How Jelli CEO Mike Dougherty grew to $12M revenue and 2.3K customers in 2018.

hello everybody my guest today is mike dougherty he is the chief executive officer and co-founder of jelly the technology platform for the 40 billion global audio advertising market he has 20 years of experience with online and mobile services and corporate development under his leadership the company jelly has developed a cloud platform that transforms audio advertising enabling advertisers and publishers to buy and sell audio advertising programmatically through a suite of demand side and supply side services mike are you ready to take us to the top yeah all right good so audio's hot right google home alexa audio input devices audio listening devices they're all over the place and it's easier than text-based stuff like reading so it's going to maybe expand faster than even the web did back in google was indexing search stuff how are you indexing all this audio data and walk me through the product how are you enabling it folks to programmatically advertise in it well actually jelly was built the concept of this building the largest audio ad platform creating innovation for audio so it can compete in this era where you have google you have facebook uh winning eight out of uh every 10 new dollar coming into advertising audio is this amazing category of billions of people use it globally and as you just mentioned it's going through this sort of very interesting inflection point where voice and the connected home and the connected car and talking to these devices is as you just described shifting digital engagement from your mobile phone or from your desktop to something where voice is the input and audios the output for certain types of services like music some of us subscribe but sometimes we consume free free music free audio and in those cases monetization having a business model for free the free tier is important so we build a platform to help audio advertising flourish in this era so walk me through how it works and actually let me just use this show as an example right so the show does about five million downloads right now i do between two and three million a year and podcast sponsorships the issues i have is i have all this you know i have 800 episodes that are historical where i've already hit the impression counts that the advertisers paid for but i have no way to go back and reuse that inventory without me opening them on audacity and putting in new reads do you solve that problem and how does the tech work we're we're working on solving that problem so this year jelly will get more and more into podcasting um but the way we you know let's look at the last five years what jelly's been solving um if you look at adwords if you're a marketer let's say you work at lyft or grubhub or somewhere you want to get your the word out uh you log into adwords spend potentially millions of dollars you're buying search display other types of advertising from google uh if you're uh gonna buy from facebook you log into facebook advertising again search target and buy social ads or mobile apps from facebook we've built a platform at jelly that allows you to log in and through jelly buy over 2 300 radio stations across the us almost like reserving a table on open table making it really easy to do something that traditionally has been very offline so your radio that's your inventory right now it's all radio for the last four years it's been all radio in 2018 that's changing i'll talk a little bit about that in a second but the reason why we started there was that's where like basically eight out of ten dollars of all audio advertising was sitting that's you know the terrestrial traditional radio business is still very large in the u.s but it's extremely manual it's extremely um i've seen the rate cards they'll they'll make you i mean they'll make you sicker than any you know food is poisoning you've ever had right well i mean it and also if you think about it from someone who wants to buy an ad they don't want to talk to a sales rep they don't want to go through that process when they can just log on adwords and buy at google so you know we wanted to make the process a lot more digital a lot more modern so quantify the success for me i mean what have you processed over the past 12 months in terms of spend through the platform uh we're processing about a hundred million dollars of spend to the platform right now our business model for the company is software so we don't sell the ads uh we are the software that allows all the people who are buying and selling from each other to work together so they they so you don't take a cut we do take a cup but we take a software fee so it's sort of like a processing thing got it so you have a dual business model there's a there's a software licensee like a pure place sas model and there's also a small kind of cut model exactly that's interesting interesting on the broadcaster side for radio stations they typically are part of a staff recurring revenue model okay um with a small percentage on upside what do they pay on average per month we have lots of different deals we generate currently about a million dollars a month from 2 300 radio stations and recurring software that's okay so i mean this is a healthy it's a little healthy little business there on that side yeah and then on the uh let's say you want to log in to buy some ads in that case you're going to pay anywhere from five to fifteen percent depending on who you are um on the processing fee essentially on the basis of how much you're spending so if it's a million dollars or a hundred thousand dollars or whatever you're spending on the audio ads there'll be a processing tech fee that we'll receive for for that i love this model because uh a lot of people look at a marketplace model and beat the hell out of it and say you can't make any money until you have both sides and you have to be matchmaker what you've done is said you know what let's just give by to both sides and actually make them pay on both sides and you have a dual business model on both sides so 2300 radio stations basically paying you a million bucks a month right for you to get access to their inventory and then on the other side for buyers of these placements they're paying you anywhere between you said five and ten percent of total spend right and you know by the way that didn't happen overnight so last i don't know four years has been going from 100 stations to 300 and then we signed in 2015 about three years ago a huge deal with iheart media which is the largest radio group in the us and they brought 800 900 stations to the table we powered their large-scale radio ad exchange with our software and that really solved that chicken the egg issue of a marketplace where you try to get skill on one side of the other how do you do it a lot entrepreneurs try to figure that out sometimes you're given uh advice fake the chicken i love that idea but um fake the chicken chicken that's hustle yeah chicken you know if you got to get drivers on your uber platform just get the driver somehow and because you got the consumers starting but in our case large-scale advert advertisers and ad agencies didn't want to work with us if we didn't have enough scale and yet the broadcasters didn't want to work with us unless there was money and so you did have that chicken in the egg but the chicken in our case was iheart i heart ended up signing a huge deal with us multi-year contract uh they provided that scale on one side of the marketplace and from there all these ad agencies that work with them said you know i want to try this i want to use this this industry needs to move more toward this like digital transaction model more like digital and so uh it sort of started from there and then we went from maybe 1200 radio stations to 2 300 now the scale is huge you log into jelly you're looking to buy some ads you can reach 250 million people a month through our partners what penetration do you have right now how many total radio stations are there there are about six thousand commercial stations in the us 40 50 yeah and we have the big ones too so if you look at like audience scale because not every station's equal um we picked the big ones first so la new york et cetera all the big cities uh so if you look at listener share we probably had about 65 listeners share right now of all listening of radio that you can essentially address if you want to buy an ad upload an ad it gets cash down on our platform all across the country the places you want to buy and run the ad and uh our software takes over from there we run it in an automated fashion when the ad runs on our platform you get a log in your dashboard that says hey my ads running right now in boston so as a marketer you can see your ad running and you can listen to it on the air so for the first time you have that kind of transparency that sort of digital access to real-time data and that's really valuable for a lot of people so when you add up both sides of your marketplace i mean are you what are you doing somewhere right now around 24-ish 25 million per year or a little under that we're doing a little under that but i would say this year we're expecting to do something like that yeah and i'm just doing the math if you do a million a month from 23 radio stations that's obvious or sorry 2 300 that's obviously 12 million there and then if you process 100 million it's unbalanced right now we started with the supply side they they're like more of our revenue okay they are that 12 million is more than 50 correct the agencies are just now starting to get to parity i think this year they'll outstrip the broadcaster side or the supply you know the publisher side from the perspective of customer uh revenue revenue yeah just to round that out though you said 100 million in ad spend three over the past 12 months minimum five percent up to 15 percent so minimum there's 5 million coming from that side but it's less than 12 million so call it maybe you're doing 22 million right now trailing 12 months and you think you'll break 30 this year yeah you didn't sound confident no i was trying to so i was trying to follow your uh your analysis by the way good analysis do you like that analysis that's am i hired oh well i i think you're doing fine so i don't think you need to work for us yeah no i would be fired in about two seconds if you tried that um what about growth so take me so last 12 months to call it about 22 million ish what were you at previous 12 months um 400 percent growth uh year over year in revenue yeah revenue wow uh 2016 was sort of a ramp year for us it took a while to get the footprint in place but once the footprint in place 2017 would really generate a lot of revenue uh 2018 we're going to see less than 400 percent but it's still going to be over doubling and our margins are very high so from a business model perspective what's high yeah um well we did in q3 85 gross margins that was up from 83 so we have a software kind of business model related to the uh revenue yep yeah just to be clear if you have 400 growth i mean you're talking december 16 run rate somewhere around 6 million and you grow that in december 17 run right about 22 million i mean that's significant growth would you consider would you attribute most that to that i heart deal yeah i think i heard was a catalyst yeah not only were they a big source of their big customer but they attracted the rest of the market so a fear of missing out concept when you have someone who represents about 30 market share in the us of national advertising yeah uh it's hard not to participate in the things they're doing so let me answer let me ask you another question about the space in general audio um you know i think why google adwords and facebook works is you can do direct attribution so direct advertise like direct marketing advertisers they know they can spend a dollar and two seconds later make a dollar fifty and then they just funnel in that channel a lot of podcasts and i think is so stupid how they do it but they're selling super they're selling cpms they're just never gonna work because they don't know how to move their audio audience to actual buyers and so if they can't figure that out which is really a creative problem it's hard to solve it with technology i think maybe have an answer but if they can't solve that spend is never going to drop you know get into the hundreds of billions right how do you see that playing out do you agree with me or do you disagree i agree with you partially i think that uh if you look at audio as a full category in the us today it's about 18 billion okay okay and the reason why it's 18 billion is that there's about an hour and a half of time spent with audio every day on average okay okay so if you're facebook or google you're someone who's big you look at the concept of how much mind share do i have of each person because that's my growth and so they started with mobile and digital and they look at that and they say that's about i don't know three hours a day at the time the average person spends with me google or facebook right there now they're jumping to tv tv is about a five to six hour time of day and that's the big battleground right now it's about 80 billion dollar ad market the next big chunk of time that no one's tapped is audio it's about an hour and a half two hours a day and it's for example driving home when you're driving home in your car audio is a type of media you consume a lot of the time and if it's got advertising it's a great time for a marketer to say hey you're driving home you haven't decided what you're going to eat yet tonight because you're hungry why not order from grubhub or why not turn into this retailer so the point is is that from a marketer it can be very effective but as you said there's not a good a lot of good feedback loop to kind of convert that impression like in a google search ad to directly to the uh um advertising there's studies there's like a six to one ratio of one dollar spent six dollar return but that doesn't give you that same sort of performance that you're used to with digital so um we think that there's going to be some aspects of that that will be in the next let's say 12 to 24 months they'll become more interesting specifically with companies that are matching digital data with some of the things that are happening in audio i'm just going to ask you that what is the tech that's going to connect that attribution loop obviously with facebook azure it's cookies it's easy what is the piece of tech that's going to loop that together it starts with uh connect the data of the ad being served and marrying that up somehow with a digital profile and so there's a couple steps of tech in the middle and we're one of the steps we create the data add serving now to in the case of broadcast we're guessing who the people are because they're not connected it's a broadcast it's an fm radio station in the case of streaming you know who it is especially if they have a subscription if they're logged in they're registered but there's also ways to get information from other sources and then that's married up to a whole bunch of data sets just like any digital platform so for example one of our partners i heart media with iheartradio has an app where they can learn a lot about the audience they take that mobile app and take the data from that and use that as a way of projecting onto a radio station guesses as to who the people are that listen to each of their stations so there's a lot of technology a lot of statistical analysis that's going to figuring out how do i reach a video gamer if i'm dealt and i want to sell an alienware computer yep yeah it was you know i learned early on i launched the show sponsors sponsors would run tests and then wouldn't tell me the data but would immediately ask to renew for a year and i'm going what's going on here nobody canceled and what i realized quickly was when i started tracking it myself with a unique url that i owned i said i'm driving them so much upside but i can't track it so i didn't know that i should have quadrupled my prices right so so i mean this is serious right like now this is how you measure your audience's purchasing power which is very different across podcasts so now i charge you know 20 times what i would charge if it was just on a cpm basis because i know my audience buys right you know it's funny there's a a very big segment that buys audio advertising one of the there's two competitors one of the competitors decided not to do as much audio last year and they just got their butts kicked by the other guy who kept funneling in cash so sometimes this stuff isn't as scientific you get it on the back end when you see your revenue you see your traffic or whatever you're like measuring and so we start with just giving data real-time data is important because if you've got real-time data i see my ad running in boston i can track web traffic in boston i can track sales in boston i can look for a lyft you know there's more tech that we need to put at it so we can actually make it more like a google ad yeah quick because we're out of time here but quick last questions funding have you raised or bootstrapped oh we raised so serious a and b we've raised 46 million dollars to date okay 46 million total and then economics wise what's your churn look like we have very low churn uh very low trend like underwater like under under under five percent okay and that's logo turn annually or revenue churn both both okay cool i mean yeah that's obviously really healthy um what is the uh in terms of acquiring these radio stations it seems like you're doing this really on a kind of bulk deal basis so me asking you a quick question wouldn't be relevant but maybe on the other side bringing a new buyer of these ads to your platform what does it cost you to get one of those people well some of the some of the things we're working on right now are big deals both buyers on that side too so at a dad agency feels like a similar type of deal cycle an investment you have to make from sales and marketing to acquire them so we typically look at an acquisition cost of a big deal of let's say anywhere from 50 to 100k just time and travel and all this other work you have to do to make sure that they get comfortable flipping over and using this platform as opposed to the old way they did it but once you end up doing that the deal that you receive is worth sometimes you know seven figures a year and so it pays off and a lot of times the contracts are multi-year so you get that return is your payback almost always like under six or five or four months i mean what are you trying do you try and optimize around payback period and what is it we don't we should um frankly because it's been a big deal type business model so far we haven't had those sort of traditional stats and you don't have to because you have 46 million bucks in funding yeah that's true yeah although you know as we start to move into the next tier i call it tier 2 or like the longer tail you want to start to measure that to make sure you're efficient yeah but i think generally you just told me if you're spending a hundred grand and most deals are can be low seven figures you're getting paid back in less than a year pretty reliably right yeah team size today where are you at uh we have 45 45 and where's home where's home base san mateo we also have an office in new york and we have an office in boise idaho for scaling up that's smart and uh year one was which year 2012. okay last few questions here we're gonna wrap up with the famous five number one what's your favorite business book the hard things about hard things by ben horowitz and number two is there a ceo you follow or study right now yes a big fan of mike mchugh from flipboard from which flipboard flipboard yep number three is their favorite online tool you have for scaling your business absolutely we've been huge fans of fifteen five team five number four how many hours i sleep to get every night not enough like six what's your situation mike married single you have kids uh married your kids how many two good yeah not wives kids what's that i said not wives kids two kids all right and how old are you um 46 46 last question take us back 26 years what do you wish your 20 year old self knew man i am telling you hang out with those guys they know how to use the email hang out those guys who understand the new internet protocol they were the ones who started the companies uh instead of like going after consulting or investment banking or whatever stupid job you were thinking you needed to go after the 90s were the time to go experiment and some of my friends who did that started companies like cnet and some other things so like that was a miss but i caught up later mike is catching up he started his ketchup in 2012 he wishes he started earlier but now jelly is in a very hot market and he's preparing himself for the war for earshare which is getting hot the hardware is there the the audio inventory will will only increase over time and jelly is positioned perfectly to try and help people understand what it means to an audio ad and get a return on it they're processing 100 million bucks in spend right now they also on the on the radio side have 2 300 stations signed up but a majority of the market share they make a million bucks a month just from that doing about 22 million bucks a month in run rate today that's up from about 6 million just 13 months ago so healthy growth there they won't grow 400 every year this year but still healthy growth with our team of 45 people based in san mateo new york and boise mike thank you for taking us to the top thank you