A Few Questions for Dave Morgan, Founder Tacoda

Dave founded Tacoda, a behavioral ad network, six years ago now, and recently inked a deal to add Comscore demographic information to Tacoda’s network. Tacoda is an FM partner, so read with that caveat, but I found our email back and forth interesting, and hope you do too.

Like Tacoda recently did, Google incorporated Comscore some time ago. Why is yours better?



Because TACODA is capturing and can target ads against anonymous browsing behaviors from more than 15 Billion page views per day on 4500 of the top news, entertainment and information sites on the web, from NYTimes.com to MSNBC.com to Orbitz WSJ.com to FM Publishing. This gives TACODA the broadest, deepest and most diverse database of user content browsing anywhere – more than Google or Yahoo! – though they certainly have a lot more search data.

By matching this browsing data to anonymous ComScore data, we now know not only what content they surf, but marketer sites they are visiting online and what e-commerce categories they are buying online. Since we can associate this with time, we can see users much higher up the purchase funnel than search marketing. We can see the users when they are still in the brand consideration phase. By the time that users get to Google, like yellow pages offline, they generally already know what they are going to buy, it’s just a matter of price and vendor.

Will there be any change in how you charge for this?



We sell on a CPM basis only, since our efforts are focused on brand and branded response advertisers – folks that care who sees their ads and where they see them – rather than direct response. We see video as a big part of this future, whether it is on the computer, of IP-driven television or on mobile devices. Nothing beats sight, sound and motion for delivering brand advertising.

Given that you sell on CPM, but are a network, don’t advertisers still want to buy site by site? Will you ever get into that business, or do you think all the behavioral and demographic data obviates site-specific selling?



I expect advertisers to buy both behavioral networks and site-by-site in their media mix. They buy individual sites for the strong, integrated branding opportunities, but they have to live with limited inventory and premium prices. Buying behavioral is a nice complement to that. With TACODA’s behavioral network, they get the audiences that they want on clean, well-lit sites. They get a lot of scale. They get lower prices. However, it will never replace site=specific selling. When someone wants a Wall Street Journal reader or a Boing Boing reader, the only place that they can be certain to reach them, and the only way to fully-leverage the sponsorship value of a great publisher brand, is to buy it site-specific.

As a behavioral network, I do not expect TACODA to get into the site-by-site selling business. It is much better served by direct or specialized sales forces working on behalf of the sites. We are focused on selling people, not pages. When advertisers want to talk to certain types of people, TACODA will be there. When they want to their messages on certain kinds of pages, that will be for other sales organizations.

So how is business at Tacoda? Can you give us a sense of your scale in terms of revenue and margins?



TACODA is doing great. As a private company, we don’t release specific numbers on our revenue or margins, but I can tell you that our last quarter’s revenue was up several hundred percent year over year, our margins are strong and growing, and our team has grown from 25 or so a year ago to more than 90 today, thanks in large part to the work of Curt Viebranz our CEO, who was our COO for the past two years and was the former CEO of HBO International and Time Inc. New Media. Over the past year, our publisher network has grown by 10X as have the number of marketers and agencies that advertise on our network. 2007 is starting out very well and we expect the strong growth to continue.

Can you be more specific on the size of the publisher network?



TACODA’s network today has more than 4500 branded content publishers – folks NYTImes.com, Dow Jones/WSJ.com, Orbitz, Cars.com, NBC, Tribune, BusinessWeek.com, Technorati and FM Publishing. These sites deliver 15-20 Billion page views per month to an unduplicated US audience of more than 140 million unique visitors and deliver real-time anonymous content browsing behaviors to TACODA’s servers with virtually every page and person that they serve. Since TACODA’s market focus is brand advertising, not performance and direct response, its advertiser customer base is quite different than other online ad networks. Among its top advertisers in Q4 were Coke, Snapple, American Express, FAO Schwartz

In your estimation, what are the hurdles/gates in the online advertising business right now?



Advertisers need more scale and less friction and there is a looming shortage of quality inventory at cost-effective prices. If General Motors wanted to appreciably increase their online ad spend this year, they would have a tough time doing it economically and efficiently. All of the substantial auto content sites are largely sold out for 2007. Search usage is growing, but not nearly at the rate that online ad spend is increasing, and the rates for the best search terms are already pretty high. The vast majority of web pages viewed every month – probably 80% of them – can’t currently support premium advertising. They either lack an intuitive and valuable commercial context – they have news, social, email, photo and video sharing content, not technology, travel, cars or health – or they have unsuitable content. Unfortunately, these non-premium content pages are growing much faster than the premium pages. The majority of ad view growth on the web in 2006 was in social and photo and video sharing. Finally, while the “sight, sound and motion” of video advertising on the web certainly offers an attractive vision for the future, it is going to take years for it to truly come to fruition.

Any other thoughts for 2007?

I think that the big online ad stories in 2007 will be brand dollars, targeting and scale. This should play very well for all networks, but particularly those that they serve the needs of brand advertisers – who care about who sees their ads and where they see them. I think that we are going to see a lot of attention, and a lot of money, flow to sites further down the food chain than those few that have dominated this sector historically. The really big guys will do fine, but the mid-size and smaller folks will do even better.

Thanks, Dave!