• by Joe Mandese , July 28, 2009

Following Frank Addante’s presentation, one savvy publisher grilled the Rubicon Project founder on the economics of Rubicon’s business model.

He said Rubicon is guaranteeing a 20% boost in revenues for publishers who use its services, but that it takes 15 percentage points of that incremental gain. In other words, the effective boost for publishers is only a 5% gain.

Addante didn’t deny those terms, but he made a rationale point for the economics of them.

“There’s three things that play a factor in that,” he said, adding that even at that rate, publishers are “still netting 5%.”

The other big factors are “time-savings” (Rubicon deals with all the third-party intermediaries involved in making the exchange of advertising-to-inventory work) and delivers “one simple check to publishers.”

Then there’s the issue of “ad ops” (or the technical side of ad operations, that the publishers offload to Rubicon’s tech team).

And finally, he said, there’s the issue of “ad protection.”

This last one has a short-term initial cost saving to the publisher, but Addante said the hidden cost of messing it up, could cost publishers big time.

“It’s an area that we invested a lot of money in the technology for,” Addante noted citing an analysis showing that “about 15 million unique users their average cost per acquisition was about $5.”

If 1% of the adds served to those customers were “competitive,” “slow” or some other negative factor that turned them away as prospects, Addante noted it would actually be quite expensive.

“If 1% of that 1% were actually at risk of leaving, that was a $1.5 million risk of having to go out and reacquire those users later,” he said.