The problem with blind ad networks was highlighted all too well last year when several major brands withdrew advertising on social networking behemoth Facebook. Companies such as Vodafone and Virgin Media suddenly had their branding splashed across pages eulogising the BNP. Brands of the same stature were appearing on wife beating and violent porn sites, all as a result of advertisers having no direct control over where their ads appeared online. Then AdJug burst onto the scene.
The company was the result of an intuitive move towards a developing online trend, according to co-founder Michael Stephanblome. The online marketplace for publishers and advertisers allows users to see exactly who they’re buying from and selling to, as well as establish clear pricing structures and receive detailed reports focusing on return on investment (ROI).
“I knew the blind ad network model wasn’t efficient and although you couldn’t see it in the numbers, I could feel erratic data points in the market. In a blind network you have no starting price and no transparent terms of pricing. The market is also saturated with intermediaries. AdJug offers a very different proposition and in many cases we find that advertisers are willing to pay more for the transparency. It enables them to optimise what advertising works best in terms of where it’s placed.”
The strong ROI focus is testament to Michael’s eBay career. He was the company’s market director in Germany for three years where he controlled an annual $100m budget. When online classifieds site Gumtree.com was acquired by the online auction site Michael was brought on as managing director to oversee the post-merger integration.
His co-founder Satish Jayakumar, also boasts an impressive online background. He was one of the founding team members at pay-per-click pioneer Espotting, and in 2004 he founded contextual advertising platform Nixxie.com which was turning over £7m within two years of launching.
“Satish had approached me during my eBay days when he was running Nixxie. I was amazed at his ability to present ideas. He had the experience of catering and selling to website owners and I had the experience on the advertising side. Seeing as those were the two most important ingredients of an online ad marketplace we knew it was a good idea to work together.”
Although the decision to work together was an easy one, Michael says the process of vetting business concepts with Satish wasn’t as straightforward. The pair spent six months honing their ideas and developing a prototype for what eventually became the AdJug site. Espotting founder Seb Bishop and René Rechtman then came on board as angel investors but the company needed significant backing in order to get off the ground.
“With a marketplace organic growth takes too long. You need investment for technology and to ramp up sales. It’s a battle before you get that critical mass of buyers and sellers. You’ll go broke before you’ve started if you try and do it organically.”
Michael is cagey regarding the deal AdJug made with Balderton Capital, but with VC investment on board the focus turned to tech development and extensive market research. “Our original idea was to find traction in text advertising – an alternative to Google Adsense. Thank god we realised quickly enough that we simply weren’t going to rival Google’s strong position in the market.”
Having woken up to the insurmountable problem of cracking the text-based market, AdJug turned its attention to display advertising and put in place an ‘enabling layer of people’ around their sophisticated automated marketplace system. But finding the right level of talent is an ongoing problem Michael and Satish are still trying to work around.
“Finding tech talent in the UK is really hard and as a result we’re opening up a development centre in Bangalore. Access to the relevant skills is amazing out there. You need a certain mindset in a start-up to combine great tech skills with commercial talent.”
With their development resources extending overseas, so too is the company’s service offering. Michael and Satish are putting the final touches to their launch in Germany, while back in the UK AdJug has enjoyed a 20% month-on-month growth rate in its first year.
The company currently has 650 publishers and 1,200 websites selling inventory through its marketplace including Trinity Mirror and shopping.com. Michael says the goal over the next 2-4 years is to build the best business possible, but is reluctant to focus on a defined exit strategy. “It’s a big risk to do that too early. What do you do if the market changes or you get a cold winter in terms of IPOs or M&A activity?”
With an impressive first 18 months behind it, AdJug’s plans haven’t been altered by the prospect of the economic climate turning sour, according to Michael. The company’s strong ROI focus means it may even benefit from the downturn as advertises seek to earn more immediate bang for their buck.
“I’m not saying we’re recession proof, but from what I’ve seen at the moment spending isn’t going down. In economically difficult situations people are under more pressure to try something new and look at innovative models like ours.”
For now, Michael is enjoying what he regards as the most exciting phase of a start-up – a period of steady growth where you can still personally achieve a lot within the company. Staying small forever isn’t on his radar, however. “I’m looking forward to seeing AdJug grow much bigger.”
