Sramana Mitra: What did this company do?
Daniel Nathan: Groupon for video games. I went there for the summer. I said, “We’re going to become an incubator and build multiple companies around video games.” I said, “I’m going to build a mobile ad network specialized in video games.” We started with three people in 2012. After one year, we were about 100 people and raised $20 million.
I was a minority shareholder because most of the shares was owned by the incubator. I learned a ton. I met great people. I worked with Germans and Germans have a reputation for good reason. They know how to execute. I’m very passionate about technology so I wanted to dig more. That company was more of an agency than a product and tech company. I pitched another idea to the incubator which was more of a tech company to buy ads in real time. They liked the idea so they give me $100,000. I was with my co-founder. After one year, I went back to them with $2 million in profit.
Sramana Mitra: What did you do with the $100,000?
Daniel Nathan: The first thing we did was hire one engineer. My co-founder was also an engineer. We built that technology to buy ads. I don’t know how much you are familiar with digital advertising.
Sramana Mitra: I’m very familiar.
Daniel Nathan: We’re buying on the CPM. We were buying impressions. We were going to agencies who had mobile budgets based on the CPI. We’re buying on CPM so we’re buying an arbitrage business model. We buy a lot of ads and we try to beat the CPI that the clients are giving to the agencies.
Sramana Mitra: Your clients were the agencies?
Daniel Nathan: Exactly. They were agencies who couldn’t deliver the budgets themselves. It’s a bit like a trading desk. The business model was, a client goes to an agency with a pitch, “I’m going to give you $1 per install in the US.” The agency comes to us, “I’m going to give you 70 cents per install in the US.”
Sramana Mitra: What is the secret of doing that? How do you get that performance out of your system?
Daniel Nathan: At that time, the market was a bit different, but it was really about the power of aggregating. If you aggregate multiple sources, you’re able to really find out, very quickly, how to buy more efficiently than others. There was not any Big Data or machine learning at that time. It was at the beginning of the industry that you should know how to buy more efficiently. You really had an edge just because you were there. It’s not because you were better.
Sramana Mitra: Your coverage is better. You’re talking 2011?
Daniel Nathan: No, I’m talking 2013.