Several local advertising technology companies are posting big gains in sales.
First off, there’s Culver City’s SteelHouse, which said last week that it estimates its 2015 revenue will add up to $130 million based on run rate – a jump of 170 percent compared with its previous year’s total.
Then there’s OpenX of Pasadena, which announced in January that it generated more than $140 million in revenue last year, a 40 percent increase compared with the prior year. Meanwhile, Playa Del Rey’s Rubicon Project Inc. made more than $64 million in revenue during the three months ended Sept. 30, doubling its total from the same period a year earlier, though it’s still not profitable.
Steelhouse, however, has been profitable since October 2013, according to Chief Executive Mark Douglas.
“Advertisers are gravitating to buying ads programmatically because it’s cheaper and faster,” Douglas said. “It’s that simple.”
More than 400 brands – including Foothill Ranch’s Oakley Inc. and Seattle’s Getty Images – subscribed to SteelHouse’s services last year to manage where and how they reach consumers online.
The company expects its revenue and network of customers will more than double again this year.
“We bring on somewhere between two and three new brands every calendar day,” said Douglas. “It’s all about momentum.”
What’s more, Douglas said he plans to hire 86 employees this quarter alone, which would bring his staff up to about 240.
SteelHouse, OpenX and Rubicon are among a growing field of ad tech companies to offer so-called “programmatic” buying options, which allow advertisers to purchase digital ads using automated software that can efficiently target specific consumers and eliminate negotiations with human sales representatives.
The method has quickly become a driving force in the advertising industry, according to a report published last week by Brian Nowak, an internet analyst at New York financial services firm Morgan Stanley.
“The programmatic shift is among the most powerful trends in online display as advertisers and agencies look for better real-time price discovery, a more efficient ad-buying process and the ability to better link ad spend to actual transaction dollars,” Nowak wrote.
About 44 percent of digital ads last year were purchased through some kind of programmatic service, according to Nowak, who expects that rate to reach 69 percent by 2020.
Despite the anticipated growth in the programmatic market globally, it could be extremely challenging for smaller ad tech firms to break through. That’s largely because Facebook Inc. and Alphabet Inc. – Google Inc.’s parent company – dominate the market, accounting for a combined 61 percent of the market last year, according to the report.
But Douglas, who launched SteelHouse in 2010, said he views the tech giants as partners rather than competitors because his customers buy a large chunk of their ads from Facebook and Google.
Plus, Douglas said his programmatic buying service is merely one component of a much larger business. The main thing that sets SteelHouse apart from other ad tech firms is that it works directly with brands and not just the team tasked with placing ad orders.
Specifically, brand marketing executives can use SteelHouse’s software to design and purchase digital ads, track user engagement and keep tabs on how the marketing budget is used.
“Media buying has been very focused on high-volume purchases in the past,” he said. “We’re focused on providing tools to find the right audience. We’ve created a new tier in the advertising space.”
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