Three former Googlers announced Tuesday the launch of their own company — Beeswax — which they hopie will solve one of the most annoying problems in ad tech.
Beeswax claims to offer the first "bidder as a service" solution, allowing brand marketers, agencies, or ad networks the ability to operate their own cloud-based bidder — a technology that automatically bids on the real-time auctions that take place to buy ad space as a web page loads. The service does away with the cost and time investment it takes to build one from scratch.
There are already ad tech companies that buy ads (they're called "demand-side platforms," or DSPs) and provide bidders. But the drawback here, according to Beeswax, is that the technology is not customizable — so advertisers and ad buyers are essentially stuck using the same tech as their competitors.
Beeswax was founded by ad tech veteran Ari Paparo, who was most recently the EVP of product management at the publicly traded software as a service company Bazaarvoice. Prior to that, Paparo served as SVP of product management at ad tech company AppNexus, and before that he was product director of advertising products at Google. He is joined by chief product officer Shamim Samadi, a 10-year Google veteran who was most recently the lead on its video ad exchange, and chief technology officer Kumar Rengaswamy, who was a former technical lead at Google, including leading its video ad exchange, and as a key architect of Gmail.
Speaking to Business Insider, Paparo explained his thinking behind forming Beeswax: "If you're an ad network, or a really good marketer with a large budget, or someone that's trying to innovate in the advertising space, ultimately using someone else's tech is going to lead to a disadvantage. I kept talking to start-ups who were using a platform that worked, but they couldn't get an edge. All they knew is they had a bunch of dials to turn. Sometimes it worked. Sometimes it didn't."
He added that he also kept hearing "horror stories" about it costing some companies $1 million to build their own bidder. "They'd have their best engineers on it for a year and in the end it didn't really work. Or [one company I am an adviser to] built a bidder that produced negative lifts when they turned it on — it de-optimized their ads. It was producing worse results than the baseline, than if they had just bought on Google. Eventually, they fixed it, but that was another three months of intensive work."
Instead, Beeswax will offer a cloud-based bidder, which can be spun up quickly, with the ability to build in extra components as desired. Paparo says Beeswax has opted for a "disruptive" pricing model. While smaller customers will be charged a percentage of their ad spend (the standard DSP model,) larger companies will pay flat fees based on their CPU and data usage.
Beeswax launches into the market at a somewhat testing time for the ad tech industry. Terry Kawaja, founder and CEO of investment bank Luma Partners predicted back in March that "90%" of the 2,500+ of companies in the ad tech space will fail. There hasn't been an ad tech IPO in months and months. But there has been consolidation on a huge scale: AOLwas bought by Verizon, Oracle purchased Datalogix, and AppNexus acquired Yieldex to name a few recent examples.
Paparo thinks the trend towards consolidation is being driven by a demand for transparency from advertisers and investors. He said: "The companies that used to achieve great margins through re-selling inventory are now finding themselves squeezed. I think that there's a lot of opportunity on the tech side of ad tech, because many of the vendors have fallen down, or chased after the easy money, and have not built real platforms. That's why we built this."
Beeswax differs because it is "very technical," which Paparo believes will set its service apart from the rest of the pack — even those ad tech companies claiming to offer their own cloud-based solutions.
"Many companies who say they're tech companies have grown by taking insertion orders, having big sales forces, and by smothering their clients with service because their product is insufficient: It's just the honest truth. We are taking a different model. We are a tech company ... it's a niche, but we think it's going to be a niche that's going to grow to be quite big," Paparo added.
While it's rare for brand marketers to build their own bidders, there are a growing amount of top-spending brands who are starting to take more control over their digital ad spend, rather than just blindly trusting their ad agencies. P&G has a long-term relationship with Audience Science, AT&T has a direct deal with AppNexus, and Kellogg and Netflix have both experimented with taking their programmatic advertising in-house. Paparo admits Beeswax won't be for everyone, but it is particularly targeting going after customers with large programmatic advertising budgets, or those with internal data science teams that want to invest on the technical side.
Initially, the Beeswax bidder will focus on online video ads, but the plan is to eventually offer a bidder across all formats.
Paparo would not divulge the level of investment funding Beeswax has received, but its institutional investors include RRE, Revel Partners, Highland Capital, and SV Angel. Its angel investors include a number of big name ad tech veterans including the former CEO of DoubleClick David Rosenblatt, LiveRamp CEO Auren Hoffman, MediaMath CEO Joe Zawadski, and former MoPub CEO Jim Payne.
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