Acemetrix Revenue, Valuation & Funding (2017)

hello everyone my guest today is peter de bal he has more than 25 years of experience in the science and business of advertising effectiveness he spent his career developing and implementing analytical models and testing systems to measure consumer response to advertising a CEO of asymmetric he's led the company in developing innovative metrics and methods for helping advertisers make better more impactful video creative he was the CEO of bunch Bal chief of insights at Yahoo and president and CEO of comScore media metric he's received numerous industry awards recognizing his leadership and advertising research including a 2011 great mind award from the AR F and is a regular contributor to media outlets and advertising industry associations Peter are you ready to take us to the top I'm ready my gosh that's a mouthful you've seen a lot huh yeah I've been around the block I'll say that it's from old school just basic television all the way through some of the new media and some of the new formats out there has really been an exciting ride so tell us about ace metrics kind of what space are you playing in and how do you make money what's your business model yeah so we when I came out of Yahoo and I look back at the TV world at the time this is like 2010 it really hadn't changed a lot in over a decade TV was still bought and sold the same way advertising was done the same way and so we decided to build a technology company around evaluating ads and the fundamental difference for asymmetric was we wanted to say we want to test every ad in the United States not just a client ad here or there and so our philosophy is you only know if an ads good if you know how good every ad is good because we're all being bombarded with ads every day and so we build a technology solution that basically grabs every ad that airs tests it put it in syndicated database in 24 hours as opposed to the four to six weeks it used to take sold on TV that's on TV and then about two years after that there wasn't much video back then until 2010 a couple years later we launched into digital video so now we cover anything that moves basically from six-second ads right on up to 5 minute long form and how are you technically getting this I mean is it's just a more advanced form of scraping essentially to get these video files exactly and there's a lot of third parties out there that actually collect the video ads and we all get a lot direct ads from clients if they want us to test them before they air so that's another key part of our businesses hey we've got these five versions let's test them and see which one works best before we you know waste all the media money and what are some of the inputs you are looking at to decide if an ad actually does perform so there's some standard metrics on attention and likability those are kind of ones that measure breakthrough so are you gonna pay attention in the first place because now of course we don't have to watch right we can skip through it we can you know watch it on on Hulu we don't need to see the edge so as you're wearing your your Disney shirt and Hulu sounds like we'll soon be part of Disney or at least a steak I know I know I'm telling you they're beefing up aren't they for this for the battle but so we test attention and likability we also measure things like information purchase intent do people remember the brand a lot of time they'll love the ad they forget that the brand is for but then we've also started to collect verbatim comments so comments that people actually talk about the ad and then we mined those for emotion and that's been the most exciting part of really over the last year so is really getting at that emotional driver interest are you updating having to pay these folks to watch these ads to give you the feedback where you're doing it some way organically no we we actually get them to watch it because our view was we want a pure sense of the creative we don't want to see whether they remember seeing an ad last night or that gets all mixed up with how much media weight is high behind it we really want their initial reaction to that creative and so we work with a lot of different sample vendors to actually get people to participate and we have over 500 people per ad geo demographically balanced to the US Census and then they turn those nine simple questions into a into our database so you you have ways to make sure it is a representative cohort exactly exerting and what your business model I mean it appear play SAS or what yeah so it's it's well it's not pure play but it's pretty close I mean we we sell us a subscription so we basically charge clients a subscription and they not only see their ads but they see every ad in their category which is really important for cute competitive benchmarking and and really understanding what your competitors are doing and then we have more of an on-demand service for people that have creative that they want us to test that has an aired yet so so the test ads that everybody gives us and just focusing on this a side give me a general sense of contract size are they paying a grand a month at ten grand a month million a month roughly and then they get access to all of the ads as I said all the ads in their category and and it also depends a little bit you know on how many ads are in the category if you're talking mobile phones you're seeing dozens of ads every that are new every week if you're talking about other categories they may have only two or three creatives a year interesting and are they I mean so how does it compare to other things on the market I mean we mentioned Nielsen a little bit in the in the in the intro do they not already do this no so Nielsen and Millward Brown and some of these other copy testing out that's a really pre automation guys and so our fundamental difference was on the technology and the normative data and all of the competitive assets Nielsen measures more on a recall basis so what you watched if you watched your show last night they'll ask you questions about the show and they'll try to ask you questions about what ads you saw and it's much more about do I remember seeing it that's valuable for certain things but for us that gets tangled up in where the ads running how much media waits behind it not necessarily the creative itself and so we wanted that pure form measure of the creative effect okay that makes interesting sense okay give me some other backstory here when did you launch the company so we launched in 2010 the cool thing now is we have campaigns going all the way back there so you know we were talking with with e-trade and you know e-trade wants to know on how the baby campaign compared to some of their new work well the baby campaign is now five years old but we all remember it right so that's the kind of thing that you know it's really fun when you can able to go back with that much history now we have like largest ad database in the world now measured by what measures by number of ads that have actually been scored interesting interesting um where was your head at in 2010 I mean were you already kind of you know you had an exit your wealthy Pat honey and savings this is just fun for you or is this something like I want to do this and by the way I have to make it work otherwise I'm broken on the street well it's kind of a weird passion of mine but everybody focused on the measurement of ads they ignored the creative and so they measured everything else they measured how much we bought how many eyeballs we hit you know all of those things about delivery but they didn't measure with what and we all knew that in our heart of hearts you know a great ad when you see it and so that was really the passion that we wanted to go after and you know coming out of spending ten years in digital we thought we were kind of uniquely qualified to build this for TV at the time but for video because no one else was doing it everybody else in TV land was doing it kind of the old way okay interesting now have you bootstrap this or of your ice capital no we wait raise capital we you know it's given this was my first merry-go-round we wanted to make sure we had really quality VCS and how much total have you raised we've raised about 20 million okay and what are they kind of when you have conversations with them about valuations and things like that what are the critical a critical kind of business things they're looking at to decide valuation yes the key things obviously are growth you know they want to see subscriber growth in the SAS model and recurring revenue growth which which is good we're actually making money now so so would you think would you think of that say that again we're making money that kind of built as you know that kind of gives you a lot of freedom to to kind of try new things if you keep on the plus side of that the other things are you know really really just looking at gross margins and I think the cool thing about a syndicated database Andy coming from comScore which is the same model you know you collect the data once and you sell it many times the incremental margins are fantastic and so that's another key key part of the business that that's good are you in there kind of 85 90 percent typical SAS gross margin range or do you have kind of human touch on your service the side of the business that drives that down yeah it drives it down a little but still over 80 so okay though we deliberately invested in the service layer you know client service people because the television market research people are just used to it and so they didn't want a tool to give them the answer they wanted yes that makes sense now what do you and what have you scaled to today how many customers on the platform we've got 95 to 100 top advertisers on the platform you know banging on it every day continue to see good growth and in you know all of the core metrics and as I said making money so we can really scale it we don't need a lot of people to do this it's a highly automated thing and for a research company or however people want a bucket is technology or research we have we have gross margins that are unheard of I mean a lot of the research companies are really high touch really consultative very very low margins so you kind of stand out there what's your team size team size is only about 45 leading are really probably overweight a little bit on our engineering investments just because we again want to stay out in front on the technology side yeah the technology looks really good it looks like it's a technology company not like Nielsen trying to make software you know so so it's it's been a really good really great team yeah I mean any look if I back into it if you have 95 customers you mentioned earlier maybe an average of about 10 grand a month I mean if you broke the million dollar a month mark yet uh we're right up well yeah we've broken that yeah yeah got it well it sounds like that just happened like last month well pretty close but it's been a nice it's been a nice you know a nice ramp and I think the thing for us is new customer growth because I think the market finally came caught up to us when we talk digital one of the things we talk about is that people are bombarded with creative but they don't have to watch it as I said before so you have this oversupply of video I mean some brands have brought their creatives in-house are producing hundreds of pieces of creative a month and just kind of puking it out there and yet consumers are increasingly blocking skipping avoiding doing anything they can to avoid it so the question is what's going to win in this battle is going to be fewer and better and how do you know if it's better in unless you test it and have a thorough understanding of the overall category its sex so that that's really where we fit and yeah I mean what you're betting on is that you can actually predict what you just said I mean the reason people are vomiting everywhere is because they don't know what's gonna work but they know if they put out enough hopefully one of them catches virality in a bottle exactly exactly wouldn't it be great to have a sense of that before it would yeah that's really what we're we're moving from descriptive kind of behavior to predictive behavior and and that's really where these emotions come in because if you see it and that's really firing and and again we're comparing against eighty thousand ads so we have a really big database we actually just published a paper it's kind of interesting which was using this emotion on how to win a can lion aunt I don't know what tan lion which is the big industry creative Awards yeah and we did that by analyzing can winners and then comparing it to the rest database and say what do these things have that the others don't that makes them a can winner so it was a pretty interesting study on being able to unravel what it is that makes these things so smash today's metrics calm we can look it up yeah awesome we'll certainly look at that yeah you know back to something economics I mean you're super healthy with 45 folks in 12 million books in a are I mean you're you're a good a hundred grand above industry average in terms of revenue per employee and the b2b SAS space which is about 137 based off our data set so I mean you know what you're saying rings true your team you said it's 45 art where you guys all based so the biggest team I mean you know in this world we're kind of all over the place but the biggest team is in LA so we have a core ground and El Segundo we have a fairly big presence in New York and a few people in Chicago and then we're just kind of everywhere wherever the advertisers are and you mentioned earlier you're growing really fast that's why you're able to raise the capital what are you growing at right now you're over here you know we're growing at about around 20 you know around 20 to 20 to 30 we did feel a bit of a slowdown I think maybe two or three years ago I think the overall industry spending levels were off and so we really are you know we still have to be and if you see like some the agency Martin Sorrell for example and other agency groups are seen a really sharp cutbacks in in the traditional agency model so we kind of have to we're kind of in that ocean you know where we skipped a bit of the ebb and flow but comparing us to kind of comps in in the research space were way above norms so we feel like we've got a solid thing as I said before when we're making money and we're able to maintain that I think it's it bodes well for us going forward and yeah so like if we go back 12 months in December of 2016 today again and today you're at over a million a month so it's fair to say what you're at about 800 grand twelve months ago a month yeah yeah yeah that's good growth yeah a lot of these companies kind of cut in a media space they were taking like a percentage of spend or trying to get a chunk of attribution the famous ad tax and now they're trying to figure out how to go a SAS model but they're stuck in the middle and neither one's working so you've got a the other thing is you've got some consolidation where where a lot of the big brands are sick of the ad tech stuff they just want to deal with a look at Google or a Facebook or you know a big bender and concentrate their spend there so there's just a lot of flailing around when you look around and I feel like to be able to have the growth the the kind of profitability and the stability with these big advertisers I think we've we've kind of weathered a lot of that pretty well yeah what are you right now paying to acquire customers you know it's all over the map to be honest with you I think what we found is that you know some of the traditional marketing avenues weren't that successful for us and so we we went back and and like you're talking Facebook Ads Google Ads things like exactly or you know advertised ad age and you know promotional stuff and what we really found is well-written personalized outreach on an ad that we've already scored because we score everything we already know more than the advertiser that personal outreach directly for me is what's really causing people to read and and pay attention and so going back to small ball and not trying to conquer the world and really go one-on-one with all these advertisers has really been really been successful one of their videos that hoot and they're not a client yet and then email them and say here's some recommendations based of our data set and they say we want you to do it for us yeah yeah words you know here's an ad that broke last night on The Voice we thought you'd be interested to know how this stacked up you know and and are you gonna open that email if your CMO somewhere of course you are yeah now if you look at kind of your team and the people dedicated to sales and onboarding and all that I mean do you try and back into a fully weighted CAC so you can understand lifetime value and some the other economics we do I mean we we are constantly looking at optimizing the best way to kind of go to market but a lot of times clients are interested in really starting with pre testing so really understanding ads that they've got that's a huge pain point they want to make sure they don't blow it give me ten ads that they're kind of building in a campaign let's test them get started and then move into the description and kind of you know higher end ad on yes we well so let me ask let me ask this a different way what do you like to what do you like to optimize your payback period for right well how quickly you want to get your money back on on acquisition you know an acquisition almost one contract covers it right for a year yeah yeah so it's really that one annual contract but I think it's also building a relationship with these marketers I think that's the thing that a lot of SAS companies yes is that especially when you're dealing with traditional big brand advertisers they really want a relationship and understand that you're gonna help make better creative not just give them another tool and so I think that's that's the that's the sweet spot of every time we get started even if it's a ten thousand dollar pilot we know that we're gonna be able to convert that going forward yep yeah I mean look at ten grand a month and your CAC you know right now I'll call it twelve month recovery period that's 120 grand spending them maybe that's worst-case scenario to get them but what's your journal what's your churn look like right now do you lost any customers we have some in kind of the ebb and flow like I said you know some brands decide they're not going to go and teaching 5% 10% 20% annually we budget around eighty five percent attention yes we usually you beat that but it's around ninety percent retention 10 percent churn and I even break that further into controllable and uncontrollable right so obviously the uncontrollable is just some of these regime changes or something happens to the client they pull back all their media span those are things that we still keep the relationship alive but sometimes we lose a contract and win them back in a couple years yep that makes good sense Peter let's wrap up here with the famous five number one what's the last business book that you read the last business book I read or the art of the start which is my son's in an entrepreneurship school believe it or not out in the East Coast and he told me to read it so it wound up being a pretty good book number two is there a CEO you're following or studying right now you know I am really interested in the Southwest CEO and we've started to do some work with them but I just think it's on the transparency ads yeah and it's just it's just the culture they create in that company is just fundamentally unique from anything I've ever seen and I think the culture side of a CEOs job is is kind of downplayed it's not as important to me I think that's what really makes a company great and that's it that's a good example of it I think number three what's your favorite online tool for building your business serious serious insights yeah we use serious all the time because we're into this individualized email and we need to track where it goes and it's funny you know sometimes I'll send a note out even if it's not favorable about a campaign saying look you know you should know this we can track we get you know a hundred opens within a company within two days I mean so that that ability to track it sounds pretty simple Matt it's not really that new but boy it works yes Cirrus and you guys are actually about the same size brandon bruce the CEO just came on a few days ago yeah and they passed 150,000 customers doing about a million bucks a month really healthy growth there too yeah I'm great all right number number four how many hours of sleep to get every night I actually sleep pretty well I usually get about seven hours that's good and what's your situation you mentioned you have a kiddo but it married single how many kids married three kids one out of school and one just graduated and once Dillon that's coin how old are you Peter I am 57 57 last question take us back 37 years what he was your 20 year old self knew I wish I wished I'd paid a little bit more to some of the emerging technology obviously hindsight's a 2020 thing I was a pilot back then and and part-time bartender and you know I love doing all the fun stuff but there was some emerging technologies and so I really try to keep on that fringe the fringe of what's next not not the mainstream stuff but really the fringe of some of the emerging technologies and seeing what's gonna be the next big thing he's still a part-time bartender he just didn't want to admit it Peter with ace metrics launched back in 2010 had some success in the space before this really understanding inside of other companies how this space is working saw an opportunity to do this kind of real-time with video doing it all over the place that team of 45 remote now serving 95 clients helping them make their ads better specifically their video ads they did about 800 grand in terms of monthly recurring revenue 12 months ago and December 2016 now over a million bucks a month over 12 million dollar run rate retaining over 90% of their customers a year over a year super-healthy payback period of 12 months and 20 million bucks raised to continue changing and updating this industry Peter thank you for taking us to the top thank you