SaaS Interviews with CEOs, Startups, Founders
1494 Real Time Amazon Ad Bidding Will Do $120m Volume This Year, $2.5m in revenues
27 Aug 2019
Chapter 1: What is the expected ad spend volume for this year?
last year about 80 million bucks in ad spend put through his platform that is basically a programmatic bidding machine especially for new platforms like amazon this year they'll do call it 120 million bucks for their platform they'll keep less than three percent of that so they'll keep about 2.5 million bucks in revenue healthy growth there they've raised 1.5 million bucks serving 250 customers that spend on average 1200 bucks per month with them so they're doing call it 300 grand per month on average something like that spending anywhere between a grand and two grand to acquire a customer so call it two to four month payback period team of 25 people in berlin
and one in the States looking to expand, which I love. Hello, everyone. My guest today is Marcel Pierlik. He started in finance in 98, then switched to internet and mobile in 2000 and launched bid management in 2010 by using AI-based trading software for stocks to automate and optimize media buying on Google Ads.
They're now active on all relevant e-commerce marketing platforms like Amazon, Google Ads, Bing Ads, Yandex, as well as greater than 50 programmatic platforms. Their USP is to outperform everyone to maximize profits for their customers.
Chapter 2: How does the ad bidding platform operate?
Marcel, are you ready to take us to the top? Yes. All right. Looking forward. Thank you. First question I have for you that, you know, people hate the ad tax in this space. So let me ask you, if I put a dollar through your platform, what percent actually gets spent versus what you keep?
Chapter 3: What is the unique selling proposition of the company?
We charge a fixed license fee. So we have more like a SaaS model typically. And so we typically keep like three percent of the ad spent.
OK, so if I put a dollar through, you're keeping three cents. Yes. Okay. Not horrible. Okay. Not great, but not horrible. Right. That's probably, is that, is that better than your competitors?
I hope so. I mean, the price transparency in this industry isn't, isn't that great. And we try to kind of say, change that by making it very, um, very, first of all, low cost. And, uh, of course, like with a very clear percentage, easy to understand. Yeah.
So what's the average kind of customer pay you per month? You said you have kind of SAS based pricing.
Yes. That's a tricky question because we have a, let's say, very wide range. We have customers, especially if you look at Google, where we manage customers' accounts ranging from something about like $2,000 a month up to $5 million a month. So you can see a very wide span there already.
Just to be clear, that's the ad spend they put through your platform, not the SaaS pricing you charge. I'm asking about the SaaS pricing you charge. On average, what do people pay for that per month?
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Chapter 4: What is the average monthly payment from customers?
Exactly. So... the minimum fee is 400 euros. Um, so that's, that's kind of for the, for the smaller ones in town. And then the average one is maybe two and a half thousand a month.
Okay. That's, I mean, that's pretty healthy. So you're kind of in the mid market space you'd say then.
Yes.
Okay. So two and a half, so we'll call it 2,500 us bucks per month. And what does that get them? That allows them to spend up like to a certain amount of money through the platform before they have to go up to the next level.
No, not really. Actually they can, they can spend whatever they like and, Since we have a percentage, of course, our revenue goes up with whatever they spend. They will only spend more if we are profitable. So if we manage what they spend in a profitable way. So it's kind of an incentive already that we have for ourselves to get most of the customer's profits for them.
Okay, but just to be clear, the $2,500 per month on average, that's a flat fee. And then there's another 3% on top of that.
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Chapter 5: How does customer acquisition cost vary by country?
No, that's not a flat fee. That's the result of the percentage fee that we charge.
Okay, so this is not a SaaS business and it's a transaction percent business.
Depends on how you look at it.
Well, one is a percent of transaction and one is a flat SaaS-based fee.
We have the lower end, we charge a $399 fee. So let's say for customers spending less than $15,000 roundabout in ad spend, it's a flat fee, but the rest is then percentage-based. Okay.
Yeah, so if the average is the customer is paying you $2,500 per month, and that's 3%, we can multiply that times 33 and say that customer is paying us through, what, about $82,000 through you per month? Yes. Something like that.
That would be the average customer, exactly. Okay, that's good. That's helpful. We have a very right range of money that we manage. And of course, I mean, if we manage larger budgets, that means more stress for the platform. And therefore, we have a percentage-based pricing.
Yeah, that makes sense to me. Put us on a timeline for me. When did you launch the company?
In 2010, three days, three days before New Year's Eve, 2010, 2011. Oh, very good.
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Chapter 6: What challenges did the company face in raising capital?
which was a long journey because we didn't have any network. And back in Germany, like eight years ago, it was very, very tricky to get in touch with VCs, especially the German VC culture is not even close to what it is in the US. So how much have you raised today? We have raised 1.5 million so far. Okay.
And you mentioned you started looking at this kind of after you got your kind of first customers on. How many customers are you at today?
We are at 250 customers at the moment. 250? Yes.
Okay, that's healthy. I cut you off. Are you raising additional funding?
Not at the moment. We started with Amazon, optimizing Amazon, which is kind of the new ad space that everybody is rushing to. And our platform is optimizing customers for Amazon as well. So that's the new thing. And we're considering once we, let's say, get to a decent amount of customers for Amazon, thinking about expanding this with additional funding too.
And Marcel, just to be clear, I mean, if you've got 250 customers at the, what'd you say, $2,500 per month kind of price point on average to you, I mean, that puts you at 625 grand a month about that in revenue. Is that accurate? No. Okay. And so which of those two numbers that I'm multiplying is wrong?
It comes from the wide range of customers that we have. If you look at our smallest customers, which spend like maybe $2,000, $3,000 a month in ad spend, up to $2 million.
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Chapter 7: How does seasonality affect ad spending on the platform?
I think our biggest customers are even spending $5 million a month, depending on the month. We have a lot of seasonality in our business. So, for example, during Christmas time, people are spending a lot more. During summertime, it goes down. And it's not averaging out during the year. So we really have lots of seasonalities.
And some customers even only spend money, let's say, during their particular season. So that really is very volatile. Um, like I said, the tricky point is also that, let's say when I give you this, this kind of average fee, it also depends on which customer segment you're looking at.
Yeah. So, so help, help, help make this clear then. So like last month, how much, uh, was processed through your system? And obviously we can multiply by 3% to understand how much you kept.
Um, last month should be around 10 million.
Okay. About 10 million. So that would mean what you guys did 300,000.
Roundabout, exactly.
Yeah, that's great. Okay, good. So if I take that 300,000 and obviously divide that by 250 customers, the average is 1,200 per month per customer versus 2,500.
If you do the math exactly like this, Yes. But like I said, it doesn't reflect our customers. Well, because it's seasonal.
Yeah. Yeah. This isn't, by the way, I don't think this is a SaaS platform. I mean, I'm just going to say what it is because it's not like predictable and recurring and stacking.
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Chapter 8: What are the revenue projections based on current trends?
Like you even said, it's lumpy. It's seasonal. These are all the reason SaaS is SaaS is because it's predictable and stacking, right? This is opposite of that.
Yeah, let's say a certain degree of it is predictable. And I agree, it's not a, let's say, pure SaaS business model-wise. But since we have this kind of, let's say, a minimum fee, which is, let's call it a downside protection that we have, it is predictable to that extent. But you're completely right, you cannot predict the upside. Sure.
Let me ask you a different question. What are you growing at year over year? Revenue.
around about 20 okay so if you're doing call it 300 grand today maybe you're doing what like uh 250 something like that about a year ago this month yes okay and and if you because you have lumpiness in each month but maybe it's more steady year to year in 2017 what was total volume through your platform total volume maybe um 80 million okay and what do you think that'll be this year
Um, I hope it will be around 120 million.
Okay. About 120 million. Yeah.
Okay.
So that would put your revenue at 3% of that. So call it three to 3.2 million, something like that.
Exactly. And I mean, maybe to make this point really clear, um, if we have larger customers, which like add to the, to the, to the amount that streams through our platform, um, with a larger customers, you typically have, let's say, um, smaller deals in terms of you charge them a low percentage because they're putting a lot more through your platform.
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