Magnite $MGNI CEO Michael Barrett - from linear TV to AI

Michael Barrett is the CEO of Magnite (NASDAQ: MGNI), the largest independent sell-side advertising platform with a market cap of over $2.2 billion. In this episode of World of DaaS, Michael and Auren discuss: The $200B shift from linear TV to streamingHow retail media networks are reshaping advertisingBig Tech's dominance in digital advertisingHow AI will change programmatic advertising Looking for more tech, data and venture capital intel? Head to worldofdaas.com for our podcast, new...

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Auren Hoffman?

  Hello data nerds. Welcome to World of DAS. I'm your host, Orin Hoffman, CEO of Safegraph and GP of Flex Capital. Discover more episodes, get weekly data as a service news at worldofdaas.com. That's spelled world of D-A-A-S dot com. Hello fellow data nerds. My guest today is Michael Barrett. Michael is the CEO of Magnite, one of the largest independent sell-side advertising companies. Magnite's ticker is MGNI on NASDAQ and currently has a $2.3 billion market cap. Before Magnite, Michael served as the CEO of Millennial Media and also was the Chief Revenue Officer Yahoo. Michael, welcome to World of DAS.

• 0:42Speaker 01

  Thanks, Orin. Pumped to be here. First time, long time.

• 0:46Auren Hoffman?

  Big fan of yours. We've been friends for a long time. Linear TV, which is for people who don't know, are just old-school TV ads. Still is a huge market. It's probably $60 billion-ish market of ad revenue and still double what connected TV does. How do you expect that trend to go over the next decade?

• 1:06Speaker 01

  The important thing to look at it is consumers have kind of voted, particularly in North America and increasingly globally, and they've chosen to consume their media, entertainment, news, sports via streaming and backing away from the cable bundle. So you have all these eyeballs, and in many cases, they're the most treasured eyeballs from an advertising standpoint.

• 1:29Auren Hoffman?

  They're tend to be more wealthier.

• 1:31Speaker 01

  That's exactly right. Younger, wealthier, haven't made brand decisions for the rest of their life where try to get me to switch toothpaste at this stage is probably not going to happen. So I think largely speaking, whenever a new media comes along, there's always been a lag between hours spent on the new media medium versus traditional. And it takes a while, but we're seeing a big kick and inflection point, and we're seeing all of the large linear broadcasters launch AVID services, which It seems self evident now, but three years ago Netflix was the model and that was never going to have an ad, always going to charge top dollar as a subscription and ads were antithetical to our purpose. And now, obviously, they have one of the largest ad

• 2:16Speaker 01

  tiers. And so that's table stakes now.

• 2:19Auren Hoffman?

  At what point do you think connected TV is going to surpass linear TV in terms of advertising dollars?

• 2:25Speaker 01

  So it's already surpassed in terms of hours watched. So more people are consuming streaming than they are broadcasts in the States. If you look at the charts, streaming's supposed to be growing in the 20 plus percent Kiger for the next four or five years, linear slightly down. It's going to pass in three, four years or so. It always happens faster than we think. We look back on it and we're like, five years seemed aggressive and it turned out to be three years. So I would say the next three years.

• 2:53Auren Hoffman?

  It's faster, but then it's also slower than I would have expected.

• 2:58Speaker 01

  Well, how many times have we, in the early days of websites, bemoan the fact that print was still getting more money than the internet and the internet had all the people in the world on it. It just takes time, that's all.

• 3:10Auren Hoffman?

  Where do you think like AI is going to play in beyond, obviously for like content generation, AI is going to have a huge impact. But how is it going to change programmatic advertising?

• 3:20Speaker 01

  There's going to be several applications of it and probably five more that I haven't even thought of that'll probably disrupt the whole industry and put Magnet out of business. I think one of the most exciting aspects of AI as it relates to programmatic and specifically in streaming, CTV, connected television, is the idea of the elimination of a severe barrier to SMB, small, medium sized businesses, being able to advertise in the broadcast environment. The creative hurdle, to be able to produce creative that's approved by the broadcasters and goes through that system is prohibitively expensive and frankly, doesn't actually meet the needs of these advertisers. So therefore, they have

• 4:05Speaker 01

  been spending all their money on social because of the idea that they know what they're getting for their dollar. I think with AI being able to generate advertisements for these SMBs, you're going to see a world where streaming today is essentially trying to catch the broadcast dollars and bring them into the streaming world. And that's the world of 500 to 1,000 advertisers. And I think you fast forward with AI-enabled creative capabilities and enhanced targeting capabilities, you're going to see a world of 15,000 advertisers.

• 4:42Auren Hoffman?

  Why is the creative such a high barrier? When I was a kid, there was always that janky car dealer ad. There was the crazy Eddie, like, everything's insane. There's all those types of things. Back in the day, you had a camcorder and a crazy guy. Why is AI so important to this?

• 4:57Speaker 01

  Because that was back in the days where there was fringe time and there was local time and it was local cable. We're talking prime time now.

• 5:05Auren Hoffman?

  So you need to have like a super quality ad?

• 5:07Speaker 01

  I'm going to advertise on Disney Plus and I'm going to advertise nationally. I'm going to target, so I'll be very select.

• 5:15Auren Hoffman?

  But why do you need to advertise nationally? You can be advertising for your local yoga studio or something in the zip codes that are important to you.

• 5:24Speaker 01

  No question in that happens. And that's one of the biggest impacts right now on linear. And that is on the local station level. The concept of local now is just IP targeting by household. It's no longer, oh, it's that Channel 4 programming in the tri-state area that I have to advertise in. And so now everything becomes local. Netflix becomes local because you can target wherever you want to target. But the bar of entry in terms of creative is still high. And Netflix isn't going to be taking Crazy Eddie anytime soon.

• 5:57Auren Hoffman?

  They actually care about the content. And if I'm just like a talking head, they don't want me on there. If it's my local yoga studio and I just come up there, my Lululemon outfit, they're not going to want that. They're going to want something like higher production value.

• 6:12Speaker 01

  Yeah, and you never could do that in Friends on a Thursday night. They weren't going to run the local yoga either. So there's a plethora of inventory out there and we always think of CTV as just being the province of the big plus services. You have a Samsung LG Vizio doing billions of dollars in advertising on their free TV channels, the fast channels. And so there's always going to be a home for that type of advertising. But again, the creative has been a barrier and I think that AI is going to play a huge role in unleashing that.

• 6:42Auren Hoffman?

  I have found that the ads today do just seem less interesting and less creative than ads a few decades ago. Maybe that's just old guy being like, it was better in my day or something like that. But do you agree? Do you think like the ads are just less good and less compelling than they once were?

• 7:00Speaker 01

  I think you go to a festival like Cannes and you see some of the creativity and it almost always isn't America. It's always international. That's cheeky, that pushes the envelope, that is funny, memorable. I think we've kind of gotten risk averse in a lot of the advertising we do.

• 7:18Auren Hoffman?

  Yeah, the ads are so bland, so risk averse. I agree, yeah.

• 7:22Speaker 01

  And I think that that is something that's a shame because as you point out, there used to be some iconic brands in advertising that existed.

• 7:30Auren Hoffman?

  How do you think influencers are going to play into this? Because they're usually a lot less risk averse. People are following these influencers directly. How are they going to play in the advertising landscape?

• 7:41Speaker 01

  Well, obviously they play a huge role now in terms of sponsored brands and in some cases even television type ads running in the streams. I think they've had a hard time crossing over. I mean, you look at something like a Mr. Beast and some of the challenges of trying to get an influencer in this world to exist in kind of a programmed content world. Listen, those thrive advertisers are all over them. It's been meaningful. I don't necessarily think it'll be just an easy transfer and the shows and programs that you watch will all be influencer driven.

• 8:16Auren Hoffman?

  And we're seeing a bunch of players emerging in the retail media world. Where do you think that's going to kind of shake up in the ad tech landscape?

• 8:25Speaker 01

  Yeah, it's been a huge impact as you have existing big advertisers like a Walmart and Amazon creating their own retail media networks.

• 8:34Auren Hoffman?

  Instacart now is doing that.

• 8:36Speaker 01

  Yeah, and folks that have never been in the advertising business before, the whole travel segment, they sit on some of the most valuable loyalty data. It's volumous and they're all getting into the media game. So it'll run its course as it relates to not everyone's going to be able to run their own retail media network and there'll be fatigue on the same advertisers or CPG clients that they all go to and try to hit them up to shift spend onto their platforms. But it's a huge impact in the advertising technology world, largely because this is all automated, it's all super targeted. And so therefore it's all programmatic by and large. And that's right into ad tech's wheelhouse.

• 9:21Auren Hoffman?

  It's both like a good thing, but also sometimes a bad thing for a consumer when you're searching for a random product on Amazon and it seems one out of four, one out of three things you see is an ad. And sometimes it's not for something that you would have seen anyway. So it's not clear how effective it is or what it's cannibalizing. Are we like peak retail media or is it just going to keep going and going and going?

• 9:46Speaker 01

  I think we're in early innings. I think we're going to see more and more, what you're starting to see, what you pointed to was the user experience on the owned and operated media that an Amazon has. They control it. It's listing, you don't know if it's sponsored or not. I think what you're going to start to see more of is ads being targeted to Orin on a TV show that he loves. That's part of the retail media network or commerce media where off property, you're going to start to see ads that are more targeted, that are backed up by data and that try to bring you back into the commerce purchase.

• 10:26Auren Hoffman?

  The CPG brands, historically, they've always spent billions annually on trade promotion, product placement in stores, little advertisements in stores, getting it at your eye level as opposed to the below level on the shelves. And that's always had tough attribution. And it's also been like a tax where these trade promotions was a tax on the retailers, the retailers that were charging, which basically that tax would be extracted from the brands. Are the retail media networks just digitizing that dynamic? Or is just taking that from one to another? How do you see that evolution?

• 10:59Speaker 01

  It's certainly building on the backbone of that, the whole idea of targeted in-store, and now the store is the website. However, if you go to a Walmart or Target, there's a whole different group of guys, gals, executives that handle the in-store, and they have a budget, and they have for years fed off of those end aisle caps and in-store promotions. And the last thing they want to do is see that bleed just one for one into a retail media network in terms of media. They're trying to double down on it. So the very same guys that are sometimes being forced to advertise themselves, they have a business model that really predicates that retail media networks have to be found dollars, not just shifted dollars.

• 11:45Auren Hoffman?

  Yeah, it seems tough. So if you're like a random CPG soap company or something like that, you got to pay to get the right in-store things. That might be the discovery. Then you've got to pay just for general brand awareness. So general brand things that go on. Then you have to pay on the website when people are shopping on the whatever.com. At some point, either prices are going to go up or margins are going to go down. It seems like they're in a tougher spot than the Walmarts of the world. Or do you disagree?

• 12:15Speaker 01

  No, as you pointed out, there's already fatigue because even though it's great signals, being able to attract the purchase in the ad, as you pointed out, that person's going to buy Dove soap because they always buy Dove soap. Are they buying more Dove soap because of the ad? And are people who don't buy Dove soap buying it? And I think that there's real fatigue that's starting. And there's still a real belief in brand building.

• 12:40Auren Hoffman?

  Maybe I'm super old school. I love Ivory soap. I still love it. I'm probably the youngest Ivory soap buyer in America. Probably everyone else is over 80 or something. I still think it's a great product. And for whatever reason, I grew up on it and I just like it and I just enjoy it. But you build these habits, maybe in your twenties or something, and then you kind of stick to them throughout your life.

• 13:02Speaker 01

  You look at the last recession that we just went through, or I guess we never went through a recession or we went through seven, depending on your point of view.

• 13:11Speaker 01

  The simple fact is that the folks that were able to keep pricing or increase pricing during that period of time, where the folks have built brands, folks resonate with it and say, I'm not switching to a store brand.

• 13:23Auren Hoffman?

  Coca-Cola is just an incredible brand and people just remember it from their childhood. It's like this enduring brand, the newest soda, the Omni Pop soda, which is cool and everything. It's unclear if that's even going to be around in 10 years. It's hard to build something so enduring that's going to last for so long. Now, how do you think of the role of data and ad tech? You've been in the business even longer than I have. We've been friends for a long time, talking about data and ad tech. How do you think that has been evolving over the last 15 years?

• 13:52Speaker 01

  It's really the oxygen to the whole ecosystem. Programmatic advertising, advertising technology wouldn't exist if it wasn't for the concept of coupling data against media to make it more targeted, more effective and better ROI. And all the apparatus that has been built has been built around that concept. These targeted advertising infused with data signals. It's just absolutely essential to the story and this is the purpose. I think what you're seeing is obviously privacy concerns. That's been the story for the last five, seven years, from GDPR to state initiatives.

• 14:35Auren Hoffman?

  Because data about a consumer, what we're allowed to know about the consumer. Maybe it's fine to know that they're in this DMA or something, but you might not want to be targeting all the way down to their house or whatever it might be.

• 14:47Speaker 01

  And it's a very messy world because there's different restrictions in different areas of the world, even in different states. And so it's probably the only time that the industry is all leaning into a federal solution because it's becoming damn near impossible to be able to run your same playbook across the states, let alone Europe, let alone APAC. So what we've seen is a acute rise in consumer privacy that's being watched closely. But also, I think with the part of the privacy initiative, sometimes it's not purely beneficial for the consumer, but the demise of the third-party cookie has really changed the game plan and the playbook

• 15:29Speaker 01

  for targeted advertising. And what we're seeing is more of a shift to the value of the publisher and their relationship with their user.

• 15:39Auren Hoffman?

  Because they've got some sort of context too around the content. It was great pickleball content or something like that. Well, you have a sense of the type of person that might be watching or engaging with that content.

• 15:52Speaker 01

  It's always been something that the buyers have kind of eschewed because there's been this lack of scale aspect to it. But more and more, they're leaning on tech partners like a Magnate and others that can take that pickleball content from a thousand publishers, bring it all into one pickleball segment, and now it's scaled and buyers trust it and are able to buy it that way. So there's been a big shift that's going to only increase to publishers being able to participate in this data economy, which is really important. It's tough being a publisher these days.

• 16:25Auren Hoffman?

  It seems like these bigger guys that have access to all the data, the Metas, the Googles, the Apples, Amazons of the world, they have this quote-unquote first-party data. And it seems like, for whatever reason, the privacy rules have been like, hey, you can collect as much first-party data as you want. You could do whatever you want with the first-party data. You could do this crazy, insane targeting, which obviously is very good for the very, very big players. If two people want to come together and work together on something, well, now you can't do that. That's terrible. And probably because the big players were the ones writing the rules. They're the ones in the room when the legislation gets created. That's my conspiracy theory, and I'd love to get your take on it.

• 17:04Speaker 01

  When you have the terms of service for billions of people and it's just a click here, we've changed their terms of service and it's 300 pages long and it's page 219, paragraph three.

• 17:18Auren Hoffman?

  We could do whatever we want.

• 17:20Speaker 01

  It's very difficult. In order to have a full experience and a lot of the social walled gardens, you need to have presence. Folks need to know who you are. It only adds to the experience. And so having this perfect fidelity in terms of signaling and latitude of what you can do with it, it's a pretty good business model.

• 17:38Auren Hoffman?

  Why can't there be a first party layer on top of all the third parties? People have been talking about this. Why can't all the publishers get together and be like, okay, we're now part of this quote unquote federated network and it's all first party-esque. Yeah, maybe it's a different URL, but it's all first party. We share, maybe even people pay a very small fee so they can get access to all the content or something like that, but they're all part of it. And you understand you're part of this first party network. Is that just impossible? Like it's impossible for people to get along and stuff because no one's just gonna join Hearst or something. You kind of want something a little bit bigger than that.

• 18:17Speaker 01

  It has been tried. There have been plenty of startups. Heck, I invested in one of them. It didn't actually work out. It's really hard. I think that generally speaking, there's always this imbalance of practicality versus perception. And when folks sit at the table and you get 20 big publishers, they all feels though there's a special, more special, they deserve more or better terms.

• 18:43Auren Hoffman?

  They're all dying together. They're all getting killed. They need to somehow work together. It's that prisoner's dilemma thing. If it was two players, they'd be able to do it. There's like 200 players and they're just not able to, well, yeah, I'm just way better than them. I don't want to help this guy because they see that other publisher more as their competitor than they do as like a partner.

• 19:05Speaker 01

  Yeah. Or as opposed to really figuring out who the real competitor are, which the walled gardens, where all the money are going to.

• 19:11Auren Hoffman?

  Interesting. Speaking of walled gardens, certainly in the last 15 years, they've every year just become more and more powerful. Now there are new walled gardens, so maybe each individual is slightly less because they have competition amongst themselves, which maybe they didn't have before. Are the walled gardens collectively going to be more powerful in the future? Or do you think the rebel alliance is actually going to take in and take down the Death Star?

• 19:35Speaker 01

  It's hard to believe that they could become more powerful. That would be saying then that marketers are comfortable with 95% of their budget going to walled gardens and 5% going to the rest of the world. So I think they may have reached a zenith, but I don't see a rapid decline as some have predicted. The ease of use, again, going to small to medium sized businesses, how easy it is to use, you drop a credit card, you have the data, you have the targeting, that's not going away. I do think the excitement in the ad industry is this pool of dollars that has been outside the digital grasp, and that is the broadcast dollars, the linear dollars. And that necessarily just isn't going

• 20:20Speaker 01

  to tumble to the walled gardens. Some, Google owns YouTube, Amazon owns Prime, they'll be a perfect home to capture some of those dollars, but others don't have the equivalency of a broadcast type experience and a broadcast type of ad. And so I think that that is going to really benefit legacy media in that regard from their streaming platforms that they're creating.

• 20:44Auren Hoffman?

  How do you think the role of the middleware providers have changed in ad tech?

• 20:49Speaker 01

  It's been a constant theme of consolidation and weeding out. There have been a long history of middleware guys that really were just in it for the arbitrage and weren't providing any additional value. And little by little, the buyers, whether it's a DSP or an agency, have gotten wise to the supply chain economics of those plays. So that's going away. At the same time, DSPs and their agency partners want to buy from fewer.

• 21:25Speaker 01

  Partners. And so therefore, even if you did have a really good innovative ad unit on 300 of the best publishers around the world, in order for that business to work, you needed to call on those publishers, get the unit on the page, then hire a team to go call on agencies and DSPs, point them in your direction and buy your special sauce. And now what agencies and DSPs are saying is, okay, I get it. It's good. I'm buying from three guys now. Put it on that guy's platform and I'll just buy it from that. And it's actually quite liberating to those middleware guys because now they don't have to hire a publisher sales team. They can just come to someone like us or our competitors and say, hey, I've

• 22:10Speaker 01

  got this cool thing. Plug it into your exchange and I've already told the buyers it's going to be there and they'll buy it from you. So I think you're seeing a collapsing of what was an incredibly confusing and inefficient ecosystem of middleware.

• 22:27Auren Hoffman?

  For those listening who don't know, a DSP is a advertising technology company that represents the ad buyer. The DSP that is now the most preeminent is the Trade Desk. There used to be a ton of DSPs. In fact, when you and I met, I don't even know the Trade Desk even had started yet. They kind of overtook. Why did they win? Why are they doing so well? The CEO, Jeff Green, he's an incredible operator. He's one of the best in the business. It's still unclear to me why they ran the tables and why they won so big.

• 22:59Speaker 01

  Nothing but the utmost respect for Jeff and Trade Desk. Built a great product, but that doesn't always ensure that you're going to win. But they did build an easy to use product in a world where everything's getting more complex. They went to market with two differences that they did in go to market strategy. One was they didn't want to get into the managed business. They did not want to hire a bunch of folks.

• 23:21Auren Hoffman?

  Which was agency friendly.

• 23:23Speaker 01

  Correct. So they didn't want to do the managed business. So they were willing to forego that easy revenue, call it ad networky revenue. They too went after. A group that folks had given up on, which was the agencies, the meeting mass, the turns. They're like, I'm going right to the client of the agency. I don't want to deal with these guys. They have too much pricing power. They're just going to jam me down every time we renew. The trade desk ran the table on picking up the biggest users and train them on the software. So now it's super sticky. The agency operates the software, not trade desk. And from there, they started a momentum that they caught a couple of lucky breaks. There was consolidation, a lot of M and A that didn't work out.

• 24:08Speaker 01

  And some guys just went by the wayside. So they've had an unbelievable run.

• 24:13Auren Hoffman?

  I think it's a tough business because the whole system, the whole stack basically changes every five years. You have a lot of creative destruction. You're doing well in one system and all of a sudden everything changes. And now your company is no longer positioned to do well. So you see a lot of folks and then some companies like yourself, the trade desk. It's there have been able to ride multiple waves. Walk us through some of those changes over the last five years where you think some of the changes are going.

• 24:42Speaker 01

  That's partly one of the tough things about being a public ad tech company is that generally speaking, your biggest investors are generalists and it's really difficult to understand the nuance. And then they see something that's cataclysmic and they're like, well, that's going to happen every five years. So how can I possibly be a long-term holder of your stock? I don't get it. That's something we battle all the time. Sometimes we win, sometimes we don't. But I think the biggest changes over the course, when we talk some about the privacy aspects of it and the targeting. But largely speaking, the battle with Google was the story of the last chapter.

• 25:24Speaker 01

  Google had such a dominance in their implementation of their software, their ad server, which came via an acquisition in their ad exchange, which was partly built, partly an acquisition. So the open web, the non-Google folks, I would say that the last era was all about trying to battle Google's dominance. Certain practices came to be to try to compete against them. Header bidding, for instance, this unified auction of putting everything together was a direct response to Google's dominance.

• 25:58Auren Hoffman?

  It seemed to make Google even stronger.

• 26:00Speaker 01

  It basically did indent Google. It did help. It did create more competition, but incredibly harmful from an efficiency standpoint. If you want to dial back up in the planet we live on in terms of the amount of calls and CPUs and all the volume being done on the same impression is ludicrous. I think we're getting into a post-Google phase if we're now looking ahead. And that is going to be more defined by, less about trying to trick Google than it's going to be more of a level playing field. There's no question that when the dust settles on this, and we're talking several years out, obviously, that it will be more level playing field for publishers, for buyers, for independent ad tech like ourselves.

• 26:43Speaker 01

  And this will be the era of streaming and CTV. And that will be the tens of billions of global dollars that will be coming into the ecosystem that have been out of the reach because of the way it was being delivered. I think you're going to look back five years from now, and I think you will see those as two major themes that are different from previous themes.

• 27:04Auren Hoffman?

  Because everything is changing every five years, what type of CEO do you think does well in this environment? It's not one where an optimization thing is going to work because it's so hard to know what you should be optimizing because everything could change. You need someone who somehow can both be a great operator, but also be a great product person and be someone who can embrace uncertainty. So if you're like betting on CEOs, how would you bet on them?

• 27:32Speaker 01

  And it's an exercise that I've gone through, exercise I've done on boards. It isn't easy. I think like anything, whether it's public or private, if it's an ad technology, it has to match the flavor of the company. If it's a product-led company, a product organization-led company, I think it's really difficult and challenging trying to change that DNA. I would definitely default to someone with product experience. But if it's more of a sales and marketing organization, more of a Financially driven, let's just say you're putting together a bunch of companies in a portfolio and it's all about capital efficiency and it's all about purchase price and it's all about running at an efficient level, then that creates another profile.

• 28:14Speaker 01

  But ultimately, it has to be someone that can partner very closely with their leadership team because no one's going to have the skillset to be able to address all the nuances of it. And it's very nuanced. It is absolutely, you need to know what's happening in the market on a quarterly basis, daily basis, to be able to make these decisions for longer term. And I think you just have to stop kidding yourself that there's such a thing as called a five-year plan in this industry because it's just not possible.

• 28:45Auren Hoffman?

  If you think of the CEOs that have run companies that have had increasing market caps and been effective, you are really the only one that wasn't the founder of the company and kind of the product oriented. Obviously, you have Jeff Green at the trade desk, you have Adam Fergie, who is at Opel and you're almost the exception, not the rule, of somebody who came in who's just an incredibly good operator. Why were you able to succeed where so many other people who have tried it was not able to be successful?

• 29:14Speaker 01

  We caveat that with saying that I am succeeding. Generally speaking, if you're in my role and you're not the founder and have never been a founder, you usually get the call when there's like a spill on aisle three.

• 29:28Auren Hoffman?

  Because when you originally took over, which was then Rubicon, it was 100 million market cap or something.

• 29:36Speaker 01

  Yeah, we had 125 million in cash and 100 million market cap.

• 29:41Auren Hoffman?

  Yeah, it's amazing.

• 29:44Speaker 01

  There's a certain latitude in that.

• 29:45Auren Hoffman?

  It can't get worse.

• 29:48Speaker 01

  It literally couldn't get worse.

• 29:50Auren Hoffman?

  Your market cap is negative $25 million. It can't get worse, I guess.

• 29:54Speaker 01

  If you drove it to negative 50, no one's going to be terribly upset about that. And it sounds kind of weird, but what it does is it gives you a chance to be patient. If this has been going on for seven years and you've been slowly dying and you didn't realize it and then you wake up one day and it's almost over, 90 days isn't going to fix it. As a matter of fact, when the board did hire me at Rubicon, they said to me, if you dare come back with a 90-day plan, we got the wrong guy.

• 30:24Auren Hoffman?

  They had a lot of foresight. That's not common.

• 30:27Speaker 01

  There is this pace where you're basically have a year, you're forgiven, you are making harder decisions, you're doing the right thing. And yeah, it gets worse before it gets better in almost every case, because it's almost always more messed up than you thought when you were going in.

• 30:43Auren Hoffman?

  I imagine the first 90 days, you're just like, oh, another one? Oh, another problem?

• 30:48Speaker 01

  Oh, Lord, yes.

• 30:50Auren Hoffman?

  Or you thought at least this part of the company was going well. It turns out that company also has had all these issues and everything.

• 30:56Speaker 01

  Then all of a sudden they checked that and all the fun stuff.

• 31:00Auren Hoffman?

  If you're advising someone who's doing a turnaround, you've really successfully done this turnaround. Beside for that, what else would you advise them? Would you be like, okay, cut more early? What else would you advise them that you think is more universal?

• 31:13Speaker 01

  Yeah, 100%. I think that when you look back on anything you do, and this flies a little bit in the face what I said, but there's a sweet spot between 90 days and a year. It should always have been three months earlier. You should have the confidence in your conviction and knowing full well that there's very little you could do to the company where folks aren't going to be like, I get it. You gotta do something to fix it. You gotta use that period of time to your advantage. And almost always, when I look back on things, we could have done it faster. Not years faster, but we could have taken the pain quicker and the recovery would have been more accelerated.

• 31:50Auren Hoffman?

  You have all these constituents you have to communicate to the employees. You've got to communicate to your shareholders. You've got to communicate to your customers, who are worried that you're going to still be in business. How do you think about this communication problem during these turnarounds?

• 32:05Speaker 01

  I think the most important folks out of the gate is 100% your team members, your employees. If they don't have the conviction, if they don't have the excitement, then you've lost. It doesn't matter what your customers think, but you have to do that in tandem and parallel with the customers. Rebuild faith, trust, get rehired if you've been fired. Know that it's going to be a longer road, but you can't do it without your team on board. And that's not easy because you're very shortly into any of your tenure if you're coming in. There is that come to Jesus moment where you have to turn to the company and say, this may not be the company that you originally joined and liked.

• 32:44Speaker 01

  And if that's the case, no harm, no foul, but please do us all a favor and depart now if that's the way you feel, because we've got work to do.

• 32:53Auren Hoffman?

  Here's the new vision. Here's what's going on. You had signed up for this three years ago, but it's changing and you've got to kind of almost like re-sign up if you want to be here and be effective.

• 33:03Speaker 01

  People tend to be very honest about it. You do that speech and you walk away and you feel real good about yourself and then 90 people quit.

• 33:11Speaker 01

  And you're like, well, I hope it's the right 90.

• 33:13Auren Hoffman?

  They're going to be more successful if they opt in and hopefully they're opting in not because it's their only option. If it's, I can't find another job. Well, that's bad. But if they have many options, yet they're still opting in, then that's a good sign.

• 33:24Speaker 01

  Yeah. First sign of signing up.

• 33:27Auren Hoffman?

  Now, part of your success is you've really been incredibly good at M and A. You've done a ton of deals at Rubicon now, Magnite, and I'm sure maybe you wish some of them went better or something, but they seem to have done extremely well and been very, very successful. Most of the folks in ad tech and also really anywhere in technology have had a very spotty record of M and A. Most of M and A has not done well. What are you doing right? What could we all learn from you?

• 33:55Speaker 01

  My first advice is if you can avoid it, don't do it.

• 34:00Speaker 01

  Because it never works out exactly as you plan and it is a high risk. But I guess my biggest piece of advice is if you're not doing it from a position of strengths, it's never going to work. How many times do we see player six team up with player eight? And in theory, they should be player three because of their combined revenue. And there's still the sixth player and the eighth player and the market doesn't care. So if you're not a leader and you're not doing this to accelerate your leadership position, I think M and A is a really horrible idea.

• 34:36Auren Hoffman?

  Yeah, I've seen that happen all the time where they're buying or they're trying a new market. They buy like the number four or five player and they stay number four or five. In fact, it slowly degrades because they don't have the product chops at the top to really make it happen. And eventually there's some ways to just like write it off.

• 34:54Speaker 01

  And in almost every case, if you're in that tier and you're doing M and A, it's with a cost structure focus first, which is also a mistake. Because if all you're doing is combining and saying, we can take 40 million of costs out of the system and that's it, that's hard to charge the hill and get your people all excited.

• 35:13Auren Hoffman?

  There are companies where they have done more M and A than all of their market cap. This is clearly value destructive. Back in the day, there was this company, New Star, that was like that, where they're constantly doing M and A and they spent probably like 3X the market cap of the company on M and A or something.

• 35:30Speaker 01

  Yeah, it's just never the quick fix. In the case of Talaria, what went well was product market fit. We were the largest omni-channel programmatic platform, but didn't have a lick of CTV. We looked at the build by partner and quickly came up with, we couldn't build it fast enough. Partnering it was too strategic, so buy had to be the option. Mark Zagorski at the time is now doing a great job at Double Verify. He was running Talari at the time. We got friendly. We started talking about the things that were keeping us both up at night. He was a subscale public company. I was a subscale public.

• 36:12Speaker 01

  Bringing it together provided more scale, but more importantly, it made a lot of sense that all of a sudden now you have one player that's the leader in CTV and the leader in non-CTV and it makes a ton of sense.

• 36:25Auren Hoffman?

  I remember when you guys were doing it, that was a super risky. It was super ballsy to do that because you guys were both somewhat evenly sized and it's very hard to like mash those two things together and be successful.

• 36:39Speaker 01

  Even worse, the way it happens, usually in M and A, there's an acquirer and there's a seller. This was, the art term was merger of equals.

• 36:48Auren Hoffman?

  And those almost never work.

• 36:50Speaker 01

  And not only never works, you have to go outside and get fairness opinions when you're a public company. And so the guy who finishes the fairness opinion, and as he's leaving, he goes, you know, these things never work.

• 37:01Speaker 01

  He said, I've never been involved in a fairest pigeon of a merger of equal transaction that's worked. I was like, oh, that's great.

• 37:08Auren Hoffman?

  Oh, my gosh, that's crazy.

• 37:10Speaker 01

  The social aspects of it can kill just as easily as the financial structure or the good market.

• 37:17Auren Hoffman?

  Social mean like the cultures, putting them together and stuff like that.

• 37:20Speaker 01

  A hundred percent.

• 37:21Auren Hoffman?

  Then you change the name. That was almost like a necessary thing that one had to do.

• 37:26Speaker 01

  It was dictated by the terms of the merger of agreement. A merger of equals is you get five board members, I get four, but if I'm the go with four, I get the chairman. Okay, you get the marketing guy, but you have to take our lawyer. It's just crazy. The fact that it worked is nuts. But we caught a lucky break and this sounds morose, but COVID hit right as we announced the deal. And one of the biggest aspects of social challenges, culture, is offices, which, what office are you going to pick? Who gets which desk?

• 37:56Auren Hoffman?

  That can be really petty.

• 37:58Speaker 01

  Oh, yeah, it can kill it. And so now all of a sudden, everyone's trapped at home. And there's this level of empathy in the early days. I don't know if you remember, but everyone got the benefit of the doubt because everyone's going through this uncharted world. And folks were like, ah, that person kind of came across as a jerk, but he seems like an okay guy. I'm going to give him the benefit of the doubt. It actually really helped us. It didn't hurt us. It went on too long. Everyone can say it went on too long. But when we finally got into the office together, it wasn't as jarring an experience. It was just an elation to be able to get back in together.

• 38:30Auren Hoffman?

  And then you did SpotX, which was another just massive acquisition. It was a crazy first time and it worked out. So we're going to like go again. How did you think about that one?

• 38:40Speaker 01

  It wasn't terribly planned because we never thought that SpotX was going to be for sale. At the time, they were owned by a German company, RTL. They'd been owned by them for six, seven years. When that came to market, it immediately got us rethinking about our marketplace position. We felt as though we had built a pretty differentiated company and it's only been for a year. But people could say what Magnite was and what it wasn't. And that hasn't always been the case. And add technology. And our biggest concern is if Spade X were acquired by a competitor, we would lose that differentiation instantly. We just needed to do more of more. We wanted to bring on more.

• 39:23Speaker 01

  It was actually quite complimentary in terms of the customer set, but it was going to be even worse in Talaria in the terms of the fact that we knew that one platform had to be deprecated. We knew that there were going to be more losers than winners in the deal because you're going to have redundancy. It carried with it its own flavor of risk. I'd like to say it was all up and to the right, but it wasn't. There was some really tough quarters in terms of putting it together, getting the culture built. But I feel really, really good that we've come out of it and the assets that we have, the folks that we have were so much stronger for it.

• 39:59Auren Hoffman?

  Cool. And a couple of questions we ask all of our guests. What is a conspiracy theory that you believe?

• 40:06Speaker 01

  I think you gotta go with there are UFOs. Now, whether they're being driven by green people from Mars or whatever the case might be, but there's just so much evidence that's coming out about these unidentified aerial objects or flying objects or whatever you want to refer to them as. And so I'm a big believer there that something's out there.

• 40:26Auren Hoffman?

  I like it. Last question I ask all of our guests. What conventional wisdom or advice do you think is generally bad advice?

• 40:32Speaker 01

  We kind of touched on it, and that is the idea that the default mode of a leader coming in or a leader anointed that came up through the ranks, it's almost like default has to be action. Default has to be, I need to see something in 90 days. I need to see something in 100 days that puts your stamp on this, that your thumbprints are all over the idea that this is now your company and this is now the vision that we have. And the concept that the folks that came before you didn't have any vision. Ergo, it only took you three months to come up with a vision or refine it. I think that patience is important.

• 41:11Auren Hoffman?

  Is it less patience and more like humility?

• 41:13Speaker 01

  They kind of go hand in glove. Humility is, in my mind, in the business setting, the ability to walk into the room and know you're not going to know everything that everyone in that room has and go in listen mode. And your default shouldn't be action mode in many cases, I feel, where I've enjoyed a modicum of success.

• 41:33Auren Hoffman?

  Well, this is great. Thank you, Michael Barrett, for joining us on World of DAS. I follow you on LinkedIn, and I definitely encourage our listeners to engage you there. This has been super interesting. I love the deep dive. We've been friends for a long time. I'm really excited to make this happen.

• 41:47Speaker 01

  Thanks, Aurin. Really appreciate the time.

• 41:50Auren Hoffman?

  If you're a super data nerd, go to worldofdaas.com. That's D-A-A-S, worldofdaas.com, and sign up for our weekly Data as a Service Roundup newsletter. Thanks for listening. If you enjoyed the show, consider reading this podcast and leaving a review. For more World of DAS, and DAS is D-A-A-S, you can subscribe on Spotify or Apple Podcasts or anywhere you get your podcasts. And also check out YouTube for videos. You can find me at Twitter at at Aurin, that's A-U-R-E-N, Aurin, and we'd love to hear from you.

• 42:27Auren Hoffman?

  World of DAS is brought to you by Safegraph. Safegraph is geospatial data for physical places. Check it out at safegraph.com. And by Flex Capital. Flex Capital invests in data companies like those we talk about at World of DAS. Check it out at flexcapital.com.