Last Indie Standing? Revenue Science on Tacoda + AOL
Revenue Science and Tacoda have been spirited rivals since the early days of behavioral targeting, an industry the two companies helped invent and proselytize over the last five or six years. With AOL's announcement that it will acquire Tacoda, however, and the recent flurry of acquisitions, Revenue Science is left as the largest and one of the last BT companies independent of a major media company or portal. We asked CEO Bill Gossman to weigh in on what the Tacoda/AOL deal means for his company and the industry.
Behavioral Insider: What does this deal do for you and your longtime partner AOL?
Gossman: The acquisition speaks pretty strongly to the strength of their leadership and the vision that having really strong owned and operated properties and a really strong network combined with the property, is the right strategy going forward for the large media companies. They certainly have cemented their execution and leadership in that area. And it also highlights how we were different from Tacoda in the first place.
We have been working very well and profitably for AOL. We have been in the business of being a platform for publishers like Dow Jones and Gannett and Disney Interactive. And we run an ad network. Well, Tacoda has been an ad network solely for quite some time. And Dave [Morgan, Tacoda Chairman] has done a pretty good job of growing that business. AOL saw an opportunity to effectively have access to all the toys and go out and hurt Yahoo and MSN. They have access to us. And now, they have a very strong behavioral overlay to their existing network. You put all of that together, and it's a pretty powerful story for AOL.
Behavioral Insider: And AOL will continue to work with you?
Gossman: As far as I know.
Behavioral Insider: Does this deal change the dynamic in the marketplace?
Gossman: AOL and Time Warner are very big media companies, as is Yahoo, and Microsoft is trying to be. Google probably is a big media company, if you think of them through the right lens. [All these companies] probably have about 80% of online advertising flowing through them. And then there is everyone else. Huge companies like Fox and NBCU and Tribune. They need a way to do some of the same sort of audience targeting the big guys are doing, so they can create quality and quantity simultaneously. On balance, they would prefer to work with an independent party than with someone that is a competitor in the content and audience business.
Behavioral Insider: Does this deal give you a new differentiation as an independent in the marketplace?
Gossman: Yes. We are the only independent player left, and we are certainly the dominant platform in North America, Europe and Japan. When we were in talks, in every sentence, there was always 'and what about Tacoda?' This deal with AOL cements the differentiation between us and Tacoda, that they were very network-centric, and we were network and platform.
Behavioral Insider: In what ways does this validate BT?
Gossman: It is more fundamental than an add-on. People will always buy places and great content channels, but the notion of buying audiences in the world of fragmented media is going to become central to how media is bought. AOL is by any measure now the obvious leader, and Yahoo is a close second. If you are an AOL Yahoo or Microsoft, you know a lot about your audience, but you can only monetize at best 5% to 15% of their time online. You need a way to syndicate that data out to other traffic, and BT is the way to do that.
Behavioral Insider: Where is Google in this discussion?
Gossman: I can only guess where Google is, but Google is obviously an awesome company. But they have had their struggles in display advertising, and they certainly dominate search by any measure. But if you talk to savvy analysts, they would say search is leveling out by any measure. Display is becoming more important, as more attention moves from traditional media to digital. Before the advent of interesting targeting, you could only have quantity or quality. If they want to be meaningful in the world of display advertising they will have to get very serious about targeting. My suspicion is that they know that, and they are a very deliberate company. They are in the process of buying DoubleClick so they are filling the gap they had in display. What they do as the next step remains to be seen.
Behavioral Insider: What about the CNBC question? Many of us thought that since Revenue Science was the current AOL partner, you would be the likely acquisition.
Gossman: Mike Kelly and his folks at AOL Media Network are a great bunch of guys, and they know what they are doing and exactly how much money they are making using Revenue Science. And they want to accelerate the sales of that, and they have a means of doing that in their acquisition of Tacoda. It's great for them, and it's great for us because it points out the differentiation between us and Tacoda. We effectively lose a competitor, and keep a very large customer. It's a fun spot to be in.
Behavioral Insider: Were you approached by AOL?
Gossman: I couldn't comment on that.
Behavioral Insider: Are you for sale? Is there a price that could buy Revenue Science?
Gossman: I won't comment on that specifically. Just to say that as tectonic shifts go on in the media world, there are a lot of people trying to figure out their way forward and how to capture more ad dollars online mainly in display. There are a lot of people talking to a lot of people. But, no, we are not particularly for sale.