I needed a job or I wanted it. At every point, it's been about innovation in the field and being able to sort of push the boundaries of what marketers are doing. And I think the, the, we're at this point where we have to remake the whole process of how advertising is created to be able to take advantage of data, not for the buying of media, Which programmatic has sort of already accomplished, but for the purpose of driving, what's that one-to-one communication with the customer, and how do we connect with the user based on what we say? Um, and, and so I, I think we're on the cusp of the, of the next great evolution of marketing, and I wanted to be a part of it.

AI assessment note: “It's very much the vision thing, Nathan.”

Q That's fascinating. And is that, I mean, is that your key, I mean, as a CEO, you're looking at, kind of, key growth metrics. I mean, that's one of your key ones, correct?

A Well, certainly we pay attention to impression volume a lot, but to be really honest, um, what I'm more focused on is the long-term progression of the clients in terms of their ability to use the data successfully. A lot of what drives that impression volume is helping to move the client and their agency's internal processes so that they're capable of executing what More efficiently in using the data. As I said, the Mad Men sort of model of advertising needs to change to take advantage of this data, and clients and agencies are just learning how to do that. It's the very early days of this sort of data-driven creative model, and so what we found is education, testing, um, running lots of, uh, interesting pilots Hand in hand working with the clients and agencies is what gets them using the data, having success, learning what works, and that ultimately drives the, um, impression volume. So we try to build a team of learning programs for all of our clients, if you will, roadmaps. Get experience with the different ways that the data can drive their messaging and their success metrics.

AI assessment note: “Well, certainly we pay attention to impression volume a lot, but to be really honest”

Q Okay, interesting. Um, walk me through the business. So what is it, as best as you can, kind of describe what it does, uh, and how you make money. What's your revenue model?

A Sure. So, um, what we do is use data in real time to personalize the A very simple example, um, you go to a retailer's website, you look at a bunch of products, and then those products follow you around in the ads that you see on the internet, ah, after that. That sort of, um, often called Or, or version one point out. We take it to a, to very complicated decision models where we can use things like what the weather is, where the consumer is at the moment, what demographic profiles do they have, whether they've been to the website or not, whether they're a current customer, there's about 14 or 15 different data dimensions that can define exactly what product or what offer We show you at a given moment.

AI assessment note: “what we do is use data in real time to personalize”

Q looking at the new bath towel kind of rug product page. Cause I need one for my bathroom. Uh, I'm now, you know, driving by a Walmart on my way to target. Cause I think I like their bath things more. Walmart targets me on my phone, walk me through the actual economics. It's a dollar to hit me on my, on my phone via push notification. How's it work?

A Well, so, so we're not in the business of the ad buying. Some other entity is making the decision to buy the ad. We're in the business of taking it once the ad is bought and saying, okay, where's Nathan? What do we know about him? What message, what offer, what product do we put in front of him right now? Recognizing that you're on a phone, you're out of your home. Um, so that tells us something right there. That's very, very important in terms of how we structure the message. One of the things that we go through and we help clients understand is that, can I take a step back? Yes. A little bit, ok. From, from the Mad Men days, we've developed ads assuming that people are sitting on their couch, leaning back, concentrating on the content in front of them that houses the ads. It really is the case anymore. The advent of the smartphone in 2007, yeah, uh, the introduction of the iPhone and then the, the, the tablet has fundamentally changed the way we as consumers consume content and the advertising that's in it, because according to our, um, analytics, only about 18% of digital ads are delivered to consumers in that lean back at home position. More than 80% of the time, You're multitasking. You're in multi-screen behavior. You're mobile outside of your home, trying to get tasks accomplished. And that means your attention in terms of what you're going to pay attention to and how yo…

AI assessment note: “we're not in the business of the ad buying. Some other entity is making the decision”