I hope you’ll join me for the following experiment.
Inspired by James Andrew Miller’s work and a host of other oral histories, I thought it would be fun to do an oral history of a company—one in particular that I’m fond of and have seen great returns from.
How is this Going to Work?
Other than dates to provide chronological context, there is no additional commentary below. All comments are made by the players themselves. I conducted no interviews for this oral history, but rather found other interviews and quotes that are cited below. My job here has been merely to research and collect the quotes, condense for brevity and continuity, and arrange them to build an interesting story. Quotes may be from the time period mentioned or a later date.
So let’s hear from the players involved to learn how they went from a startup to a $20B+ company today!
Cast of Characters (in order of appearance):
Jeff Green—Founder/CEO of The Trade Desk, Co-Founder of AdECN
William Urschel—Founder/CEO of AdECN
Kevin Johnson—Former President of Platforms and Services Division at Microsoft, Current Starbucks CEO
Roger Ehrenberg—Managing Parter of IA Ventures
Dave Pickles—Co-Founder/CTO of The Trade Desk
The Trade Desk Co-Founders, Jeff Green & Dave Pickles.
Selling AdECN to Microsoft
Founding The Trade Desk
1. Founding AdECN
Jeff Green: I heard there was a company that had been publicly traded – it was called Expertelligence – based in Santa Barbara, and it had tried to do an [advertising] auction. The company had gone bankrupt, but [AdECN co-founder] Bill Urschel had bought their tech from them. He was the finance guy in charge of the cap table. I was the ad guy who had the vision. What he had bought was really just the back of a napkin, but we started AdECN with it.
Bill Urschel: AdECN [was] the first, real-time online exchange for advertising… It's like the stock market, except that it's all happening in a computer, where all the bids and trades are executed. As an exchange, our clients are the ad networks and similar entities. We are not just another ad network. What we're doing for our customers is providing liquidity. Just like the stock market, an ad network may have a good campaign, but run out of inventory—a place to put an ad in their own publisher base. In an exchange, they can shop those campaigns. Ad networks can also run out of campaigns, but still have good inventory left they could sell to a publisher. They use the exchange to find buyers for the inventory.
Green: AdECN was a system that basically was trying to be the New York Stock Exchange of advertising. We built a hub, where we could conduct auctions, in real time, and allowed people to participate in real time. What we're building now, is a system much more like the Goldman Sachs of online advertising. While we participate in a NYSE-like platforms, we utilize those real time auctions to better buy media, and buy media in a better way than what we've done in the past.
Urschel: To continue the stock market analogy--if a client goes into Merrill Lynch, and wants to buy 1,000 shares of IBM, but they can't find a seller among their own customers, they go out to the stock market to fulfill the order. It's the same thing with online advertising. We're becoming the infrastructure for online advertising, and providing the ability to enter ad campaigns and ad spots. We provide over a dozen targeting methods, so advertisers know what they're buying. For example, that they are reaching a 40-50 year old male in Los Angeles on a sunny day, and who is visiting a site on small aircraft. It's a real-time auction, on a CPM basis, where the highest bidder wins. When someone lands on a web page, it triggers an auction on all advertisers in under 100 milliseconds. We also provide the ad serving itself, and all of the accounting.
Green: We spent a few years creating [this exchange], figuring out that because there were 350 ad networks, we'd either need to compete with all of them with cutting edge technology, or we could create an online advertising exchange, because no one else had. We decided to put on our fair and neutral hat, protect the market, and change the landscape. I think it's fair to say we did that—we [eventually] sold to Microsoft.
2. Selling AdECN to Microsoft
Urschel: It was very straightforward. We contacted them well over a year [earlier], and made our pitch to them—not so much for an acquisition, but for them to become part of our exchange... We were too early for them, several people couldn't get their hands on what we were doing—but it happens they had a fellow there writing a white paper, proposing just what we were doing… Microsoft came back to us in April, and suggested the deal. I think it was just maturation of our industry, and the point where they needed to do something with the exchange concept.
Kevin Johnson (President, Platforms and Services Division at Microsoft at the time): Both Microsoft and AdECN have a deep commitment to creating the technologies and platforms that enable advertisers and publishers to maximize their ROI in the digital marketplace. We believe the addition of AdECN to the Microsoft portfolio is a perfect fit and will create more efficiency for the industry by forming a more robust marketplace between advertisers and publishers, aggregating more supply and demand. This is good for the whole advertising industry.
Urschel: They actually moved very quickly. Most of the delay was not them, it was most us dotting our I's and crossing our T's. It was very fast, considering that there were lots of moving parts and attorneys involved, and it was not unpleasant. I've sold companies before—to public companies—and this was by far the most exhaustive in terms of due diligence I've gone through. I'd have to say I'm happy with the deal process itself, and I ended the deal respecting them for it.
We got offers from others, but this one by far made the most sense. Our other offers were from ad networks and agencies, and if they acquired us it would have tainted the neutrality of the exchange too much. Even with Microsoft, we have to be careful, however we think Microsoft is diverse enough to stay neutral.
From: Jeff Green
Date: October 6, 2009
Subject: Thank you
Dear Friends & Colleagues –
As you may know, today is my last day with MSFT/AdECN.
I can’t believe how far we have come in such a short time. Though nearly 5 years ago, it seems like yesterday we started AdECN as pioneers in the exchange space. Using an auction for every impression, we debated whether to build an ad network or an exchange. We opted to build an exchange because there were hundreds of ad networks but there were zero exchanges…
This chapter has been one of the most exciting of my life. AdECN never could have grown like it has without great employees, great partners, great clients, and a great parent company—Microsoft. I sincerely thank you for your partnership—and in many cases, friendship…
I would very much like to keep in touch. Linkedin and my cell phone is the best way going forward.
Until next time,
3. Founding The Trade Desk
Green: As far as the team goes, we have several engineers who have come from AdECN and Microsoft, including Dave Pickles who wrote the ad server at Microsoft which allowed AdECN to scale to hundreds of billions of monthly impressions.
[Dave Pickles and I] basically said we wanted to create the company when we left Microsoft. Both of us are serial entrepreneurs, and as fun as it was to be at Microsoft to see something you created beginning to grow up and become adopted, as a central part of a humongous company—and as much as we loved building the product and had a great experience there—it's not as much fun maintaining it. We felt we wanted to be more cutting edge, and given that the industry is so ripe with opportunity, now was the time.
We put together a seed round, worth approximately $2.5 million… The two funds that led the round were Founder Collective, out of Boston, and a group called IA Venture Partners, which is led by Roger Ehrenberg, who used to run the Deutsche Bank hedge fund. He left to start his own firm, which only invests in data-based companies, who are all focused on accumulation and use of data.
Roger Ehrenberg: Jeff and Dave had set a visionary and ambitious plan that involved a tech build that was nothing short of insane… As all great founders do, Jeff stayed close to customers and planted seeds well in advance of the Company’s ability to deliver, laying the foundation for great expectations (and rocking tech and product) and rapid adoption. The only thing that remained was shipping the product. Well, as is the case with pretty much every construction project and startup, stuff takes longer and costs more than expected, and The Trade Desk was no exception.
Pickles: [We launched] in 2009. We funded in 2010. We spent 2010 and half of 2011 just building stuff. It was a tough year… We had a couple dark moments, but then [Jeff] did a great job pushing me to throw stuff in the garbage. As the CTO, you can get locked into this place… But having someone come tell you to ‘stop, you’ve got to think about this differently,’ was super helpful.
Ehrenberg: [Jeff] did great work helping us understand the unfolding of the addressable market (his hypothesis that Programmatic would eat traditional ad buying was not yet clear to many), [and] customer feedback and feature requirements. He and Dave also provided us with revised estimates of release dates corresponding to key technical achievements that would put us in-market. At this point both Founder Collective and IA provided a bridge to this next set of milestones. Why? Because we believed in Jeff’s vision and hypotheses about the reshaping of ad buying, as well as his leadership, recruiting power and industry credibility, together with Dave and the tech team’s ability to ship.
Green: We’re all in for a bunch of reasons. It’s the most effective form of advertising to win the hearts and minds of the consumer. In , when advertising becomes one of a handful of trillion dollar industries, I believe half of that pie will be some form of video. There’s also no one in TV who has the lion’s share of market share—it’s really fragmented.
In the very first presentation I ever made about The Trade Desk to venture capitalists, to raise money for our seed round, there was a slide where I said I believe we're building the business for the next 100 years. So there are parts of our strategy that we think will be around for 100 years, and we want to optimize for that. And we talked a lot about the fact that advertising is a $700 billion industry and will soon be a $1 trillion industry in less than 10 years. And so we're optimizing for the long term.
It's just such an exciting time in television. It's really hard to be bearish on any of it. The one place where it creates some transition is that most of advertising in the traditional world is sold at an upfront. So one week a year is when they really buy and sell most of the ads. And that's not really the best way to create the most amount of demand for things. Especially when targeting is at play. So transitioning from that old way of distribution as well as selling everything on an upfront basis, to a world where more data can be deployed, and decisions can be made all year long instead of just one week a year, that transition is probably the hardest part of the transition. But consumers are dragging the industry there whether we’re ready or not, just because they want things on demand. So it's a great forcing function for change.
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