How Rokt CEO Bruce Buchanan grew Rokt to $178M revenue and 3K customers in 2024.

hello everyone my guest today is bruce buchanan he's the co-founder ceo and chairperson of rocked founded in 2012 the company makes e-commerce smarter faster and better bruce you're ready to take the top ready to go nathan i'll tell you what you are in a hot space e-commerce plus marketing help us understand what you're doing for customers uh so i started this business eight years ago and we uh our objective is to make e-commerce smarter faster and better basically i'm trying to solve a problem i had from my previous business which was jetstar a cost airline in asia pacific which i built over 10 years to be the largest low fares airline and one of the problems we discovered local cell into one of the first director consumer businesses that we discovered the importance of this moment in time where consumers were transacting which we call the transaction moment and if we could get the right products and the right messages in front of uh our customers we could double the profitability airline and that's the problem we've been trying to solve at roc the last eight years i've got about three thousand clients now mostly enterprise we launched our shopify up recently but we specialize in enterprise level but the transaction moments are key business and what have you guys passed in terms of revenue at this point uh so we measured that in two ways there's a covered our revenue numbers this year will be about 170 million but we also measure our underlying distance that ticketing vertical and our travel vertical are still massively affected so we should surpass 200 million in the underlying business level uh this year but our actual realized revenue adjusted for what will happen with covert in those couple of verticals are still massively impacted with about 170. okay so just to be clear you think you'll break about 14 million dollars in december 2021 revenue which would put you on a run rate of being 170 million we'll do a total this year 170 million got it so you'll do more than 14 million in december yeah more than 14. and just be clear that's not like gmv that's not like gmb through your platform right that's actually your margin rocked takes correct no we our gross profit if you will it will be about uh just under 90 million um so we measure it's a slightly different way we measure it but yeah if you looked at it on a gross profit or gross contribution level it's about 90 million so explain that to folks i mean i think what you're building is the future of e-commerce sales those of you that haven't used rocked it's basically like let's say go on shopify and you check out i'm gonna make this up a flower pot the flower pot company at the end of the checkout process might then sell you fertilizer because the fertilizer brand pays rocks to put the fertilizer upsell at the end of that that transaction moment and so what you're saying bruce i believe is like what is that 170 million number is that that's not is that gmb through the platform or what does that mean it's a little bit complicated because we've got product sales and advertising that gets mixed together and product sales we book and the sas revenue as well sas revenues just gross in their product revenue we book at our margin which is typically about three percent which goes into that gross 170 number but advertising we booked a whole number uh and then our margin on that if you look at a contribution numbers less than that that's the difference between the 170 and nine years basically the way you treat the advertising revenue what is that contribution margin on advertising uh it depends on what we're doing but our gross contribution margin advertised about fifty percent fifth interesting so am i understand this correctly the difference between 170 million and 90 is basically there's 70 or 80 million bucks of advertising revenue going through your platform of which you only capture 50 percent of the spend that's that that's the amount that we pass on to our e-commerce partners effectively the delta between those two numbers so if you look at gross profit so if they're selling product you know they keep obviously around 97 of all the revenue and so we don't book the with the gross product sales but when we're talking about advertising we book the gross revenue and we clear the the transaction so disney's trying to acquire customers on our platform they might spend x million dollars we clear that with you know uh a thousand different e-commerce partners or whatever they thought that that out of clears and then you know the core part of our business is we made unlike a typical advertising value ecosystem where then this is slightly different from product and marketing um which is the other two sides of our business but on the advertising side we are a closed wall garden similar to like a google and so we clear everything and we deal directly with the advertiser directly with the economist company primarily because we're dealing with sensitive data um and in a world in in the last few years that's only becoming more important that we keep that very secure for our clients so since you own the marketplace if disney pays you 10 million dollars and they say go put it through your platform you'll basically effectively spend 5 million through the platform on ads keep 5 million as revenue for using the rox technology yeah they're all jv's i mean the way the economics work on the advertising is um they're contracts like jv's where we passed fifty percent of the transparent relationship we then where all the costs which is about forty three cents in a dollar so fifty cents goes to partner they see exactly what's happening we're very transparent we spend about 43 cents on technology and hosting and sales and commission and management of the platform and data costs and all sorts of weird wonderful things and we keep about seven cents on the dollar on the net advertising sites that's typically how the advertising business works and then in 2021 of the 90 million of gross revenue how much of that will be sas uh sas for us is relatively small the fastest growing part about sas for us will be probably you know around five six seven million dollars i think this year um the fastest growing part of our business is product what we call distributed commerce we're actually selling like parking or insurance or you know whatever name of product that gets bought when you're buying another product um and that on that product we're taking it's a marketplace cut as well it's a straight rev share effectively it's like a credit card merchant fee is effectively the way that looks uh from the pl perspective you don't understand how that p l works yeah just to make it easy for everyone listening to follow along if did if you helped disney sell a winnie the pooh stuffed animal right through your ecommerce checkout and that stuffed animal was 10 bucks you'll take essentially 30 cents of the 10 bucks or about 3 percent exactly that's exactly how it works you're not producing your own product and storing product you're just the cut we we sell nothing and that's really important actually because we want to be completely unbiased as a middleman we connect consumers and um and brands and providers in a way that makes the product more effective so if i if you sell insurance or whatever through rocked and a customer is buying an airline ticket you'll sell 60 more insurance because we get the right product the right price in front of that consumer when they're buying we can manage the the consumer relevancy and the contextual relevancy in real time in a transaction flow to optimize against lots of different variables but essentially your take rate on that product improves by about you know 50 60 so you pay us three percent but you sell 50 or 60 more products because you're putting them in the right transaction moments on related products yeah and getting the creative right the ux right so you know some people when they buy parking want to see how close the parking garage is someone to see uh the picture of the garage someone see a map you know and so everyone's got different buying parameters and the ux and the product and the pricing all changes dynamically to get the best outcome for the e-commerce provider and sometimes that's their own product by the way that's where the sas components come in it's much lower margin for us but whether it's their own product or their own marketing messages you know you've got anything on the review page or payment page or shipping page or confirmation page could be you know site download my app or you know buy the baggage product on my airline ticket you know there can be lots of those sorts of messages as well yeah essentially there are three arms of the the revenue stream it's still all the same thing which is a transaction moment it's all about optimizing actions and experiences but you've got a sas revenue stream which is an internal stuff you've got a product uh rev share which looks like a merchant service you like a credit card and then you got a an advertising revenue stream and advertising is where we started and so it's still the biggest but the fastest growing is a product piece of the puzzle you raised 80 million dollars last year what valuation were you able to raise that at we raised uh 80 million dollars it was a closed round so we didn't go out to market um and so we raised it at 450 uh pre-money um and uh you know that was right in the middle of was probably a couple months we were doing the negotiations right in the middle of covert which was kind of interesting so we went into covert with uh with about 50 or 60 percent of our volume centered in in verticals that were uh basically shut down cruise lines airlines hotels yeah you know entertainment sports ticketing they didn't do too well cinemas you know so our whole ticketing entertainment vertical dropped 97 our travel vertical dropped about 60 or 70 percent so they just got really badly hit and uh the great...