DoubleClick Goes DoubleDown!
- by Tim McHale , October 3, 2003
McHale: How's it going?
Ryan: I think it's going well. 2001 & 2002 were tough years for the Internet industry. The feeling right now is that, across the board, it's picking up. The Internet particularly is picking up. However, marketing has not picked up much yet. I was just saying last week to someone that our head of HR came in to make a serious pitch for us to hire more recruiters, because we're not getting to all the open spots that we have. I haven't had that conversation in a while. As far as DoubleClick's business, we just bought a company that has over 100 people in Chicago. Our revenue is up 22% over the first quarter, so things starting to pick up.
McHale: You're continuing to increase your position as the leading online media technology company. From the looks of things your R&D must be working 24 hours a day. Can you talk to us about that?
Ryan: Well, what you always want to have in a company like ours are products that are in different phases, so that some, like our ad-serving products are doing well and are very profitable. Then there are some that are just increasing and rising but are out there in the market. Some are about to be launched and you have no idea how the market will respond. I think that we have a range of products there. Abacus and ad serving are more mature, very profitable businesses for us. E-mail is probably the next generation, though it will have cross-over possibility pretty soon. It's a $40 million to $50 million dollar business and it's doing pretty well. Site Advance, Campaign Management, things we've only had in the last year, have just picked up. They're growing. We're still doing a tremendous amount of R & D there. We have Abacus Japan that's just been launched. DART Motif, a new rich media product, is just being launched this quarter. I feel pretty good, but you never know. I'm sure two years from now, one of these things won't work. There have been a bunch of companies that had one product early on, and that was their company. But they didn't develop other products and just sort of stagnated. DoubleClick has done a good job of launching a bunch of different products and expanding our portfolio over time and we want to continue to do that.
McHale: How do you keep a company like this, a global organization, to run at the peak of its performance?
Ryan: I think it's all about people; having great people and delegating enough so that they can "just go." You balance it enough so that you keep great people excited, but yet give them the controls so that everything is under control. There's no recipe for that, but we've done a pretty good job. The team has been very stable and it's been very good. We've worked together for a while, so I feel, especially in the European business, there's a lot of good things going on there. It's very distributive; we've always been very global. Both acquisitions we made last year were in England.
McHale: What do you see as the challenges running today versus before May of 2000? Back then you had a tremendous amount of momentum. A lot of excitement. There was a buzz here like no other. It seems to be back and yet it feels different.
Ryan: I think nothing is ever going to duplicate the late 90's in the Internet world. From an excitement point of view, from a growth point of view, from a "you have to throw the budget out by June" point of view, because everyone had surpassed it by so much. I think you're never going to duplicate that. Once it ended, the hard part was getting people to a point in that transition where they were still excited by something that is doing very well but maybe wasn't growing by 25% a year. So that was a big management challenge. Along the way, there were some people who couldn't make that switch, or couldn't remain motivated and therefore left. But that's not the biggest challenge - the biggest challenge strategically always is our strength. But if we don't execute it well, it can be our weakness. We tend to compete with smaller companies that are single product companies. And our strength is that we compete and we say, "We have a lot to offer you, we have stability and we have cash." The weakness could be that the whole company is not focused on E-mail or on Ad serving or on any other product. There are times when - if you don't do anything "well" - you can become sort of big and flabby and soft. To date, I think it's worked as a strength for us, but along the way, I see little examples always where you think, "Oh, we weren't focused enough on that." Someone else was hungrier.
McHale: Got it. How do you quantify experience in this company, where it's a company and an industry that's under ten years old?
Ryan: I think a lot of the people who are working here have worked in the industry now for at least six or seven years and also tend to have experience in larger companies. I think that's a nice balance. I feel comfortable with the variety of experiences we have right now.
McHale: Let's talk about new products. For example, in the rich media category. DoubleClick is offering the idea of providing a one-stop shopping service, which is very compelling.
Ryan: The biggest complaint we get from advertisers is the amount of time it takes to do a rich media campaign. They all want the results, but it's just too involved, and, ironically, it feels a lot like the complaints we heard from people about advertising in 1995 and 1996. At that time, ad serving was very hard to do, it was unwieldy. But then it got a little more standardized as ads became more consistent, better and faster. We think we can do the same thing in the rich media area. Rich media's going to be a huge percentage of all internet advertising. It's going to have more benefits to the whole industry. It's going to bring in the consumer package goods people and those that we've been trying to get involved since the Fast Summit. Years ago, if I had stood up at that point and said, "I think that by 2003, which is five years from now, CPG companies will have spent more money but not that much more." Everyone would have said, "No, that's not what's going to happen." Now, for the first time, I do feel like they're looking at the medium very seriously, they're understanding the value of branding. The rich media is getting better and better, easier, and that's going to be increasing.
McHale: Focusing on the one-stop-shopping concept, where you have expertise that provide such a shopping experience, do you think that's going to limit tech-startups from coming into and bringing innovation? Is the market over in a lot of areas?
Ryan: No, I think that, in rich media in particular, it's a big and growing market, so we'll be another competitor. What we've seen in many cases in the past, outside of EBay, is that there are generally multiple competitors in one area. What will happen is that this particular market will start to segment more. We're talking two years from now, but someone will offer the very, very cheap solution and someone will also be the niche player. And there will be one or two in the middle that provide the meat to things. Then there's some rich media companies that really are just taking flash, doing larger reports around it, and then presenting the product. There's probably not going to be a market for that.
McHale: What do you think of the desktop growth, in terms of WhenU or Gator or Forbes Alerts?
Ryan: You're talking about the Gator-type market?
McHale: Desktop applications. What do you think?
Ryan: I'm not sure all the legal issues have been worked out completely - so it remains to be seen. The publishers are not very happy with it.
McHale: Does DoubleClick have any ability to serve against desktop applications?
Ryan: We don't really work with those Gator-type companies. We work with the publishers directly.
McHale: Here's sort of a tangential question - do you miss being in the media business? I mean you're in the media business, but you're not in the media business. From the standpoint of where you were years ago.
Ryan: Right. There are elements of the media business that I like. We're very involved with the IAB. Our clients are the top ten agencies. You say we're not really in the media business. What that really means is that we don't actually have people selling advertising, though we're in close touch with people who do. What I miss is the people. Those people were a lot of fun and very talented.
McHale: It's definitely a social business. Clearly you're a media technology company, so you must have more programmers and people who are understanding of technology compared to understanding relationships. That's what Madison Avenue business is more about.
Ryan: We're really a hybrid because we're spending our day talking to those same clients - it's just that the sales has changed a little bit.
McHale: I don't know if you saw the article in the New York Times recently about spam and what it costs, how costly it is for companies - is Spam something that will ever go away?
Ryan: It's a solvable problem. It's a solvable partly through technology. It hasn't been solved yet. I am actually relatively optimistic that a year from now, it will be much better off.
McHale: Is there a DoubleClick product that you're talking about?
Ryan: You know, we actually thought about it and then decided that you need a consumer product. We don't sell to consumers directly. We're not the right player to do it, but I think it is solvable. I'll use a quick example, if you try and do a very obscure search on a search engine right now, in seconds they can go through billions and trillions of pages and find the right answer, which wasn't the case five years ago. Now they can. That problem for me is harder than writing a program to identify spam. I think a program could be written very easily to identify that as spam.
McHale: I have Cloud Mark on my computer, and that pretty much eliminates a lot of it.
Ryan: There are programs out there and I think that if you look at today versus a year ago, the products are already much better. Now, you'll still find that they're not final generation. They're like search engines maybe in 1999 or 2000. You know they were good, you found a lot of things, but they're not as good as they are today. And so when that happens, and everyone has it, it will work much better. The other option is that it will help if there is government legislation. If for no other reason than seeing other people go away to jail discourages many other people from sending spam, not everyone, but many. And the third thing is, there's a possibility of the industry getting together - which hasn't happened yet - and trying. The seminal problem is that e-mail is very inexpensive. Catalogs and direct mail have functioned well because there is a cost. Targeting can be expensive. Therefore, you don't have the spam problem with traditional direct mail as you do with email.
McHale: When I was a kid, I remember my parents spent time protecting us from our environment. Back then though it was just more about looking both ways before you crossed the street. You didn't have to worry about really tasteless programming on television; there was nothing on radio other than that crazy thing called rock and roll and the Beatles. But now, being a parent, it's amazing how much more guarded you need to be. Without getting into too much of a social discussion here, I was just wondering what do you think the impact of technology is - both on a positive and a negative standpoint - on American society?
Ryan: Well, I think that technology is not going to alter that fact. I'm not sure if you saw the article in the New York Times about Lucille Ball and Desi Arnez. It's commenting on the fact that, not that long ago, they portrayed married couples as being in two separate beds. They made the point that the amount of sex has increased dramatically on TV. Technology doesn't play a role there, unless it allows parents to turn off certain programs on TV. I'm not sure that the Internet is the biggest driver of the issue here and so I'm not sure it's a technology solution. I grew up in Europe and people there still think that what United States parents are worried about is ridiculous. There's essentially very little underage drinking in France. Kids drink but you don't have the binge drinking. They are convinced that by being so protective - the results are counterproductive. And the same is true on sex. I don't think it's a technology question or a technology solution.
McHale: When I see the things come in my email every morning, when I send/receive, it's amazing to me the silliness of all the spam and how it's so tasteless. In some way, it's the Howard Stern-ization of the media, to some degree, which could be traced back to Murdoch's entry to some degree.
Ryan: I think people are adjusting to what the Internet can bring to their children. In the beginning there was sort of fear seven years ago. Nowadays, it's becoming much more manageable.
McHale: Let's talk about analytics and data. With all of DoubleClick's data tools, the company clearly understands the importance and value of using behavioral data. You know, where demographics is all about sizing up a consumer's potential based on a measuring their outside appearance, age, gender, zip code, etc. vs. behavior, which is sizing up a consumer's potential by what they are thinking about. What's your secret to helping marketer's understand this important shift?
Ryan: Well, each sector is a little bit different. The drivers and opportunities in catalog sales are different than in any other industry. Still, the targeting that can be done in the catalog industry is much more precise, because it's based on significant purchase behavior and it works tremendously well. We have started to expand our data business internationally and the model is working well oversees. I think it will become more developed over time as you adapt to what information is available. It's a big part of our business and strategy. Overall, the data business is probably a good 35% of our revenues right now, derived from modeling, mostly offline, some online and now increasingly data management. I think one of the fastest growing areas in the next couple of years will be data management and that's really managing the whole data base for a client. We do it right now - through our division that we purchased, CSE, for many large companies.
In marketing there may be so many data points about relationships with the customer that the data needs and the modeling needs are going to be more sophisticated and continually growing. There's a long, a twenty year trend, that I don't feel much differently about today than I did at the beginning of DoubleClick, which is that technology and data are going to play a bigger and bigger role in marketing - and that's just a continual trend that is happening and will continue happening.
McHale: I agree, except that, from my own standpoint, it's going incredibly slow, when you see 90% or more of all marketing dollars still being allocated based on sample-based age and gender targeting tools, which are very, very first generation. They really haven't improved technology and methodology since 1970.
Ryan: Well, in certain areas, I'd agree, because I don't think that they've developed very much at all. What occurs in the Internet, which I actually think is due to ad serving, is that when you serve a million ads out there, you actually know that they go to a million different desk tops, which isn't the case in publishing. So the Internet has leapfrogged media's ability, viability and accuracy of those numbers. Now, what it hasn't changed is that you generally don't have a big enough sample to reach someone who "wears black shoes and lives in New York City." But the real problem is not technology. In some ways, it's so small that it's just not worth doing. What we're seeing in email, for example, is probably the best example of that, E-mail lists are getting very sophisticated. Two years ago our clients who sent out three different e-mails at different times during the week now send out 100 and they're different. And they know that two years from now that number probably won't be 100 it will probably be more like 500. So e-mail will probably be the best example of what you're talking about and will surpass catalog.
McHale: But yet, because of how much money is still going into other media, one could make a case that there's not a major, compelling argument there, simply because the marketing community hasn't really moved.
Ryan: Magazines are targeting. You see a number of different ad packages that go through Time magazine. With regard to TV and radio though, I agree, and that's because it's a technology question. They haven't been able to segment households yet in the way that magazines have. Ironically, you would've thought of print as sort of being like the lowest tag, but because printing press technology improved so dramatically, it enabled them to be able to do smaller print runs. TV is the hardest thing. It's such a big infrastructure. In our last board meeting, Tom Murphy, who was the founder of Cap Cities and is on our board made an interesting point. He was involved with TV when it was black and white and it didn't work very well in the 50's. During the meeting we did a demo of DART Motif rich media product and actually showed the board a number of more recent campaigns that have been running. He was just struck by the fact that the gap between TV and Internet ads - in terms of a visual point of view - is still there, but it's getting smaller and smaller. You know, there are some great campaigns out there.
Ryan: I have a funny story - we were in France, and one of our kids saw a rotary phone and couldn't work it. She was pushing the buttons and she couldn't make a phone call and was getting aggravated, because she couldn't figure out how to make a phone call. It's funny, just how quickly technology moves. It didn't look anything like a telephone. It had a cord.
McHale: Everything old is new again. Let's move to another subject, is there anything more important than ROI?
Ryan: No, because that really ultimately captures everything. Everything else is just a tool of the way. Day to day, its just like advertising, you've got to get customers cheaply, whether they're existing or new. We always try to get our product management together and say, "Look, don't complicate life. Make sure you're going for that goal, because ultimately, every advertiser is looking for that."
McHale: What's your feeling about agencies? Your suite of products seems to challenge the advertising agency's raison d'etre to some degree.
Ryan: No, I don't think so.
McHale: Well, the DoubleClick suite offers everything an agency does except creative.
Ryan: We're providing the infrastructure for them to use. It doesn't replace agencies. We don't know why people buy Coke versus Pepsi. We never see any data on that. We can help people deliver ads and other marketing messages. The data that is used to determine the campaign performance is interpreted by the agency. Bloomberg [terminals] didn't put Morgan Stanley out of business. The Morgan Stanley guy loves having the Bloomberg terminal because it's all on a desk, it makes him much better. So that's really the parallel there. We don't have creative people here to design campaigns.
McHale: Well, isn't there's a distinction between branding marketers and direct marketers? Most direct marketers have all their operations in house and no longer use agencies. What is the ad agency of the future going to look like?
Ryan: Well, my point of view is that the threat to agencies doesn't come so much from our tools. In direct marketing, when it involves manipulating the data base of customers, many companies take that in-house, and so they buy tools from us or other people, but they take it in-house. The agency then loses that business or part of that business. That's independent of the tools. The real issue there is that historically agencies have been slower to love direct marketing and to really "get it." For example, agencies do not take advantage of working with their customers on e-mail. Our e-mail tools are sometimes purchased by the agency, but most often are purchased by the client and the clients often say, "Well, the agency really wants to do sexy campaigns, but they don't want to do database modeling because that's so techy and geeky" and therefore they lose the business. So, I think that as more of the world is becoming more direct marketing-oriented - if you can't do the database manipulation at the agency level, you're going to lose business with your clients.
McHale: What will the integrated agency look like years from now? I understand the economics of the business, but with little investment in understanding the future, if you agree that marketers have decreased confidence in traditional media...
Ryan: I don't think that there's a huge problem with the agency holding companies. Over the last couple of years the global players have gained market share. There's a natural tension of a global agency that is trying to structure itself so it can handle Coke or J&J. They're going to find it hard to work on smaller companies very effectively, so that creates an opportunity for lots of new agencies to pop up. That's fine. I think that the global holding companies made a point of having different brand names to try to avoid the conflict situation. They did that okay on the front end. On the back end, what they have not done is the necessary consolidation. I think that there's enormous work that needs to be done there. The back end for them is they have 50 data centers; each one is a different buying center. They don't do joint buying. They don't do joint coordination. However, IPG is being the most aggressive - they're doing very good work there, which ultimately, will be very important for them to remain competitive.
McHale: What advice could you give for someone graduating high school considering a marketing career, planning your college curriculum? How would you do it, knowing what you know now?
Ryan: I would go as technical as possible. I think that the creative aspect never goes away and it's always been important. What has been added on to that though is the ability to understand data. You know, in many ways, the more math, engineering, and computer science classes you have, the better. And that's not traditionally the profile of someone at an agency. It was always the guy who had the pony tail and was really, super creative with an English major. That will still exist, but I would advise people to get more experience with technology products.
McHale: Let's talk a little bit more about traditional media - up until now; DoubleClick's core services addressed the interactive media side of the media mix equation. When will we see new products that help service and manage the traditional side, where the bulk of the dollars still are?
Ryan: We're very open to looking at that.. To date, we have found, because of the legacy data, there has been a much bigger role in direct marketing offline as well as online. People think of us as very much online, though a big part of DoubleClick is offline. The traditional media part, such as television, is not where we see as many opportunities that are attractive, compared to Internet opportunities. But, you know, we are looking it at more and more. Nothing urgent there, but if there was a good opportunity we would enter that space.
McHale: When you say the bulk of your business is offline, what do you mean by that?
Ryan: The traditional direct marketing part, a full 35% is catalog. Since we're no longer selling media, we look at the media as the dollars spent on technology and data. And actually, the markets are not quite as big as it would seem because there aren't that many products. And I'll give you one example. We have a media planning tool for online advertising. And our client said, "We'd love to use this for print." But you have to be careful going into those businesses because you're talking to people who've used the same tool for 20 years. They don't just switch.. You've got to be careful. And so we do look at it. Five years from now, I think we will be present in that space.
McHale: Do you personally believe the Nielsen rating projections?
Ryan: Do I think the numbers are accurate?
McHale: Yes. For example, when "Friends" is projected as doing a 15 rating, do you really think that many people are watching that program?
Ryan: I think that there's definitely a high margin of error there. I would guess that, from what I know, that it tends to be higher on smaller programs than it is actually on "Friends." I'm not sure "Friends" is the best example.
McHale: If you were a media planner overseeing a seven-figure $$ budget on television, how would you handle your allocation of television in light of that confidence factor, or lack of?
Ryan: The allocation factor is bigger than the TV versus not-TV issue. I'm not really an expert at looking at the numbers. You'd have to get a real media buyer who does TV on that.
McHale: Last question - how are you able to have fun these days with so much going on - what type of person can stay on top of this business and actually "have a life?"
Ryan: You'd have to ask the other people. I'm relatively well-known for balancing off the two things and pacing myself. I've been doing this now for over seven years. I was at a CSFB conference recently, and they pulled out the speaker line-up from '97 and out of 60 people that presented in '97, there were three of us left. Jeff Bezos, Shelby Bonnie and myself. So I love it and we have a lot of great people here - I've never felt like this was all dependent on me, needing to make decisions on every single thing. We have fantastic people. I pace myself. I make sure I take vacations. Even through the early years, I've always taken about four weeks vacation per year, to make sure I'm spending enough time with my family. I started doing triathlons last year, so I do a lot of sports. I play on the basketball team here. The thing I'm most proud of, though, is that, for the second year in a row, I was the Double Click ping-pong champion!
McHale: I remember the comment you made in your speech at Insight2003 about how you and Michael Jordan wear the same sport shoes, though the comparison ends there once you get on the court.
Ryan: I played in a basketball tournament this summer and we got killed, it was terrible, so I'm keeping my day job! In any event, I have a lot of fun. I really enjoy it.
It's very rare that you can be part of something that can start with a couple of people and can grow and become global. I look and think that there are literally billions of dollars in revenues out there that are potentially revenues that could be DoubleClick's someday. I don't think that we're finished in any way shape or form; I think we're just starting. That's what's so exciting about it. What makes it really fun for me is that you have this big group of people that you're working with and you're trying to be competitive and you're still getting excited by beating other players and there's a feeling that we've been pretty successful and so, that's fun for people .
McHale: Getting back actually to what we began with, I've seen a company's culture change when they move to different buildings. This building has been home for DoubleClick for a long time. And so for as much benefit as there is to moving, the move changes things simply because it's not the same context. Any thoughts to what you want the company to keep having from this space to your next?
Ryan: I like designing spaces and I've done it several times and I think that when you walk into our new space, you'll feel like it's somewhat similar to this space. There are a couple of things - one is, most of the offices will be in the middle of the floor. It will be bright, there will be high ceilings. It's going to be nice. I'm definitely going to have a ping-pong table, so don't worry about that, but no basketball court. We'll be three blocks from Chelsea Piers. It's going to be great.
McHale: Kevin, thank you!
