Tuesday, February 10, 2009
Interview with Steve Pelletier, FatTail
Story by Benjamin F. Kuo
Late last year, we had the chance to talk with Velocity Interactive's Ross Levinsohn about their investment in Woodland Hills-based FatTail (www.fattail.com). At the time, the firm was working on--but not talking about-- their next generation product, which the company announced yesterday. We spoke to Steve Pelletier, the firm's Founder and CEO, about the new product:
Tell us a little bit about your new product?
Steve Pelletier: Just as a bit of background, our company started in 2001, and had a product called AdBook, which is a very robust order management, workflow inventory, and billing package for large online publishers. That has been in the market since 2004. We have hundreds, and hundreds of web sites where their ad inventory is being managed by the product. However, what happened as we worked with clients on AdBook, we got deep into the trenches with online ad sales and learning the operational nuances--there are plenty--we realized that there were a couple of big gaps in the market. One was simply yield management--that's an overused term, but basically it's the notion that you have to be able to have a basis for forecasting your available inventory, and adjust your prices accordingly. Even users who are using AdBook don't have that. Most tools in the market are focused on the operations side, and post sales--what happens downstream, so publishers can provide proper revenue recognition and billing numbers. Because of that, the sales team is left with a data entry problem. What we wanted to do, was basically provide yield management functionality, but wrap it up into a product that a sales person can use. That's what we've done, and what we're calling PageGage.
What is it a sales person can do now with your new product that they couldn't do before?
Steve Pelletier: There are two or three major points. We've created a patent pending technology called Autobuild. It's an automatic proposal builder. Unlike the current situation--where a sales person basically has to hunt and peck for inventory--it might take days for a response to a proposal--now, a sales person can answer four, five, or maybe six simple questions, they can hit a button, and it comes back with an automated proposal. It does the work for them, and uses the data to make intelligent recommendations specifically for that person's advertiser. We're the only company with this auto-build functionality, which includes inventory forecasting and dynamic pricing. It also includes looking at historical data, and trying to bring back placement choices which absolutely work well on an ad-performance basis, for a specific client. Some using the product to sell to Dell, gets a whole different recommendation than someone selling to American Express.
How does your solution fit with the many automated tools and ad networks out there?
Steve Pelletier: We try to bring up a couple of points. From a customer's perspective, one thing we've consciously tried to do is to make it available to any publisher--long tail, torso, or right side. Unlike AdBook, this product is literally available to anyone. That's the first point. The second point, is that if you're selling lots of your inventory through a network, from a publisher's standpoint, that's not a good thing. It's not terrible in that you can backfill your inventory, but they're giving you 50 cents on every dollar of inventory. Publishers who are using networks to fulfill lots of inventory, are basically failing in their sales effort. You've hit on a nugget here--which is this tool helps reduce publisher reliance on an ad network. Your sales team can sell more inventory directly, which means less to networks.
Addressing the other point, of automated tools--led by companies like Google, which allows advertisers to manage their own campaigns--have actually opened up a door to us. People are much more willing to look at data driven tools. In fact, one of our goals with this product is a proposal builder, which provides proposals to advertisers and publishers directly. You can literally click on an "advertise here" link and it will allow you to book a proposal, and that proposal gets build, and you can review, accept, or modify it.
You had an interesting path, having started as a bootstrapped company and now being venture backed. Can you talk about that experience?
Steve Pelletier: I started in 2001. My background is, I was an interest rate derivative trader in New York, and had moved over to the buy side here on the West Coast. I got a wakeup call. You get tremendous resources in New York, but at a small, buy-side management firm we had nothing. I had to build my own tools to manage my profile, so I got into software. In the late 90's, online started to get press, and people were raising money and this was pre-first bubble. I was sitting there on the ad side, and saw that there was an amazing industry. It was very trackable, and very measurable, and I thought that there was data you could use to drive media planning decisions. That was the foundation for FatTail in 2001.
I obviously knew nothing about media--I was a finance guy--and that became completely evident when we starting trying to sell software to agencies. We built some tools to aggregate data, and analyze data, and tried to provide media buyers and ad agencies with some tools to get better ad performance for their clients. I would never, ever recommend a startup make their primary model trying to make direct advertising sales to agencies (chuckles). Luckily, what happened is that a publisher we can met at Network World liked the general concept of campaign analysis, and one thing let do another, we took the toolset we built for the agencies, latched onto order management, and Network World became our first partner. AdBook was shipped in 2004 with their help. We switched gears quite a bit, and went from selling to agencies to selling to publishers. AdBook is now very robust, and handles sales, finance, and all the way through the process. It's used by many publishers, including B2B publishers like Network World, United Business, TechWeb Network, Reader's Digest, WebMD in the health market, and others like that. That was great to build, but we said we didn't want just a product for large publishers, because the industry is so large we didn't want to limit our target market. We also wanted to create a product which was a little more focused on the sales side of the business, which is why we have PageGage.
Finally, was there any particular decision which made you decide to go out for a round of funding?
Steve Pelletier: We avoided it, obviously, until recently. It was a badge of honor to be able to grow organically. A couple of things happened. First, we wanted to take a flyer on some new products. PageGage was one of them, and there's another which we won't get into today. We took a flyer on building some prototypes, and showing them around the market--but also to venture investment folks. That was when we really started getting amazing feedback. They felt we were onto something, and we decided we could either continue our slow growth, or ramp this up more rapidly. Having gone the slow growth path, we felt like it was time to move faster. The other thing, is we were really looking for a venture partner with some domain expertise. Obviously, Velocity is really great in that regard. With Ross, and Jon Miller, they really understand the business really well. This is a plug for Velocity, but they've been very active helping us with respect not just to ideas, and marketing, and product, but also with relationships they've brought to bear.