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Marketecture: Get Smart. Fast.
Episode 112: Ilya Pozin of Telly on why the future of TV is free
00:51:13
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- [00:00]
Ari Paparo
This podcast is brought to you by Sojourn. Thinking about how to get more out of your travel marketing? Sojourn's travel audiences tap into real time data from top hotels, airlines, and more so you can reach the right travelers at the right time. Whether you're running programmatic or social ads, Sojourn's AI powered audiences plug right into your DSP for better performance. Test Sojourn's travel data to take your campaigns further. Learn more@sojourn.com architecture that's every S O-J-E-R-N.com architecture what do planking, Gangam style hashtags and Viewability have in common? They were all popular in 2012, but while the first three fizzled out, viewability has lingered. Adelaide thinks it's time to retire that relic. That's why they created au, a modern metric you can use to plan, buy, optimize, and even trade media. EdWeek calls au the attention economy's most widely recognized metric, and it swept the measurement category at last year's Ads Exchanger Awards. Don't get stuck with a fanny pack of metrics. Ask your agency about switching to AU. You can also visit Adelaide metrics.com that's adelaidemetrics.com welcome to the market Podcast. I'm Ari Paparo. I'm joined by Eric Franchi as well as our special guest Ilya Posen, who is the founder and CEO of Telly. Telly is the free TV company. Eric's an investor. Eric, tell us about Telly.
- [01:39]
Eric Franchi
Telly is an amazing consumer device which again, I'm an ad tech investor. So everything that we invest in, you can't touch it or buy it at a store or get it for free. So it's like the first and only consumer investment we've ever made and it's a big bet. It's a bet that TVs can be free and ad supported and if it's successful, it can be, in my opinion, absolutely massive. And Ilya, the founder and CEO is a super sharp guy with an interesting history. He was a co founder of Pluto, he was a doctor ad buyer back in the day and he's a super sharp and smart guy.
- [02:15]
Ari Paparo
Okay, I'm really interested in hearing how the economics work to build a TV ship to the United States and get it paid for with ads. That should be really interesting. Interesting. So this week we announced our special surprise guest at marketecture Live. Market Live is now three weeks away, which is like scary. So Eric and I are gonna be recording a live episode of this Podcast at the event. And our special guest is the one and only Brian O'Kelly, who was the number one guest, I think, by views or listens last year, and whom I have a long history with.
- [02:47]
Eric Franchi
Yeah, so you tweeted something a day or so ago, and it was very much like, dude, where's my car? Where you're like, hey.
- [02:54]
Ilya Posen
So I was hanging out.
- [02:55]
Eric Franchi
I was hanging out with Bach. He was telling me about what he was doing with AI. I was like, dude, you should come to market, talk about this live. And he's like, dude, yeah, let me do this. Pretty much what actually happened.
- [03:05]
Ari Paparo
Yeah. So I don't want to give away what he's up to, but, you know, Scope three is known for its sustainability and for measuring carbon and things like that. But Brian has been seeing kind of a bigger picture. So him and I do talk occasionally, and we got on a zoom call, and he made some suppositions about AI and said, well, if you had AI that could do X, wouldn't it do Y? And then I said, oh, if you did Y, you could do Z. And he's like, yes, that's what I'm thinking. And I'm like, yeah. And that would reduce the carbon, wouldn't it? And he said, yes, it would. And then I said, okay, this is big and complicated. Are you announcing it? And he said, well, I have an event on March 14 that he's. He's running his own event. I think it's the 14th. I apologize if I got that date wrong about sustainability. I'm going to talk about it there. And I'm like, well, Markitecture live is the 17th. Why don't you come on stage and tell everyone about your thoughts about the intersection of AI and sustainability? And he'll be there with you and I talking about this stuff that's very interesting, cutting edge, and not straightforward about the way you might think about the intersection of those two topics.
- [04:09]
Eric Franchi
And he's always fun to have on stage, irrespective of the topics. So that should be. That should definitely be a highlight of the day.
- [04:16]
Ari Paparo
Yeah. He talked about showing his painted toenails based on a joke I made. But I just want to be clear. No one will see my toes during Architecture Live. Fortunately, yes, no one wants to see my toes during Architecture Live. Are there any tickets left, Ari? Yeah, there are some tickets left. We're approaching our capacity. I think we will sell out. Got about a couple of weeks left, so I would Definitely go to markettesterlive.com and buy some tickets. Because you want to be there. It's going to be. It's just like so filled with content and really excellent speakers around AI identity, other things. We have one person who's bringing a keyboard to their breakout sessions. There'll be a little musical interlude. Not sure about that. Should be fun. All right, let's get into it with Ilya Posen of Telly. Ilya Posen from Telly. Thank you so much for being here.
- [05:06]
Ilya Posen
Yeah, thanks for having me.
- [05:07]
Ari Paparo
So we're pretty excited about this. I don't have a telly. Eric, you have a telly, don't you?
- [05:11]
Eric Franchi
One of the first tellies. It is fucking awesome.
- [05:14]
Ari Paparo
What's so awesome about it?
- [05:16]
Eric Franchi
Okay, so number one, it's the best TV in the house. It's a beautiful large screen tv. It's got Ilya, check me on this. Is it Bose or Harman Kardon? Harman Kardon speaker. Harman Kardon speaker. Just as a functional tv, it's the best. But then it's got the telly bar, which has all this functionality. So my stocks, the weather, like all this information you can toggle to, you know, watching various stuff and then it shows ads. What's better than that?
- [05:43]
Ari Paparo
Oh, my God. So right before, right before we recorded, I was like, let's not make this too promotional. Let's just keep it even right out of the bat. It's a telecommercial, okay? You asked Ilya, tell us what was. What's the thinking here? What. What is the origin of this company and this idea?
- [06:00]
Ilya Posen
So at my last company, Pluto tv, you know, we. We created the whole fast category, right? And we went against the grain. Everyone thought we were batshit crazy. People here think we're even crazier. Got to say, doing an ad supported hardware is not. Not something that people instantly get. But you know, at Pluto, we built our app for every TV manufacturer, right? We worked with all of them. First of all, it was very difficult to build an app for TVs that are highly underpowered, right? So what we saw is that TVs we know, they're the biggest screen in the home. They're at the center of the whole family, but they're. They're pretty much as dumb as ATM machines, right? TVs haven't really changed in 20 plus years. The form factor has. They became. They used to be big furniture pieces. Now they're skinnier and skinnier and skinnier, but like they still do the exact same thing, right? There's some form of content that's pulled from somewhere and it's brought into the glass and that's it. Imagine if our smartphones just became skinnier and the phone clarity became better. And that's all they did. Right. But that's not the case. Right. The phone part of a smartphone is like 30% of what we do. There's a bunch of other stuff. So we looked in the market and we saw, why is this happening? Why haven't TVs innovated? And that's because there's no margin. It's a commodity business. TV OEMs lose money selling a device. When someone loses money selling a device, what do you do? You cut out things. You remove speakers so you can upsell a sound bar. Do you put the fastest processor in? No, because that costs you more money. Why would I do that? Because there's no margin. There's been no innovation. So TVs have literally stayed flat. And what happened is other devices started to pop out around the house, right? We have smart home controllers, we have your Alexa, your Google Assistant, your mirror came out with a fitness device, which is literally a TV with a camera. And that's a problem, right? And then every TV company looking for any sort of revenue went into the ads business. But their DNA is still hardware, right? So that's where like the light bulb literally went off and said, all right, well what if we actually build like not a smart TV is a bad phrase, right? Because they're not really smart. All that does is deliver content over the Internet. But what if we actually build like the iPhone of TV is, right. That make it do so much more than television. And is there a way to do it that we could actually disrupt the entire business model and make the whole thing ad supported? And that's, that's literally telling.
- [08:11]
Ari Paparo
Okay, lots of talk. No, no, that was not promotional. Let's talk economics. So let's go with the dumb guys first. The dumb smart TVs. I'm being facetious. We love, we love all of our TV manufacturers.
- [08:23]
Ilya Posen
They're your sponsors.
- [08:24]
Ari Paparo
Architecture. They're our sponsors. But like a company like Vizio Public Company. So you know the details. How much of their revenue are they making on like ads and data versus TV sales?
- [08:36]
Ilya Posen
I mean, gross or net. That's, that's really the problem here, right? Is they'll. They make majority of their money selling, you know, top line selling TVs, but their margins come from data and advertising, right? So they're. When you're cranking out a couple new models of televisions every year, and TVs are TVs are owned for a long time. People have TVs for seven to 10 years in a single household. Imagine how many models they're now supporting. So like most of their engineering team, right. And most of their product team was supporting, you know, dozens of existing televisions rather than focusing on one and making it better and better and better. So their money comes from ads, Their money comes from data. Top line revenue of course comes from selling the device. But there's no margin there.
- [09:14]
Ari Paparo
Yeah, makes sense. Okay, walk us through your economics. To the extent that you give them public. Like if, I mean Eric invested in you. I didn't. But if I was an investor, if I was a big, you know, VC and you're raising money that the unit economics would be the entire conversation, right?
- [09:28]
Ilya Posen
Yeah. I mean look, the TV is not cheap to make. I think a lot of people think free tv, it's going to be a, you know, low budget, low income, targeted device. That's not at all the case. I think people get it because it's free, because there's no barrier to entry. Then they, they get it, they unbox it, they put it up, they go holy shit, this is like the best fucking TV I've ever had. So that's, they think it's free and it's low income. Then they realize it's the best and they tell all their friends about it. And this is why we are where we are today. And we have a massive wait list and people are signing up and we do literally no marketing but economics. So I'm not going to like obviously unravel the whole.
- [10:01]
Ari Paparo
Yeah, just give us the breadbox approach.
- [10:04]
Ilya Posen
Look, the, you know, it's not, you know, you want to get a good, it's a 55 inch 4K HDR display.
- [10:10]
Ari Paparo
How much would it retail for if it wasn't ad supported? Let's start there.
- [10:13]
Ilya Posen
Probably somewhere between 600 and $1,000.
- [10:17]
Ari Paparo
Okay. How much would it cost to build if it was not?
- [10:19]
Ilya Posen
Well, if you follow what I said earlier, where TV is actually lose money on the TV then you can kind of read between the lines of what it cost you. Right. Like, like the sound bar alone is a 400 to 500 retail sound bar. People make margin on soundbar. So like that would, you know there. But the top screen when you're buying it at a store, like a 4k 55 inch TV probably 400 bucks alone, losing money on it. Right. So the bottom screen we have to make custom. There's a camera that we added that there's a far Field mic. We added that. The fastest processor ever in a TV lives in our tv because in reality, it's like a computer. All of that stuff adds up. And it's not, it's definitely not cheap to me.
- [10:57]
Ari Paparo
Are you just mining Bitcoin on people's TVs? Just admit it here.
- [11:00]
Ilya Posen
That would be a good strategy if it worked. It wouldn't. It does not work.
- [11:03]
Ari Paparo
No, it does not work.
- [11:05]
Ilya Posen
We're not. No, we're odd dollars. We're mining our dollars. But.
- [11:08]
Ari Paparo
Right, so, so if you're retailing for 6 to 800 equivalent TV, you're building it in, you know, China for 300, something like that. I don't know. You don't have to tell me.
- [11:18]
Ilya Posen
No, no, no, no, no. It's simple. It's. I'm telling you. TVs don't. There's no margin. It costs us a lot more to make than you.
- [11:24]
Ari Paparo
Okay, let's go to the other side then. So how are you making money and how much money are you making?
- [11:29]
Ilya Posen
God, you're just unboxing everything so you.
- [11:33]
Ari Paparo
Don'T have to answer. So.
- [11:34]
Ilya Posen
Well, look, I'll explain the business model, right? So when you look at like a Vizio, Samsung, Sony, lg, any TV maker, their margin comes from ads and data, right? And where do you deliver that ad in your operating system? So they have a few opportunities to deliver ads. When you're, you know, you turn on your tv, you're figuring out which app to use, you see some advertising, right? Maybe you open up an app, it's streaming, there's some ads playing, they get a cut of that, right? So that's, that's how they make their 35 to $40 a year in ARPU. What's interesting about telly is we have that bottom screen, right? So we have a dual screen television, and that bottom screen is on every single minute that you watch something on the top. That's our operating system, right? So we have an opportunity to deliver advertising during the entire time you're using your television. If you're, I don't know, Samsung or Vizio, and you use an Apple TV with your Samsung, Samsung, screwed. They're never making a dollar from that customer. They probably lost five to ten dollars selling them a tv and now they're using an external streaming device that they don't own and they never make a penny. That's literally a loss for us. We don't care what device you use. We don't care if you watch Comcast. We don't care if you Use your Roku device, your Fire TV stick, if you don't care. If you use apps on our device, great, even better. But we always have a relationship and we have that attention with our consumer for over six hours a day. And that's how we're able to monetize.
- [12:58]
Ari Paparo
When you say dual screen, the physical device has two screens. It's a main screen and then like a ticker kind of screen.
- [13:04]
Ilya Posen
Yeah, it's a main screen. 55 inch screen up top. Below that is a Harman Kardon soundbar, and underneath is another screen that's literally the top screen cut into thirds. So take one third of the top screen, put it on the bottom. It's like a really wide tablet. Right. And that's attached to it.
- [13:22]
Ari Paparo
And so for the main screen, you have the same business model as your competitors. You're getting that 35 to $40 ARPU on the data and the ad insertion and app installs and stuff.
- [13:35]
Ilya Posen
Directionally.
- [13:36]
Ari Paparo
Let's just call it directionally. Yeah, you don't have to give the exact numbers. And so you're saying just I want to unpack it for people is like if I buy a Samsung TV and then I plug an Apple TV into it and I use the Apple TV as my primary viewing experience. I never go to the Samsung OS really, unless I have to. They don't get most of that 35 to $40. They may still get a data.
- [13:55]
Ilya Posen
They'll make none of it. Yeah, well, what about the data?
- [13:57]
Ari Paparo
They still get acr.
- [13:59]
Ilya Posen
They still, they'll get some data, but most of their data comes from people experiencing native apps on their television. They try really hard to get you not to plug in another device, but.
- [14:08]
Ari Paparo
On your device you could, you could plug in an Apple tv.
- [14:10]
Ilya Posen
That's right. Okay. Because we have that operating system on the bottom.
- [14:13]
Ari Paparo
What's the experience of Monet Bar? Like, what's working? What kind of campaigns work? Is it QR codes? Is it direct response, or is it more branding? I. I imagine you can't play audio on the thing unless a user ops in or interrupt.
- [14:26]
Ilya Posen
Yeah. If you're not watching television, we could, but our whole goal, like our value proposition, is when someone's paying attention to what they're watching, that's when they see an ad. Right. We actually have a sensor on the tv. It's a motion sensor, it's not biometric. But we know how many people are in front of the TV at any given point. We know when the room is empty. So we actually see during traditional commercial breaks about A third of the room leaves on regular tv and you can imagine out of the ones that stay how many of them are actually tuned out and doing something else like, oh yeah, commercial break. Let's go get a snack or something with us. You know when you're actually paying attention to the content is when you see the ad and that's incredibly effective. Think of it like I know you're watching a basketball game at an arena, you're checking the stats out on the Jumbotron and there's like a Bud Lighter State Farm ad coming across the screen.
- [15:13]
Ari Paparo
So you could be serving ads to a golden retriever though, right? You have, you have dog, large dog detection.
- [15:19]
Ilya Posen
No. So we, we're the only. Because we have that sensor. We're the only TV that can actually turn off ads when a human isn't present in the room.
- [15:27]
Ari Paparo
I was just asking for your sense.
- [15:29]
Ilya Posen
Yeah, we, we love golden retrievers. We could tell the difference between a dog and a human. Yeah.
- [15:34]
Ari Paparo
What, what do dogs like watching on the bar?
- [15:36]
Ilya Posen
We don't know. We haven't pulled that data. If you want to pay for that data request, we're happy to provide.
- [15:40]
Ari Paparo
You should run squirrel. That.
- [15:42]
Ilya Posen
That's right. Yeah. We might have to replace a lot of TVs there.
- [15:45]
Ari Paparo
Eric, I'm going to put you on the spot. What ads have you seen on the bar and have you bought anything?
- [15:51]
Eric Franchi
The ads that I'm seeing are fairly locally targeted, so obviously they have the benefit of a lot of data. So I would say there's been a fair bit of local targeting, everything from healthcare providers to autos. There's been a good smattering of like dtc and they all have the ability to scan the code, go to a custom URL. I pay attention when I'm looking at the screen. Ilya, directionally, is that the right expression?
- [16:23]
Ilya Posen
No, no, that's absolutely right. So we're kind of like we're a mobile tablet attached to a TV. Television naturally gets 15s and 30s. We don't go after that. That type of demand. It's like that's cool for a commercial break. That's not us. We literally have a screen in front of you while you're paying attention. We have, you know, display rich media. Like we have a bunch of different IP units that we pulled from existing and then, and then we sell directly on custom and custom data targeting that are way more effective than a 15 second commercial spot on any kind of data. We've pulled our recall rates, our view through rates, everything is just by far Surpasses.
- [17:00]
Ari Paparo
I don't want to go into the weeds here because we could probably talk about this for hours, but if I was a programmatic buyer, would I see this as CTV inventory or banner inventory or what?
- [17:09]
Ilya Posen
I think that's a challenge. So we, we position ourselves at both. Right. But it's tricky because typically, like when we go out in the marketplace, we're a tv, so naturally people put us in the CTV bucket. We don't want to be in that bucket. Right. But we also don't want to be in the mobile bucket because that's full of like, you know, low CPMs. I'm on a blog and I see 18 banners on a page where we're one ad at a time, front and center, in front of everyone. So this is something that we're trying to solve and educate on the market and figure out how, like, how do we position this? I think the market's making a turn in our favor because a lot of other televisions are now, you know, in their tiles they have display units on their homepages, right? Like they have big banners. Typically those were used for tune ins, but now you're actually seeing brand ads there. So a lot of that demand is perfect for us. And that's kind of where we're trying to educate the market with.
- [17:58]
Ari Paparo
Right. I learned on this pod about Roku City, which was a new thing for me, which I thought people were pulling my leg, but actually it exists.
- [18:05]
Ilya Posen
You know, Pluto bought a lot of Roku. And the highest performing ads for Pluto were not video. They were screensaver display. Roku City. Like we, we love those ad units.
- [18:17]
Ari Paparo
So over the years I've had a number of sort of Twitter fights with people or other discussions where I've made the point that the worst business model in the world is we'll pay you to look at ads. And that business model does come up so often. You know, it used to come up with coupons and it came up with bitcoin and blockchain and stuff. And my argument has always been that you attract the worst customers. The people who want stuff for free are not the most desirable customers. So how do you understand that issue? Combat it. What data do you have to say that that's not the case?
- [18:49]
Ilya Posen
I actually agree with you. I think if you pay people, there's a bunch of incentivized ad viewing that's a horrible bucket to be in. We've had people bring up ideas like, hey, could you create a reward program for telly where I get paid to watch more tv. We said absolutely not. Like, that is the worst place we could be in because if an advertiser knows they're sitting there in order to get paid, like, that's just the wrong relationship. That's not for our customers. We don't pay them. We give them a free tv and it's a great tv, but we don't incentivize any kind of viewing whatsoever at all. Right. So the, the viewing that we get is completely organic. It naturally, in America, the primary TV gets three and a half hours of TV viewing per day. That's just, that's not our data. That's just market data. Right. We're getting way more than that because we have all these beyond TV features. Like you could do zoom calls and play games and do fitness and all that stuff. That's where we focus on it. Like, let's come up with other stuff beyond TV that gets people to sit in front of this device and do more. Right. We, our biggest competitor is the phone. Like when you get home, like everything you do, like if you're watching TV and you're looking at, you know, your phone for NBA scores, we're going to put that over here. If you're, like, if you're browsing, you know, things to watch on Netflix, you're trying to figure out the Rotten Tomatoes review, we put that front and center. Right. So do you want to make a bet on, you know, DraftKings or FanDuel or somewhere else? We're integrating that into the bottom screen. So we want to, we want you to put away the phone when you're there and we want you to RTV and nothing else.
- [20:14]
Ari Paparo
But aside from rewards explicitly, isn't there a bias towards lower income consumers? Who would want a free tv? Why? If I was an advertiser and I made that point, how would you combat that?
- [20:24]
Ilya Posen
Americans love free. I don't care how wealthy you are. You're, you know, you're at a game, your favorite team wins, you get tacos, you're driving 20 miles, losing more money in gas to get those tacos. I'm sure we've all been to like conferences or whatever and you know, you're at lunch break and there's like a huge line of somebody spinning the wheel, giving away free AirPods. Everyone's obsessed with free. I learned from my last company at Pluto that free is not low income. Right. It's very much universal. I've met so many celebrities and super wealthy people that, that watch Pluto on a regular basis and it's, they could Very much afford a paid service, but they like the experience and they don't mind ads. And I think the same thing here. We have data on everybody that has our TV and that's waiting to get a TV and we actually over index on income so we're actually wealthier than the average American.
- [21:11]
Ari Paparo
If someone wanted a free TV tomorrow, what should they do?
- [21:14]
Ilya Posen
They would go to telly.com they would sign up, they would have to share some profile information, they would get on our waitlist and then eventually they'll get one. We're trying to go through that thing as fast as humanly possible. The demand is huge, but we're going through it. And if they know somebody, maybe if they contact you and maybe not me.
- [21:33]
Ari Paparo
Eric, not me or Eric, don't contact me, about to tell you.
- [21:36]
Ilya Posen
Yeah, we'll bump them up to the top of the list, but we're going to go through that wait list pretty quickly.
- [21:41]
Ari Paparo
Okay, let's talk about the general TV market a little bit. So last year there were two big things in my opinion about the TV world, Vizio and Walmart, being one and the other being in our world at least the Trade Desk's operating system, it seems. So I think this is supportive of your thesis, the basic thesis, which is the hardware and the ads are converging and the ads are the driver, not the hardware. But I'd really be interested in hearing your take, especially on the Trade Desk's operating system and its prospects. Is it a good idea how the economics potentially work?
- [22:15]
Ilya Posen
I mean, on the Walmart Vizio first of all, I mean that's an easy one. That was a huge validation to our business. Right. They acquired the company not to be in the hardware business. They wanted to grow their, their retail media advertising business. And I think it was a smart, smart play. Vizio is a, has a great price. Nothing cheaper than free though, you know, nothing.
- [22:33]
Ari Paparo
Do you see Walmart like take starting to take more aggressive losses to bring Vizio prices down?
- [22:39]
Ilya Posen
Maybe, I think. But they can only go so far, right? If you're making, you know, 40 bucks a year on a TV like you can bring it down a little bit. There's a big difference between $1 and 0, right? So I don't care how low you, you bring it down, like free has no barrier to entry. It's the fastest growing segment of anything, right? Every major company out there from, you know, Google and beyond started with a free product, right? And, and now, you know, it's, it's nothing grows fast.
- [23:05]
Ari Paparo
And free, well, but I Mean if, let's do the numbers. If you throw out your number 35 to $40 a year in, in Arpu on advertising now if Walmart it can increase that to 60, $70 because of it's Walmart. Right. There's a million ways it can enter it.
- [23:22]
Ilya Posen
Yeah. For seven years.
- [23:23]
Ari Paparo
For seven years you can start talking about maybe not free but like $100 TV.
- [23:28]
Ilya Posen
Yeah, but once again a hundred dollar TV is never going to compete with a free TV. Even a dollar is not going to compete, I promise you. We've tested this, we've tested it at Pluto and all across there's free is in its own, its own bucket.
- [23:41]
Ari Paparo
Yeah, it's got it. Okay, I want to hear about your take on the trades operating system.
- [23:46]
Ilya Posen
Yeah, I mean I think that's an interesting play. I think it caught a lot of people off guard. Right. Because in the same, same reason people own devices for seven plus years today when you're buying a new TV and you already have an existing device that you're plugging into your current tv, there's a good chance you're going to take it out and put it in the new television so you don't have to reset up all the apps. I think. I'm not exactly sure what they're play is like. Even Apple and Google don't have great market penetration in streaming devices and that's Apple and Google. Right. So to come out with your own OS and your own device is there has to be another motive right there. There has to be another motive. You know, you might know better than I do.
- [24:27]
Ari Paparo
I hypothesized at the time that they were going to try to pay for distribution, that they would go, maybe not the Samsungs or LGs of the world, but they'd go to the fourth, fifth, sixth operating system brands and, and pay them some amount to swap. To swap.
- [24:41]
Ilya Posen
Yeah. I mean there, there are a bunch of TV makers like TCL and, and others that aren't in the OS business and take on other people's OSes and they'll do whatever is the best deal and they release so many models. They could put one model on Google, one model on Ventura and but at the end of the day the numbers are still small. Like when you're looking at a single model of a single TV oem, you're looking at hundreds of thousands of units, you know, at best. So I can't see like how you know with your own operating system how you penetrate 130 million households quickly. There has to be another Play.
- [25:14]
Ari Paparo
Yeah. I mean, I don't see a world where LG or Samsung swaps or I don't know who the number three or four are, but certainly not Vizio.
- [25:22]
Ilya Posen
I mean, I think a lot of people speculated that like you hear talk in the market that maybe trade desk is out to buy Roku and this is like their case study of like, hey, we could do better with an os. Like this is a chess game. I think it's not. This isn't like one move at a time. I think you have to look a lot deeper. I think Jeff's very smart. I think he's calculated and we'll see what happens. But your guess is as good as mine.
- [25:46]
Ari Paparo
All right, well, let's call it there. That was a super interesting conversation. We will be back in a minute with the Refresh, which is our refresh name for news of the week. We have a lot to talk about.
- [26:01]
Ilya Posen
Ryan Reynolds here from Mint Mobile.
- [26:03]
Eric Franchi
I don't know if you knew this.
- [26:04]
Ari Paparo
But anyone can get the same Premium.
- [26:06]
Eric Franchi
Wireless for $15 a month plan that I've been enjoying. It's not just for celebrities. So do like I did and have one of your assistant's assistants switch you.
- [26:14]
Ilya Posen
To Mint Mobile today.
- [26:16]
Eric Franchi
I'm told it's super easy to do@mintmobile.com.
- [26:19]
Ari Paparo
Switch upfront payment of $45 for 3 month plan equivalent to $15 per month.
- [26:24]
Eric Franchi
Required intro rate, first 3 months only.
- [26:26]
Ari Paparo
Then full price plan options available, taxes and fees, extra fee, full terms at Mintmobile do.
- [26:31]
Eric Franchi
All right, we are back everybody with the refresh. So we have some controversy this week. We're going to get into infosum trolling, live ramp short sellers coming after Applovin. We've got an awesome M and a deal that just hit yesterday. DV acquiring RockerBox. But Ari, you wanted to talk about TTD. We just ended the last segment talking about TTD and the future of their OS. But it's been two weeks since their earnings. Miss the first one ever. The stock as of this Moment is down 39% year to date. What do you want to talk about?
- [27:06]
Ari Paparo
Well, I just think we're in trauma. The whole industry is in trauma. The number of people out there who just, it's like they just don't know what to do. They're wandering the streets. They are unsure about the future of the open web. The number one winner of the whole trade desk debacle is Guidepoint because those consulting calls are happening at a furious rate. And I think there's definitely some gloom and doom with some of the other ad tech folks coming in light, I guess Magnite had a light earnings also.4% up.
- [27:39]
Eric Franchi
Yeah, 4% every year.
- [27:41]
Ari Paparo
And there were some numbers that came out that the CPMs on open web really dropped after the election last year and just sort of painting that apocalyptic future that I think a lot of us have been talking about for the past year or2 with AI destroying the open web and identity and all that stuff. So I think we us all need a kind of a big hug. Unfortunately.
- [28:04]
Eric Franchi
Unfortunately, this is a virtual podcast. Otherwise I'd give you that hug. AR Il. What are you going to say?
- [28:10]
Ilya Posen
No, I said let's hug it out. We definitely need a hug. I think a lot of people, the election actually, I think was a bigger toll on everyone than I think they initially assumed. Those ad dollars really went up, you know, during the election. There's a lot of spending. It's a. It was. And I think once it went away, you know, numbers dropped for everyone. I don't think everyone felt it across the board. So maybe, maybe that had a big part of it.
- [28:32]
Ari Paparo
Yeah, I mean, 2024 might have just been a pretty bad year, but the election covered it up.
- [28:38]
Ilya Posen
Exactly. Yeah.
- [28:39]
Eric Franchi
It's fascinating to see just how quickly like a single thing can cause an entire vibe shift for an entire industry. Right. Like everything was good up until just generally speaking, everybody felt really good up until that, you know, earnings miss. The first earnings for ttd. Right. So I think it's understandable.
- [28:59]
Ilya Posen
But Lovin went completely in the other direction. Right?
- [29:03]
Ari Paparo
Yeah, that didn't help. Like that didn't help. That made the story not help.
- [29:07]
Eric Franchi
Yeah, yeah, that did not help. But I do think there's something here. I was hanging out with friend of the pod, Joe Zappa yesterday, and he's pointing to what he's feeling, which is like this old guard. And you can consider TTD and Google and all these other big companies in this old guard versus the new guard of, you know, building this next generation of infrastructure for ad tech using AI and everything that's coming down the pipe, from custom algorithms to agentic AI to, you know, the automation of planning and everything like that. And there's like so much excitement on this other side that the companies that, you know, are, you know, effectively the old guard, they seem a little bit shaky as a result. And you couple that with a bad earnings report or an earnings miss, rather everything, it's start to look, you know, bleaker than it might actually be, I don't know. But it's going to be Fun architectural life, I'll tell you that.
- [30:00]
Ari Paparo
Yeah, it will, it will be fun architectural life. We have a lot of people to talk about this stuff.
- [30:04]
Eric Franchi
The other side of this guys, is like a good earnings report. It's very hard to manufacture one. I know Jeff's got his 15 point plan and it's not going to, you know, be a turnaround in a quarter like one good earnings makes everybody forget like, you know, whatever happened previously. We know that. All right, so Ron Jacobson from Rockerbox, he was on the pod like three.
- [30:23]
Ari Paparo
Weeks ago, two weeks ago. Yeah, he was a good pod.
- [30:26]
Eric Franchi
It was a good pod. He was noticeably chill or had like this aura.
- [30:30]
Ari Paparo
He's a very fast talking, intense person who also is very chill.
- [30:34]
Eric Franchi
Yeah, yeah, no, he's got this way about him. And then yesterday it was announced that DV acquired the business for 85 million in cash and they had not raised very much money at all. So it was a great win for Ron, great win for the team. And just we were talking about DV last pod last week with just how impressive they've been in owning this idea of taking the next steps needed around quality after analytics and the drumbeat of performance. And buying Rockerbox is I think another big step forward in changing what the perception and the offering of DV is.
- [31:09]
Ari Paparo
Yeah, I'm very interested in the subject. I wrote a newsletter maybe five, six months ago about how the verification companies needed to be full stack measurement companies, or at least they should think about that. And I'm a really big fan of this deal, more so than I was about Cybids, which I think was a little weird. But dv I think finds itself in a position where TAM is smaller than it would like for a big public company. They've effectively won a good portion of the market. They need expansion and they're under attack for a lot of reasons because of some last generation technology and approaches. And it's good to see them making an effort. I'm not the hugest fan of this company and everything it's done, but they're making an effort. And I think the contrast with ias, who is just nowhere to be found, is pretty stark.
- [31:53]
Eric Franchi
Ilya, how much do the. I guess they used to be called verification. I don't know what we call this, this category of company. How much do they get into the mix with tele and your conversations with brands? If, if at all.
- [32:07]
Ilya Posen
I mean they're, they're. The relationship exists on all sides with them. It's all kind of part of the flow of the Inventory. They were, they were very prominent and big. During the Pluto TV days we were kind of defining and building this whole category because frankly it was non existent and when you're bringing in so much inventory and they're there but now it's, I feel like it's just part of the flow on, on literally all sides on the agency side and the, on the ad tech side it's, it's there Ari.
- [32:31]
Eric Franchi
So the future of dv, is it enhancing quality and brand protection and safety or do you think that, you know, effectively with some upgrades you, you know, have extracted the amount of potential in the market that you can get? And is the future around targeting and measurement and optimization and performance? How do you think about their future?
- [32:53]
Ari Paparo
Yeah, I think their assets are relationships with agencies and advertisers, trusted relationships and infrastructure to pull in the data about digital media. So when you have those two assets you can effectively measure or optimize anywhere in the funnel. Hopefully that would be my vision if I was the CEO of the company is like any type of digital ad through any channel we're going to either be able to measure or optimize it to various kinds of advertisers needs and you could continue building and buying companies to do that as long as they don't sell media. There's no conflict and it's a very big tam if you can pull that off and no one else really does that. I think that was kind of the vision of Nielsen and Comscore 10 years ago and they both let it fall to the wayside a little bit. Comscore because it's had just a lot of difficulties and Nielsen, well, it also has a lot of difficulty but they haven't been able to do the full funnel. So I think it's a big opportunity and DV is in a pretty good position to attack it. Whether they'll be successful or not and whether their core business will hold up is unclear. While we're on the subject, let's talk about Rocketbox and why they didn't raise funding. Did they do a seed round 10 years ago or something like that?
- [34:11]
Eric Franchi
They did, yeah, they did an angel and seed, Jerry Newman, who has since retired but invested in just the greatest class of companies. About 15 years ago he was an investor, he didn't raise much money at all. Yeah, he was in ttd.
- [34:26]
Ari Paparo
Yeah, he said no to Beeswax, just FYI but love you Jerry, if you're listening. Yeah. So the reason why Rockerbox was able to raise so little money was because and Ron will Not want me telling the story is that the first couple years of the business, it had nothing to do with measurement. It was a programmatic arbitrage business. Basically. He graduated from AppNexus with a master's degree in manipulating ad auctions and he made money on various weird little schemes for using AppNexis and other DSPs to produce results for customers. So he had a little ad network and that paid the bills while he built the real business and then transitioned out of the dark corners of programmatic advertising into the bright light of proper attribution. So it's a big success story for those of us who have toiled in the Internet minds. But it's worth not shoving that under the rug that that's how the company got funded.
- [35:19]
Eric Franchi
It's not all that uncommon though, right. Like, you know, having some sort of media business as the way to get the thing off the ground, fund it, and then ultimately kind of building the technology from there. I think it's a well trodden path.
- [35:32]
Ari Paparo
It is. It doesn't always work. A lot of people get addicted to the media revenue and they can't switch. It's. It's really like a bravery thing is how much ARR do you need before you turn it off and you look at like video amp who I think we're having on the pod in a couple weeks. They've had a struggle with it.
- [35:46]
Ilya Posen
Yeah.
- [35:47]
Eric Franchi
But when it works, I mean, you can keep a lot of ownership of the business and not need to dilute yourself. So great job to Ron. All right, now we got two crazy things or fun things. I don't know if it's crazy or fun. So we're not in San Fran this week, but a lot of the industry is in San Fran this week at Ramp up, which is normally a great event hosted by Live Ramp where they talk about everything, their own ecosystem and everybody gets together. All right, so everybody's there, set the stage. The entire industry short of these three guys are in San Fran.
- [36:17]
Ari Paparo
I was supposed to be there. I had a ticket. I kind of hurt my back and didn't really want to sit on a plane for five hours. So that's why I'm not there.
- [36:24]
Eric Franchi
Ah, okay. All right. So it goes to show how influenced for this event is. I was supposed to be there. So that's the stage. Infosum who Lauren. We've had on the pod before. Clean room kind of data collaboration technology competes with Liveramp in a couple ways. They strolled Live Ramp with an ad campaign called Ramp down and it was Strategically placed out of home ads around the event. So there's ads on bus shelters. I think it's clear channel bus shelters encouraging various enterprises who happen to be attending ramp up to ramp down the risk of handling over their data to third parties and ramp down the time it takes to start using data collaboration technology. So everybody thought this was pretty fun. I think it had the intended effect of getting everybody on AdTech X and LinkedIn in talking. But then Lauren and her team get themselves uninvited to ramp up as a result. And again, I think Lauren is playing this really well. She posted the screenshots and got everybody further on her side. So it's been a while since we've had a good old fashioned beef in ad tech. I'm here for it.
- [37:31]
Ari Paparo
Yeah, Lauren's got some moxie. I love the way she plays the game. She'll be at MarketExter live. Let's just say that. So we've actually had a little experience of this with market Ad Tech. God has been placing outdoor ads outside of various venues. Not competitive because we, we don't have any competitors. We're just totally kumbaya with everybody. But just for fun, we've had ads out in CES and other places and just a plug. We execute it all using ad lib, which makes it really easy for us. And they're an advertiser, so I'm giving them a free plug. But it's fun. It's a really fun thing to do. I know people were doing it with Snapchat for a while because Snap has the ability to micro target locations. That's a fun thing to do. But not many B2B visitors of Ramp up are probably on Snapchat. So it's, you know, skews demographically undesirable.
- [38:17]
Eric Franchi
Yeah, but B2B marketing can be kind of boring. So, you know, pulling out the creative playbook, taking some jabs at a, at a larger, you know, behemoth is, is a lot of fun. So I give them credit for it. And what do you think about them getting uninvited? Would you do that if you were a live ramp?
- [38:35]
Ari Paparo
Yeah, I might not want my direct competitor at my show talking to my customers. I probably wouldn't have done it because of the ads. I would have done it because of, of the competition. I don't know how much that business involves interoperability. I'd assume it does. Like, if a customer wants a ramp ID in Infosum, they probably need a partnership of some kind. So it might be delicate to burn Those bridges.
- [38:58]
Ilya Posen
It's like a rap battle out there.
- [38:59]
Eric Franchi
It is. It's a beef.
- [39:01]
Ilya Posen
Ramp up, ramp down. There we go.
- [39:04]
Eric Franchi
Yeah, yeah. Okay. All right. Even more controversial. So as probably expected, the short sellers have come for Applovin. So there were two short seller reports that dropped a couple days ago. Applovin was down as much as 23% intraday on the reports. And they basically. They both alleged one thing and then one goes a little bit deeper. So they both allege that Applovin inflates revenue by force feeding app installations. And then one of them went a little bit deeper. And the report, it takes hours to read. Hours.
- [39:40]
Ari Paparo
We read it. So you don't have to.
- [39:42]
Eric Franchi
Yeah. Alleging everything from engaging to ad fraud to stealing data from meta to Viya violating coppa, AKA tracking children, to serving inappropriate ads to children. They basically threw the kitchen sink. And that short seller was called Fuzzy Panda. Strange name for a vicious short seller. Anyway, this was to be expected. I mean, this stock is up something like 25x over the course of a couple years. It's been on an incredible to Elias point hot streak, particularly as of late. I'm not surprised about this. What do you guys think?
- [40:13]
Ari Paparo
I'll just say that a lot of these ad experiences that Applovin makes money on are really bad. Now, I'm not saying they're fraudulent, but when you see them, the ads that are very aggressive with tiny little X buttons, hard to close.
- [40:26]
Eric Franchi
Yep.
- [40:27]
Ari Paparo
Hard to close. Audio on multiple ads and an ad wall for rewards. This is like not Madison Avenue. High quality ad experiences. The side loading, force feeding thing was news to me, but Eric Souford popped in as our mobile guy and said, oh, this is totally normal. Which I mean normal is a judgment call. Basically, the app 11 SDK gives the apps permission to install other apps on click so you don't have to go to the Google Play store. There's Android only, of course. So you're on a low quality Android phone, you're playing a game, there's interest, so you accidentally click it and suddenly you have a new icon on your home screen. We used to call these drive by downloads back in the day in the 2000s, the ActiveX controls. But apparently this is normal. And then someone jumped in on X. I forget the fellow's name who said that. He built this as part of Facebook. So Facebook's ad network does this too, which I think this is a giant ad for switching to an iPhone so you could avoid all this nonsense. Anyway, the point being like this is this apparently is not illegal. Lots of ad networks do it, but it's pretty shitty and I don't think any consumer wants it. So where does that leave us? I don't know.
- [41:39]
Ilya Posen
I mean, I think it's gotta perform. Right. A lot of those ads are. They're not gonna be brand ads from the Fortune 500 companies that advertise there. But. But it's got to perform. If it doesn't, the ad dollars won't flow. Right. So I used to do a lot of performance marketing. That's how I kind of got my start. I ran an agency for 12 years. I never did brand advertising. Some of the like the in game units perform and when I say perform, I don't mean just like, oh, I accidentally got someone to click unintentionally. Like there's actually a full conversion after click. Right. So I don't know. I'm sure there's plenty of crappy stuff out there, but the majority has to work.
- [42:14]
Ari Paparo
Yeah. And also the conversion isn't counted until the user opens the app. So even if it's installed automatically on someone's phone, that's not a conversion. The conversion the user has to open the app. I think this just sort of reinforces the unfortunate reality that the in app advertising market is overwhelmingly games, game advertisers and consumers who are high users of these games and the mainstream brands still struggle to be found and to spend money there. Which is unfortunate because the demographics are good. It's just the experience is not good.
- [42:48]
Ilya Posen
It's a big audience too. It goes wide. Yeah.
- [42:52]
Eric Franchi
Yes. All that said, on the mobile gaming front, it'll be interesting to see how Applovin's trajectory on the non mobile gaming front plays out over the course of the coming quarters because there's a lot of D2C brands, there's a lot of agencies that are talking about how they're seeing good results from a ROAS perspective. So it's going to be interesting to see this thing play out. This is interesting. Perplexity is teasing a new browser called Comet. What do you think about a new browser? Is that what the world needs?
- [43:24]
Ari Paparo
There used to be this joke that every browser is a name that could be used for an suv. Right. Navigator Explorer. And I think this follows would be more like a sedan, but you could definitely be driving your Kia Comet down the street.
- [43:39]
Ilya Posen
I mean I have some views on this. I think browsing is changing incredibly fast because of AI and so like searching is right. You're not going to Google, you're not looking for results. If you have an operator, slash agent built into a browser that just go. Gets information for you and brings you back the results. Do you technically even need a browser? Right. And we've all been following the OpenAI's examples of, like, I'm searching for something and you're seeing the mouse move and they're clicking and like, it's doing the work for you. But that's sitting on top of Chrome or whatever, which is highly inefficient. I actually didn't. Didn't see the release for Comet, but I. I'm imagining what it is. It's a browser that's probably optimized for agents to go out there and get information and bring it back much faster, more efficiently than a bloated kind of like Chrome browser that's full of plugins and a bunch of other crap. Right. So I'm kind of bullish on it. We're making a big dive into AI, and not just to chase the bandwagon, but we found ourselves kind of accidentally in the lead position for this AI home device race. Like, TVs don't have microphones. We do. Right. TVs don't have cameras. We do. TVs don't have a dedicated screen for information. We do. So if you remove the actual TV part of telly, right. Imagine a situation where you're going like, hey, telly, open Google, you know, search for used cars. Click that third link. Yeah, that blue one right there. I love it. Let me schedule a test drive or whatever. Like, voice browsing, to me is actually something a lot of people don't talk about. That I think could make a television, whether it's ours or someone else's, fully comparable to the performance you get out of like a mobile phone or a laptop. And right now we're working on building that, and we're doing it because we have a browser and it is Chrome. It's not as easy as it would be if we had a browser that's optimized for this thing. Side, I'm kind of. It's interesting to see this come out because it's relevant. It's close to home right now.
- [45:36]
Ari Paparo
Yeah. And Amazon just upgraded Alexa for the first time into the AI age. So I think that's part of it. I want to give my opinion, which is that OpenAI's operator, I think that's what they called it, which is a headless browser approach. So it's not your browser, it's a different browser through the web. I think that's a total dead end. And a waste of time. You can't log in, it doesn't know your history. You have to retype your credit card every time it was demo error. It doesn't make any sense. It makes much more sense for it to be your browser. And whether it's this new Comet thing or it's the future of Chrome or it's a plugin to Chrome, whatever it is makes a ton of sense. And I totally agree with you, Ilya, about that. I think it's a really exciting prospect.
- [46:20]
Ilya Posen
Yeah, I think Minority Report got it wrong where the future is going to be us waving hands to browse and get information. I think voice browsing is like, imagine if you just like tell your computer, your phone or your tv just like, hey, order me a pepperoni pizza from Pizza Hut right now. That's it. That's all you said, right? It already knows your address, has your credit card, knows where, like just adds a pizza to cart and it's there. We just ordered a pizza in five seconds. Doing that on a computer with a keyboard mouse will take at least 3, 4 minutes. Right? So I, I think we can. I don't know, I think there's something there.
- [46:56]
Eric Franchi
I agree. And I think you said something a couple minutes ago that probably shook a large majority of the listenership of this pod to their core, which was, why are we going to even need browsers in the future? To paraphrase what you said, we won't need browsers in the future to paraphrase what you said. And that being the infrastructure for what we think of as the open web is really the big conversation that we're going to be having over the course of the coming years.
- [47:21]
Ilya Posen
This is an interesting thought. I've been thinking. If you don't have a browser, right? If you just have some sort of LLM giving you back information, what happens to all the ad inventory and all the websites? And when that agent goes out there and looks for information, it's not like you're not getting an ad impression for that agent, right? That's a bot that's obviously not getting paid and it's bringing back information. Without that ad, what happens to the hundreds of billions of dollars of ads?
- [47:50]
Ari Paparo
This brings up the kind of, the funniest and best tweet of the week, which is Zach Weinberg, original founder of Invite. He tweeted, there's gonna be a huge ad opportunity while people are waiting for their LLMs to respond.
- [48:02]
Ilya Posen
Right? Right. That's right.
- [48:07]
Eric Franchi
It's back to the 15 second.
- [48:10]
Ari Paparo
Your LLM will be ready soon.
- [48:12]
Ilya Posen
It's like net zero. Yeah, it's net zero for LLMs. Maybe that's another good business opportunity.
- [48:20]
Eric Franchi
Oh, my God. Yeah, But Iliad, that was the implication, right? Where it's, you know, if you just have tasks being done and agents, you know, talking to agents or whatever this future looks like. The future doesn't look like what the infrastructure for, you know, much of the open web is right now, which is display and video ads.
- [48:37]
Ilya Posen
It's. It's already happening. Anybody who's running, like, SEM campaigns, right, they're. They're running search, they're seeing a decline in audience. Like, traffic is going down because we're getting our information by some of that just going and getting it for us. It's. It's happening whether you like, people are listening, probably going, oh, yeah. It's like, you know, it's happening in the next 12 months faster than we can all imagine.
- [49:02]
Ari Paparo
I saw an interesting tweet. I cannot remember who did it. They were saying that one unexpected result could be that people publish less in that if an LLM can summarize everything about your company or yourself or whatever, maybe you stop being as transparent and don't publish that information. The new website for a B2B SaaS company is like. Like, give us your email and we'll tell you what we do.
- [49:27]
Eric Franchi
I saw that as well. Yeah. That's an interesting way to think about it.
- [49:31]
Ari Paparo
Yeah. You don't want to be put on the same anonymous plane as everybody else's.
- [49:36]
Eric Franchi
So much to talk about here, but I think we're out of time, unfortunately.
- [49:39]
Ari Paparo
Unfortunately.
- [49:39]
Eric Franchi
This has been fun, though. Yeah.
- [49:42]
Ari Paparo
Right. Well, Ilya, thank you so much for being here. I learned a lot. I feel like maybe I want a telly, but I'm not sure. I still have to be convinced. Maybe I'll go to barbecue at Eric's and try it out.
- [49:52]
Ilya Posen
I think. Come see it. I think we'll convert you and then, you know, you make a choice.
- [49:56]
Ari Paparo
Do you have a showroom?
- [49:56]
Ilya Posen
We do. We're here in New York.
- [49:58]
Eric Franchi
Oh, yeah.
- [49:58]
Ilya Posen
We're right by Union Square. Right by Union Square. You can't just, like, walk in, so I don't want to, like, put the address out there and have a bunch of people knocking. It's a private showroom, but hit us up. We'll show it to you in person. I want you to come and see it.
- [50:11]
Ari Paparo
Could I, like, videotape it and, like, do a little content creation?
- [50:15]
Ilya Posen
Yeah, put me on the spot.
- [50:16]
Ari Paparo
That's why I do my sales guy call you. All right. This is awesome. Thanks for everything.
- [50:23]
Ilya Posen
Yeah, thanks for having me.
- [50:24]
Eric Franchi
Thanks, guys. We'll see you next week, everybody. Thank you for subscribing to marketecture. New interviews are added every week at marketecture TV and your favorite podcasting app.
- [50:43]
Ari Paparo
Thank you for listening to the marketexture podcast. New episodes come out every Friday and an insightful vendor interview is published each Monday. You can subscribe to our library of hundreds of executive interviews at marketecture tv. You can also sign up for free for our weekly newsletter with my original strategic insights on the week's news at News Market tv. And if you're feeling social, we operate a vibrant Slack community that you can apply to join@adtechgod.com.