SaaS Interviews with CEOs, Startups, Founders
913 Adtech: Revenues of $110m on $500m Spend, How it breaks down
23 Jan 2018
Chapter 1: What is the main topic discussed in this episode?
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 Sean Reeksecker.
He founded his company Centro in 2001, intent on building software to eliminate operational efficiencies, solve growing complexity and fragmentation challenges, and help marketers make smarter decisions. He's built the company into one of the largest providers of media operations software and managed services in the industry. Sean, are you ready to take us to the top?
Yeah, let's do it.
All right, largest provider of media operations software is a big title. Quantify that bad boy for me. What makes you the biggest?
Well, there's a couple of different things. Is that from a digital perspective? We have a platform that actually does all of the automation. for digital across search, social, programmatic, and direct-to-buying. And so we're processing, this year should be a little over half a billion dollars in digital across the spectrum from a software perspective.
That's what's going through your platform. Yeah, correct, yep. And tell everyone, just going back to 10,000 feet for a second, what does Centro do? What's your business?
Yeah, so we're a software automation firm in our heart. When I started the company a little over 15 years ago, the entire idea was that when you look at the process of purchasing, planning, buying, and operating digital advertising, it's highly complex.
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Chapter 2: How did Centro evolve to become a leading media operations software provider?
I've always looked... at our business in two ways. The service company, one, has actually allowed us to fund the development of the platform, and two, because they're using it. They're kind of the first folks through the door, so we actually can build it perfect for them, make sure it works right, and then we can distribute it to our customers.
I think the service company, although, yeah, it's not a high gross margin business by any stretch of the imagination, it's really helped fund the company and make sure we build great software.
And make that real for us. Tell us like a client story that purchased a managed service from you. On average, what's that deal size look like? And what are your people delivering to the client?
So now you got to remember, we've been in business quite a while. And I think, as you know, businesses will go through different life cycles. So early on in the process, how I started up, so I started the company, didn't have any money, didn't know what I was doing. And so I figured out, well, I had to figure out how to sell and get clients.
At the time, back in 2002, 2005, ad agencies were struggling just to do digital nationally. So the first step was that ad agencies would outsource their local digital buying. So newspaper websites, TV websites, radio websites. And that's the hardest and most complex piece of the industry. So we did that. Then as time moved on, we looked at the mid-market ad agencies.
So Oklahoma City, Denver, Colorado, Tallahassee. And we said, those agencies are going to struggle actually with just digital overall because they're not funded like the big holding companies. So we moved into that market and we've got people in about 50 different locations today. And that's agencies outsourcing.
And then as we've continued to grow, what we've seen is that there's a blend of both what I'll call mid-market brands or clients as well as ad agencies that who utilize us to do some or all of their digital marketing for them today. And then a typical client, it's different. Before, our average client was spending with us about $175,000 a year, mostly on an RFP-based type of a relationship.
Just on the managed services side or also on the ad spend process through your system?
Just on the managed services side. We didn't officially launch our software externally.
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Chapter 3: What challenges did Centro face during its growth?
There's a tech fee and there's a services fee. And when I talk about that, when we do manage services for a client, there's also another tech fee that goes on top of that. Okay. So in other words, we break it out for our clients. So if you come to us and say, I've, I'm a, I got $10 million in which I'm going to spend. We'll say, okay, well, it'll be 10 to 15% for services.
Chapter 4: How does Centro manage its service margins effectively?
And there's another 10% for the software through the RTV platform. So all in all, you'll actually get a better margin. But that's how it works together. But we price it out separately for our client. And the last piece is our preference is that all of our clients are self-sufficient.
And so we put together a plan to help them get there because I say to them, look, at some point, you don't want to pay us a service fee. You know, you should consolidate that margin for yourselves and for your clients, which will actually improve performance. We're happy to help in the short term. But long term, you know, our goal is to help make you do it on your own.
CRMs might be the tool that I fight with the most. I just haven't found one that I really liked. I don't know if you guys are the same way, but they're just so tricky. And a while ago, I had a guy named John Lee on my show. He's the CEO of ProsperWorks. And he told me they just passed 40,000 customers and 24 million in annual revenue. So they're doing about $286,000 in in revenue per employee.
And I said, wow, why is this working? And I said, you know what? I'm going to try it. So I went to prosperworks.com forward slash love your CRM signed up and it immediately became clear why it worked. Those of you that love growth hacking, you should go to that link just to see how they do the onboarding. That's prosperworks.com forward slash love your CRM. In short, it's like magic.
You know, I'm not the guy that, you know, finishes the sales call and then takes the time to actually put data into the CRM. They have this magical way of just doing it. And it's a beautiful thing. So every morning when I wake up, I just go, okay, what leads are prosper works telling me to reach out to because they're most likely to close and it works so well.
And you guys know, I love money and I love only focusing on the leads that are going to close. So I encourage you to try prosper works or sponsoring the show. Check them out at prosperworks.com forward slash love your CRM folks. That's again, prosperworks.com forward slash love your CRM.
Now, adding up kind of all these different elements of your business, when you look forward in 2017, what do you guys think you'll beat definitely in terms of revenue?
In 2017, this year?
This year.
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Chapter 5: What client stories highlight Centro's managed services?
What does ERP stand for?
It's an enterprise resource planning application. And inside of the definition of ERP is workflow automation and messaging and communication, financial reconciliation, contract and IO management, vendor relationship management, all of those things fall in the bucket of an ERP platform.
If you take an ERP system like a MediaOcean, purposely built for digital, now MediaOcean does television, they do print, they do a lot of things we don't do. But then you combine it with a DSP, such as a trade desk or a media map.
It's a display side platform or demand side.
Sorry, demand side platform, yeah. And you then take a BI platform such as a Domo or a Datorama or Tableau. And if you seamlessly merge them all together into a single platform, that's basis. And it's something that no one else has.
So demand side platform plus business intelligence all merged together. That's an ERP, a purposely built ERP platform.
It's got financial reconciliation. All messaging and communication happens inside. So we're getting the industry off of email. and spreadsheets back and forth. So it's a new product and it's going to take a while. It's a big product. It's an enterprise product. It's going to take a while to get traction in the market, but it's different.
Are you pricing that on a SaaS basis or you're going to just keep doing it on a percentage of spend?
The way that we have it set up is that there is a SaaS contract for the overall platform, but then there's a variable cost associated to the real-time bidding aspect of it.
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