SaaS Interviews with CEOs, Startups, Founders
909 AdTech: How to Get Advertisers to Put $20m Through Your Platform While You take 5%-50%
19 Jan 2018
Chapter 1: What is StackAdapt and how did it start?
This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple hundred thousand dollars to 2.7 million.
I had no money when I started the company.
It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone. My guest today is Vitaly Pacherovsky.
He is the CEO and he's the co-founder of StackAdapt, a venture-backed advertising technology company that helps brands accelerate customer acquisition. StackAdapt was named top 20 most innovative emerging companies in Canada in 2017 by CIX. StackAdapt was part of Startup50 of Canada's top new growth companies in 2017 by Canadian Business.
Chapter 2: How does StackAdapt generate revenue from advertisers?
Vitaly, are you ready to take us to the top? Rock and roll. All right. Tell us about the company. So what's it do and what's your revenue model? How do you make money?
Yeah. So we started four years ago. We are operating in advertising technology space. So what we do is we basically, what you said, we work with companies to help them accelerate customer acquisition. Be that companies that do most business online or companies that have maybe presence offline and they look to just get exposure to new customers.
But at the end of the day, our mission is trying to figure out what drives success. revenue in their door.
Now, a lot of ad tech companies, they're playing around with kind of SaaS models versus a percentage of transaction volume model. Which revenue model are you guys focused on?
Chapter 3: What challenges does StackAdapt face in customer acquisition?
It's percent of transaction. To be honest, you're absolutely right. I think every advertising or media company has tried to figure out SaaS model. It just doesn't work because the nature of advertising businesses is very seasonal. So sometimes advertisers just want to spend money in the summer, just sometimes in the winter. So that SaaS model of payment doesn't really work in media.
Now, what percentage are you guys taking on spend?
It's not public information. But because we take a different approach than most companies, we don't just operate as a tool where we take fixed margin. Because a lot of the pricing on a platform is based off of success of the company. So sometimes we'll make more money off of some companies. Sometimes we'll actually lose money. So it's more fluid pricing for us.
What's it definitely less than?
Chapter 4: How does StackAdapt's pricing model work?
Like, can you give us a high end? It's definitely less than what?
It's definitely less than 50%.
Five zero?
Yeah.
Got it. Okay. So every dollar you put through his platform, you won't pay more than 50 cents per dollar. That's on the high end.
Oh, that's on a very high end.
Yeah, yeah. Well, I mean, you can give me a lower high end if you want, but you don't want to be specific. So we'll stick at 50 cents.
Uh, no, that's, uh, that's not the answer, but, um, yeah, it's, uh, it really varies, uh, based on the company, uh, based on, on the type of goals and so forth. How low can it go?
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Chapter 5: What strategies does StackAdapt use to win against competitors?
Uh, it can go as low as, uh, maybe zero or even 5%. So, yeah.
How, what's it, what's a scenario where it would go to zero?
Uh, so in case like, for example, where, where the advertiser advertisers looked for, um, for really large scale, uh, And their performance goals are very driven by conversions, for example, where there's opportunities to actually lose money. Because we, for example, as a company, we always buy media on cost per impression basis, but sometimes we sell it on fixed performance-based goals.
So in that case, for example, nobody wants to sign up for a certain product or if they, for example, buy it based off of engagement model. If the user doesn't buy it and the product is not good, it doesn't resonate with the audience, that's where you can potentially lose money.
Now, there's a lot of these kinds of companies, your kind of companies in the space. How are you winning the sales battle? You know, when your salesperson's on the phone trying to get someone away from your competitors, why are you winning?
Yeah, so I think what helps us win, first of all, is our focus on native advertising. We were the first company that started scaling that ecosystem.
What year was year one for you?
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Chapter 6: How has StackAdapt's transaction volume changed over the years?
When did you launch?
So we started in 2013 and launched in 2014. And so we are definitely the largest company when it comes to buying native advertising. So that's something that everybody wants to do more of now. How do you know you're the largest? Well, because we simply work with every single partner who does native advertising. We work with every exchange that taps into native advertising.
So by that definition, we are the largest when it comes to native.
So when you say largest, do you mean you have the most integrations, not you spend the actual most physical dollars?
No, our platform capabilities are the most powerful in native advertising. I see.
And you're basing that statement off how you're integrated across everybody, basically.
Yeah, exactly.
Got it. Okay.
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Chapter 7: What is the significance of customer lifetime value for StackAdapt?
So just to share volume of, uh, of inventory that we're plugged into.
Okay. Got it. Yeah. That makes sense. Uh, okay. So launched in 2013. Now, do you remember in your first year, how much transaction volume you guys processed?
Uh, first year we did 86,000. Okay.
Not bad year. It's year one. All right. So 86,000 and then fast forward to last year, 2016, what'd you do then?
Uh, we did 8.9 and this year we're planning to do 20.
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Chapter 8: What advice does the guest have for aspiring entrepreneurs?
Got it. So 8.9 million last year and you're on track. Now, are you on track this year to do 20?
Yeah, probably more.
Okay. So you, so you've already done like 16 or 17.
Um, I think I have the numbers up to September, but yeah, we're definitely on pace to do that. Okay. Very cool.
So, okay. That makes a lot of sense. So you're making money from taking anywhere as much as 50 cents on the dollar, all the way down to 5 cents on the dollar, sometimes no sense on the dollar, depending on how it works. Um, you know, a lot of people say with pricing, the simpler it is, the better, but it sounds like you have kind of a scale that like changes all the time.
How do you get crystal clear with your new customers, what they're going to be paying if it's so variable and always shifting?
Yeah. So reality is for us, it's all about actual meaningful results with our customers. If we're, if our technology performs and is able to drive them results, then that's what we're basing our pricing off of. Um, at the end of the day, um, For example, let's take Google AdWords.
Nobody really cares how much Google, what margin or how much money they make out of it because at the end of the day, if it drives sales, then at the end of the day, if your customer acquisition cost is lower than your LTV, then you're happy. There's obviously opportunities to maybe bring it lower, but it all starts with a benchmark of what are you willing to pay for every customer
And if you're able to hit that number, then, then the question is how many more customers can you drive?
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