Compressing time, revolutionising advertising

PubMatic, a pioneer in real-time bidding for online advertising, is betting the advertising industry will soon go wholly digital, and is gearing up to dominate the market


Indira Kannan
In less than the time it took to type the first word of this sentence, advertisers are bidding for and placing advertisements on websites, thanks to the power of real-time bidding, or RTB. The technology, part of programmatic function or workflow automation, has also powered the rise of PubMatic, an enterprise software platform for large digital publishers such as NBC, Fox, eBay and Kayak.

"We help these large publishers price, package and sell all their ad space in a digital manner, using real-time bidding technology, which has become the backbone of internet advertising," explains Rajeev Goel, co-founder and chief executive of PubMatic.

In 2006, Goel, based in PubMatic's Silicon Valley headquarters in Redwood City, founded the company with his brother Amar, and Pune-based Anand Das and Mukul Kumar. "There was an overarching change happening, with advertisers shifting towards buying audience - buying an anonymous person that they want to put a message in front of, as opposed to buying a specific web property as a proxy for that audience," says Goel.

The company, a pioneer in RTB for online advertising, saw itself as a publisher-driven business, a contrarian position in an advertiser-driven sector. "During the first year or so, it was difficult to raise venture capital because many investors said 'nobody's figured out how to make money from publishers and so, that's not really a model we want to back'," Goel recalls. Since then, PubMatic has raised $63 million through four rounds of funding, the latest in February. Its major investors include Nokia Growth Partners, Nexus Venture Partners, Draper Fisher Jurvetson and Helion Venture Partners.

PubMatic has about 500 clients globally. Their definition of a publisher is anyone who builds a relationship with consumers. Goel estimates of the global advertising market of a little more than half a trillion dollars, about $133 billion goes into digital advertising, while RTB accounts for about $30 billion.

He says digital advertising is growing 50-70 per cent annually, and steadily increasing its share in the advertising market. "More and more radio is consumed via digital services such as Spotify and Pandora, more and more billboard advertising is digital billboards and, of course, you have all types of internet advertising, on a computer screen, on mobile devices, video ads, etc. Our focus is on that entire digital portfolio, which will eventually be 100 per cent of advertising," Goel says.

The US is PubMatic's largest market, followed by Europe and Asia-Pacific. The company has clients in 30 countries and significant footprints in New York and Pune, where its development team is based. PubMatic has 275 employees in Pune, and plans to hire 80 more this year. It has expanded its Pune hub to a 60,000-sq-ft facility. India is not yet a major market, but with around 100 million internet users and growing, Goel says PubMatic aims to be the top player in India through the next couple of years. He doesn't disclose the company's clients in India, but brands such as Snapdeal or Rediff seem to be typical examples, going by their profiles.

PubMatic follows a fee-based revenue model. Though Goel doesn't share any numbers, he says the company's growth mirrors the market's annual growth of 50-70 per cent. "Our approach is to maximise revenue, consistent with being a break-even company, and we've been achieving that objective for some time now," he adds.

Forrester Research, a market research firm, recently named PubMatic as the market leader in its category, based on market presence, offerings and strategy. Goel declined to comment on reports that PubMatic was planning an initial public offering this year, only saying the company wasn't seeking any further venture investments.

One of the key trends the sector must adapt to is the rise of content consumption on mobile devices. Recently, PubMatic acquired New York firm Mocean Mobile, a leading publisher ad server in the mobile space. Goel identifies Google and its advertiser-focused model as PubMatic's biggest rival, and hiring as the biggest challenge. Naren Gupta, the Silicon Valley-based co-founder of Nexus Venture Partners, the first and the largest investor in PubMatic, agrees: "Building a management team seems like you just put an ad in the paper and hire some good people, but the war for talent is absolutely unparalleled."

A hundred milliseconds -that's about the time in which an advertiser can now bid and place an ad on a website, thanks to firms such as PubMatic. If time is money, in this sector, compressing time is worth a fortune.


They appear to be funded well. They retain a large number of their clients. As with anyone else, they're going to have to keep creating new products.

PubMatic has a robust mobile offering; they score very well for their mobile offering, compared to some competitors. Everyone's trying to ramp up on mobile because that's where the consumer is. What aren't migrating at the same speed are advertisers. The business of PubMatic and everyone else in that sector is to facilitate the selling, buying and delivery of advertising. Until monetisation picks up, it doesn't matter where the consumers are; what matters from their point of view is where the advertising is.

There is still a great deal of confusion on the part of publishers and advertisers alike about what the consumer experience is supposed to be on mobile devices. So, as long as they remain confused about what a consumer actually wants, they will likely serve inadequate mobile experiences, which will keep consumers unhappy.

I believe PubMatic is profitable. I believe their revenue strategy is right on target, as it is to facilitate the programmatic sale and delivery of advertising and the fact that programmatic is only going to grow, by everyone's expectations, at a pretty significant pace year-on-year.
Susan Bidel is senior analyst at Forrester Research, New York

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First Published: Jun 23 2014 | 12:47 AM IST

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