How Lotame CEO Andrew Monfried grew Lotame to $125.2M revenue and 300 customers in 2024.

hello everyone my guest today is andy manfred he founded a company called lotimi in 2006 and has been focused on building the world's leading unstacked data solutions company that helps publishers marketers and agencies find new customers increase engagement and grow revenue he led the company's successful ad network for many years targeting thousands of campaigns valued at millions of dollars all delivered and executed through the platform then in 2011 he shut up the ad network to focus the company on it on its original vision a full-featured sas based dmp under his leadership the company has grown to 200 plus people with offices in the us eu and apac prior to founding the company he was an executive at with advertising.com from 99 to 2005. andy you ready to take us to the top i sure am nice nice to be aboard all right hello to me sas based dmp what does that mean and how you guys making money uh well what it means is we help 300 plus plus brands manage all of their customer data and activate it so this big issue about big data uh we actually come in with a strategy and execute on it and um the name low to me stands for locate target message that was one of the original premises of the business was to locate the proper consumer with the proper targeting and the proper messaging um and that was a premise and it started off as a media business and we pivoted fully into a sas based technology so so this by the way i've had a lot of people on you know mediocre and bill i mean tons of people that used to be in kind of the pure ad tech space a lot of them actually based up there in new york and it takes guts to truly shut down the ad business and go all in on the sas play but they're right now they're all kind of dancing they kind of don't want to give up the old revenue but they want the new sas revenue and it's some combination what gives you the confidence to totally shut down the ad agency's side of your business and go all in on sas so we were doing about 30 million dollars in uh media based revenue we were profitable it was growing uh yeah by the way that's gross okay got it so we were doing yeah we were doing a big dollars though for a 40-person business using our technology we were eating our own dog food we were using our platform to deliver campaigns for agencies and brands and what ended up happening was in about 2009 in 2010 we started getting signals that the agencies were running those campaigns through their own trading desks at the time they were called agency trading desks and we were left out of a lot of quote unquote rfps and ios and because of that i saw that signal and rather than ride that puppy down into the ground i literally woke up one day called a board meeting and in august of 2011 we let go about i don't know 30 people and went back down to about 10 or 15 people in the company um and rebuilt it from zero revenue from literally zero back to where we are and we more than doubly replace that revenue over the next six years all based around sas so andy just to be clear the 30 million that was 30 million in ad spend going through your platform of which you were taking what five times 30 million was net to us that was our revenue okay how much total ad volume uh it was in the in the millions i mean the total the total amount of revenue we were delivering was based on campaigns so we would get let's just say we'd get a 500 000 campaign for pepsi we would have to pay the publishers who helped fulfill that inventory probably in the neighborhood of 50 or 60 percent of that revenue but the net to us was 30 million we were a 30 million dollar revenue business yeah what i'm trying to get out was the average kind of ad tax you were taking if so if someone put a million bucks through you what percent of that were you taking on average uh 50 50. okay so we can double the 30 million that you took net so you were putting about 60 million annually through your platform at the time keeping 30 for yourself that was the ad tax correct right so make sense by the way why people would want to run these internally right they want to they want to take that money and spend more of it right but the great question ends up being when agencies do that agencies are supposed to be agents for the client my question always is when agencies run their own trading desk and it's much more opaque it's much more transparent now is who are they optimizing for when you're running a trading desk or you're running a quote-unquote ad network one of the great things about an ad network that i helped run was ad networks are very clear they optimize for themselves they're optimizing for their own yield and their own margin to maximize that value for themselves do agencies do the same thing when they run their own trading desks do they act on the best interest of the client when they're taking that 15 or are they doing what's best for the trading desk and that was the thing that i grappled with the most when i shut the media business down and i was pretty public about it how much how much capital did you guys raise at the time in 2011 uh we raised at the time probably about 20 million 25. okay and after we shut it down we raised another 35 million so why did you andy why not spin out i mean you wouldn't get a huge multiple on it but why not spin out that 30 million business and sell it to somebody else it was something we toyed with and we had offers actually to sell it the reason you can't do that when you have limited uh focus and you want to be focused is because you end up servicing it if it's on your platform you have to continue to develop ways to deliver those those media dollars yeah and i knew if we sold that business it would have to stay on our platform to get delivered now remember what we built was the first platform in 2006 that i was able to walk into an agency and say tell me nathan you want to reach males to 25-34 that love soccer and have written about soccer at the time nobody was doing that because what they were focused on was contextual targeting of of publishers all of our data came from the social channels myspace friendster kazaa uh all these platforms where the consumers in 2004 2005 2006 were writing about themselves and there was no technology to harness that and what we called it was collecting verbs write read upload blog share these are the verbs and our whole platform is predicated on that was predicated on that collecting verbs or actions um and then packaging that up neatly for an agency to use and transparently showing them how we're now reaching them company to do that now as you went through that pivot in 2011 i mean you didn't clear the cap table right so battery and emergence all those hooks are still on the cap table all those folks are still in the cap table we have never lost one investor um in fact if anything they've all doubled and tripled down on the business uh and they've participated in the rounds all the way through so let's let's let's break down i don't mean to keep cutting off but i want to get a lot in here and we're running short on time walk me through what the customers look like today so on average what are these customers paying per month for this data platform uh somewhere in the neighborhood uh i'll just give you round numbers between 15 and 20 000 a month okay and our customers range from comcast to ibm to companies like hearst companies like the weather company companies like let's see webmd the daily mail we have about 300 customers on the platform tribune corporation cbc canada broadcasting um in australia we have the largest broadcasters uh we have telcos like vodafone so basically these car these companies with huge data sets what i call first party data which is all their customer and subscriber data they need a way to link that with the outside world with the world of experian and dun and bradstreet and all these other and sync that data so that they have better knowledge of who their customers are so when they get on the phone with a call center or they're looking to have a conversation or personalize things they're using our platform as the central warehouse yeah for all of that by the way i i totally get the product i mean this is a very hot space uh execution is different it sounds like you're executing very nicely with those kinds of customers now let me do some math here fifteen thousand dollar a month price point on average nice round number times 300 customers that puts about 4.5 million bucks a month right now is that accurate i think it's a little higher than that yeah we generate a lot of uh excess revenue in terms of uh what i call overages so you'll see a lot of data fees in there uh pure sass though 4.5 a month yeah it's it's a it's it's ballpark in that ballpark okay and then help us understand growth rate so exactly a year ago so march 2018 what were you doing per month then uh it was probably about 20 less okay got it so you're doing maybe 3.6 million a month at that point yeah our growth is pretty consistent with the industry our profitability has grown has grown faster because we've kept our expenses uh the same or even declining year over year so we have i say this tongue-in-cheek but we've effectively we've doubled revenue in the past three and a half years while keeping our head count the same and um so we've moved folks in and out but we've kept...