In Redwood City (CA), we met with Rajeev Goel, Co-Founder and CEO of PubMatic, a leading marketing automation software company. Rajeev shares his story of what sparked the idea for PubMatic which he started with his brother, Amar, as well as how PubMatic’s business model has evolved since its founding in 2006. Rajeev also imparts his perspectives on the most prevalent trends in digital media and advertising, including the rapid shift to mobile platforms, and provides some crucial advice to aspiring entrepreneurs around mission, funding and stability.


Martin: Hi, today we are in beautiful Redwood City at PubMatic’s office. Hi, Rajeev, how are you and what do you do?

Rajeev: Hi, Martin. Good to be here with you. My name is Rajeev Goel , co-founder and CEO of PubMatic.

Martin: What made you start this company?

Rajeev: Sure. So PubMatic is actually my second startup. I was born and raised here in Silicon Valley and I did my first startup when I was in college along with my brother who was the founder of the company. He and I started PubMatic as well along with a couple of other co-founders. The opportunity around PubMatic came from our own experimentation as being publishers and trying to monetize content on websites. He and I both have masters in Computer science so we think about things from technology, data and systems perspective. And as we were trying to monetize some properties that we had set up we discovered many of the challenges around how advertising, the buying and selling of advertising has changed from being property or content based to being audience based. At the same time there were no systems, no technology applications to help publishers with this. And so we felt we could create a very significant multibillion dollar technology and services company and focus on the needs of publishers and that’s what we have been doing the past nine or so years.

Martin: Good. So this means that PubMatic directly was springed out of your previous startup.

Rajeev: So actually the first startup was back in the mid-nineties, so I am probably older than I look. And then after that I spent about five years in strategy consulting. So selling to Fortune 1000 companies; Craft Foods, Lowes home improvement, All State insurance. And then I spent a couple of years with the German software company SAP here in Palo Alto. So I was at SAP and Amar was at McKinsey and at Microsoft, so he was at Microsoft in ad sales. We both wanted to go back to our entrepreneurial roots and build something from scratch and so as we experimented with website monetization we discovered the opportunity around PubMatic.


Martin: Let’s talk about the business model of PubMatic. So what are the specific customer segments that you are targeting?

Rajeev: So when we look at the advertising industry what we found is that large publishers are significantly underserved in terms of partners that are helping them in terms of technology and in terms of services. So if you look at the advertiser side of the ecosystem there are very large agencies and agency holding companies and they help the marketers, the brands figure out where to spend their advertising budgets. The flipside of that of course is that big media companies, app developers, publishers, they have to build the content and the audience that those marketers want to spend on and they don’t have any real help. That’s what we created PubMatic for.

So PubMatic today is a leading software Platform Company and we help these big publishers maximize the value of all their digital assets and we do that through technology software platform that is licensed on a fee basis.

Martin: And is it that you are only helping them to monetize the content or are you also helping in producing and distributing this content?

Rajeev: We don’t help them actually generate new content but what we do help them with is three distinct things.

  • First is yield management, so helping them drives as much revenue as possible for every single ad impression.
  • Second is workflow automation, so there are a lot of things that happen inside of a publisher or an app developer that are very manual in nature and we can improve a lot of those outcomes by informing with data and then streamlining it through software automation.
  • And the third thing is analytics so we recently launched a real time analytics platform and this is the industry’s leading analytics solution that really helps these publishers and app developers better understand what exactly is happening inside of their business so they get new insights and can create new opportunities and new initiatives.

Martin: But this would mean, ok understood, yield management having them based on the current content and eyeballs monetizing or improving the CPMs for example but on this automation and analytics part, I guess it would I guess publisher understand which content is performing better so he can produce more of those.

Rajeev: Yes, I think much of the technology that we have built is applicable as well to the content as well as the advertising and that’s an area we hope to explore much more deeply in the coming few years.

Martin: Cool. Tell me about the beginnings of the startup. Because if you are building two sided model somehow how did you find the first customers? I guess you targeted first publishers.

Rajeev: Yes, that’s right. When we first launched back in, we started the company in 2006 and launched the first version of the platform in 2007. We launched it on a self-service open basis. So we knew that this was very disruptive technology, disruptive approach and we couldn’t identify all the potential customers or more importantly how customers would actually use the platform and so we launched it on open basis, people could come and sign up for free while we were under Beta and try out the application and use it. And we would actually spend a lot of our time in the first six months just calling up customers that signed up for the product and asking them: “Was it working for them? What was working well? What was not working well? What additional features they would like.” So we spent a lot of time just talking to those customers and I think taking that open approach when you are the first in the market, when you are pioneering a new market is very, very good because you can never really imagine how your customers will utilize your solution.

Martin: So this means after you introduced your first version for free you build up some scale I suppose based on the publishers and only then you started to onboard advertisers?

Rajeev: We actually work directly with publishers. We don’t work directly with advertisers. So the advertisers work with us through their own technology partner, typically a demand site platform or other type of exchange solution.

As we started to discover which types of publishers, which segments our product was resonating with them most we moved from being a free beta to being a premium solution that is on a paid basis and in fact we only work today with several hundred publishers or 500 or 600publishers globally but we target the largest publishers in the world. So our customers are companies like NBC, Spotify, and New York Times – so very, very large publishing organizations or applications, mobile applications. And what we have found is that by being more selective and working with fewer but larger publishing organizations we can really go much deeper into helping them drive their business better and that it is a better business opportunity for them and better business for us.

Martin: Rajeev, how is the revenue model working and how did you come up with the specific pricing tier?

Rajeev: Pricing, like a lot of things came through experimentation but we charge the publishers a fee for the use of the platform and the demand side platforms that I mentioned earlier also bid and buy media and audience. On our platform we have fee based solutions for them. And these are primarily on a revenue share basis where we charge a fee equivalent to some percentage of the media value that these publishers and buying technology organizations and buying companies transact on our platform. And figuring out exactly what that fee is I would say is a constant experiment in some ways. So we are always testing new pricing, we are always taking new approaches to market and seeing what’s resonating with the customers and seeing what they like, what they don’t like. I think as a market grows and matures there are also opportunities to change pricing.

In the early stages of our business customers wanted a risk based approach where we would only take a fee if we could demonstrate certain results, but as our model became more and more common and publishers understood that there were real gains then they were willing to pay a fee for all of their business but that’s a lower fee but that has actually worked very well for them and for us.

Martin: Rajeev, you see so many publishers, what type of trend can you identify in the publishing industry?

Rajeev: Obviously one of the biggest trends is the shift towards mobile. Within our own publisher base maybe three years ago 10 to 20 percent of the traffic that these publishers had was on mobile devices and now that’s well over 50 percent for the vast majority of publishers and of course for some app developers they have only mobile application or mobile experience. They don’t have any desktop experience. Publishers are really struggling to figure out how to they best monetize and build a consumer experience in that environment. So that I think is one of the biggest trends. We recently published some data to show that we have closed the mobile advertising gap with our platform where publishers actually see higher mobile CPMs than they do desktop CPMs which I think is great news for publishers.

Second key trend is the shift towards a real time bidding or programmatic advertising. So typically advertising has been bought and sold by hand so you have expensive sales people from the publisher that are courting the advertisers and that process is changing to be much more one about audiences, ‘I want to find high quality audience that is with specific attributes’ and they want to find them in real time so that based on what you have done in your last hour, day or week on the internet and exhibited certain behaviors or interests advertisers can target that on anonymous basis. So that is also changing I think how advertising is being bought and sold.

And I think the third big trend is you have got the walled gardens, and so the likes of Google and Facebook and these other what are typically considered technology companies but in fact are making the vast majority of revenue through media and advertising sales. So Google of course is a very large publisher, they have You Tube, Gmail, Maps, these are huge properties. Facebook of course makes almost all of its revenue through advertising. So these media technology companies are putting significant competitive pressure on traditional publishers and I think those publishers are figuring out how do they react to that and how do they thrive and succeed.

Martin: And what is your perspective on the pay walls because I think in Germany, New York times as well is increasingly trying to put content behind pay walls. Do you think this is some kind if a permanent trend or maybe do you think, “OK, this is just a short term trend”?

Rajeev: Yes, I think pay walls definitely have a future in the media industry. The real challenge is how many companies have premium enough content or unique enough content that they can charge for it and consumers will be willing to pay for. I think that’s a pretty slim number of publishers, obviously some well-known examples like Axel Springer in Germany, New York Times or Wall Street Journal in the US. But I think after 10, 20, maybe 50 titles the number of properties that significant number of consumers are actually willing to pay for drops significantly and of course the course of creating news, creating content, distributing and all of those things is quite expensive. So I think a pay wall would be a suitable solution for a handful of media companies but I think we will definitely need to see advertising even beyond that.

Martin: My perception is that whole publisher world is becoming a little bit more volatile over the last five years or so. Some bigger publishers are going a little bit down in terms of number of viewers and some media like Upworthy are shooting up like in a year or so. What is your perspective on that?

Rajeev: I think that’s right. It’s clear that in today’s world of mobile devices, viral distribution and referral through friends there are many new ways to make a publishing or media company succeed and many of the traditional ways no longer work. Subscriptions and these kind of things, heavy paid media , buying advertising, buying distribution; a lot of those things don’t work, but like you said Upworthy, Buzzfeed or some of these other newer models take advantage of creating content that is more viral, more snackable and more shareable is how they are driving distribution and then of course monetizing that through advertising.

So I think this requires a very fundamental re-think of how newsrooms are built. In a lot of these companies they compensate their writers based on how many shares their articles get. That s a very different value system, much less economic system than going after long format journalism that can win a Pulitzer prize or such industry award. So I think many of these traditional media companies have to rethink what does it mean to be a publisher, what does it mean to be a news bureau and how do we succeed in the new world and they are struggling with that as it may mean to change their actual identity.

Martin: Rajeev, over the last 9 years what have been the major obstacles while building PubMatic and how did you overcome them?

Rajeev: I think we have had many, many obstacles and I am sure we will have many more to come.

The first obstacle was when we launched the business it was new and disruptive so people did not understand what the value was, how to use it, all of these things. So we had a multiyear period of education in the market where we had to really educate publishers, educate advertisers on what is our model, why is it valuable, how could it help them. And I think once we achieved that we saw very significant growth.

I think another key challenge in this industry and in the advertising industry and online industry is the rapid pace of change. So innovation cycles, technology cycles are six to twelve months in nature and so if you are not constantly innovating then you are going to be out of business pretty soon. So one of the things that we have done, and with significant success, is we have built a global engineering team: 20 percent is here in the US and 80 percent is in India. And that lets us innovate in real time around the world and also innovate at a price point in terms of our cost basis that is very different that drives profitability into our business. So these I would say are two of the biggest challenges.

Martin: One question to the operations. How do you manage the operations because you have an office here in the Silicon Valley I guess mostly for tech reasons and I guess you have an office in New York where lots of publishers are and potentially only for customer relations and sales and how are your serving the other worldwide or international clients?

Rajeev: We have 13 offices now around the world, so we have got three or four in the US, we have 4 or 5 across Europe – so Munich, London, Paris, Stockholm, Milan and then we have several across Asia Pacific – Tokyo, Singapore, Sydney and India. So many of these are local sales and service offices, as you mentioned, and the headquarters are here in Silicon Valley and for significant development in India.

We have been a global business from day one, so two of my co-founders are based in India, two of them are out here so you know Silicon Valley and India are on the opposite sides of the world and then we have just been filling in all the space in between. But it does require operating on a different level in order to succeed and being very global from day one. And that’s one of the lessons I learned at SAP. When I was working here in Palo Alto, headquarters is in Waldorf, Germany and significant operations in China and elsewhere around the world. And so you learn to communicate differently, you learn to build products in a different fashion, you learn a certain discipline and how you take products to market and sell them and so your global sales force can speed on them and those are some of the many lessons I tried to apply here in PubMatic.

Martin: And when you started, Rajeev, did you start with a development team in India based on your Indian background or did you start with a developer team here in the Silicon Valley.

Rajeev: Yes, in fact our first couple of dozen developers were all in India. At one point we were about 30 people – just myself here in Silicon Valley and 29 people in India. I was doing everything non-development related: driving product and driving business and marketing and all of those things. We tried to put every dollar we could into technology and research and development at the beginning. And then as we started to sign up customers then we of course of involved the business facing teams.

Martin: What I hear from a lot of people that when you are working with Indian developers you really need to focus on the quality, because they have a different kind of mindset form people from the US or Europe etc. How did you in the beginning choose the right developers for your team?

Rajeev: Yes, I think that’s an important question. And particularly in environments where there isn’t necessarily the same startup culture, there can be a desire for people to work at large companies where there is less perceived risk compared to the bigger brand names.

So what we did is we looked for a combination of two things;

  • One is someone who had proven ability to develop well, by that I mean they worked in development organizations for several years, we could give them code tests and things like that actually test their coding abilities.
  • And then second we looked for the right mind set. So we wanted younger, more entrepreneurial, hungry developers, men and women who really were not satisfied with a lot of the maintenance work they happens at big development organizations in India and then said were hungry to do real innovations.
  • And then one of the other things we have done is we have let those folks travel quite a bit to the US. So it is very important to them to meet with customers, be on the front lines of solving for customer problem because that is a very different mindset and approach than sitting in a building all day and coding in abstract.


Martin: Imagine your little daughter comes to you and says, “Papi, I’d like to start a company”. What advice would you give her?

Rajeev: So I think a couple of things. And I actually have two boys one is four and one is five so maybe they’ll do that one day.

First thing is for successful companies, it is very rate that the initial idea is actually the successful idea 5, 10, 15 years on. So if you look at Facebook, if you look at Google, if you look at any company people deem as success the business model tends to change overtime. What typically doesn’t change is the space the team is operating in. So I think it is very important that entrepreneurs stay very open to iterating and listening to feedback from customers and the market on whether something is working or not working. That I think is very important. You have to be willing to challenge your own assumptions and change your model, change your business, change the solution that you are bringing into the market as you get feedback that gets in.

I think second a lot of companies focus from a teams perspective on the right outcomes with the people that they hire so hitting certain revenue targets or shipping certain products. I think that is of course important. I think it is also important to focus on the right behaviors among the team because as the business scales up the types of outcomes you are looking for will change from quarter to quarter and year to year but often times the behaviors you want from the team will be very consistent. And so I think it is really important to train those behaviors in and talk about those right behaviors from very, very early on so that there is an alignment and you don’t find that you have the pocket of the company that is behaving in a very different way than the rest of the company and that can create a significant challenge.

Martin: Can you think of an example of what does that mean?

Rajeev: Sure, from a behavior perspective you want to have a customer service orientation, meaning we come to work in the morning thinking about how do we make our customers business a better business. Now whatever the financial goals are or the new customer sign up goals are that will change from one quarter to the next or from one year to the next. But if that customer service orientation is important for your business you want to make sure that not only people on the front lines but people on the finance organization, people on the legal organization, people in the product and development organization, they also have that customer service orientation and that’s a known and valued thing inside the company because when you are 30 people it will certainly be important but it will be even more important when you are 300 or 3000 people and it is hard for the CEO or the founder to be talking to everybody inside of the business.

And then I think maybe the third piece of advice would be to organize the company so that different teams or different employees are focused on different time horizons. So if you can have certain employees that are focused on this quarter of the next six months and some employees that are focused on one to two years what is happening, what are the key trends what are the things we need to be aware of and focused on, then you can, I think, build a very powerful company, where you don’t get surprised and changing the market and driving the market instead of having to react to the market.

Martin: Good. Thank you so much, Rajeev, for your time.

Rajeev: Thank you, Martin. It was a pleasure.

Martin: And next time you are thinking about starting a company at some point you should think about your corporate values because they remain kind of stable overtime and they will have a big impact as your company grows.

Martin: Great. Thank you so much.

Rajeev: It was great.

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