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The Medium Rules: AppNexus, AT&T and the Future of Media w/Michael Rubenstein

The explosion of so-called programmatic advertising over the past decade is one of those technological phenomena that has had so many and so varied a set of seismic second-order effects that we almost take it for granted that the world of interactive advertising was always so. Not the case. Consider this quote, which now reads as charmingly quaint, from the April 14, 2007 New York Times article announcing the sale of DoubleClick to Google: “DoubleClick’s chief executive, David Rosenblatt, said a few weeks ago that a new system it had developed for the buying and selling of online ads would probably become the chief money maker within five years. The system, a Nasdaq-like exchange for online ads, brings Web publishers and advertising buyers together on a Web site where they can participate in auctions for ad space.” As it turned out, the acquisition of DoubleClick by Google has turned to be one of, if not the single-most consequential acquisition by any tech company in history as it relates to the publishing web and the business of online advertising. On this episode The Medium Rules I sit down with Michael Rubenstein, the President of AppNexus, for a conversation tracing the origins and history of electronic exchanges for buying and selling digital advertising inventory. Michael takes us through his experiences working on the first ad exchange developed at DoubleClick, the decision-making process in connection with the sale of DoubleClick to Google, and then his decision to leave Google for another startup, AppNexus. Of course, AppNexus went on to become the biggest and most successful independent ad exchange out there, and Michael discusses the growth of AppNexus, it’s various strategic decisions along the way, the competitive pressures as programmatic advertising in effect swallowed the industry, and finally the process and logic in selling to AT&T. In the process of walking through all of this history, Michael ends up delivering a master class in current and future trends with respect to the media business. This episode is a true must-listen piece of content which we hope you will enjoy watching and listening as much as we enjoyed in the taping.





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Alan BALDACHIN: From the HBA podcast studio in New York City, welcome to The Medium Rules. I’m Alan Baldachin. Google becomes really the behemoth in online advertising.

Michael RUBENSTEIN: We effectively became the anti-Google, we became the platform that companies would choose when they cared about ownership of their data, when they cared about transparency, when they cared about take rates.

BALDACHIN: Where do you think opportunities are going to come from in the digital app business?

RUBENSTEIN:We’ve entered a new phase of competition in the digital app business.

BALDACHIN: I’m delighted to welcome Michael Rubenstein to the HBA podcast studio. Michael is the president of App Nexus, which operates the leading online marketplace for buying and selling digital ads. In August of last year, App Nexus was acquired by AT&T and the transaction reported at 1.6 billion. I won’t put you to the test as to how accurate that was. I do M&A, so I know that’s a little bit of a jump ball. Michael has graciously agreed to come on and give us his take on some recent history and the current state of the digital ad business, as well as the disruptive technologies we should be looking for over the next five to 10 years. We’ll also talk a little bit about the App Nexus acquisition. Michael, welcome.

RUBENSTEIN: Thank you. It’s a pleasure to be here.

BALDACHIN: So let’s start a little bit from the start. You are from Toronto like me?

RUBENSTEIN: Yes, proudly so.

BALDACHIN: And I feel like I should rename this the Toronto Expat in New York and Tech podcast because that seems to be what it’s becoming. You went to McGill; I went to Queens. We won’t go there. But you know, little rivalry. But you were working in AD Tech in Toronto. Is that right? How did you sort of get from Toronto to New York into the digital ad business?

RUBENSTEIN: Sure. So, actually when I was at McGill in my second year, I, along with a partner started a business, started an entrepreneurial venture. And it was a campus marketing and advertising business where we were helping corporate sponsors come on to college and university campuses. And during my time at McGill, we did that business every year. And it grew. And we were working on college and university campuses all around Canada and the United States. And so it was a real learning experience and put enough money in my pocket to be able to afford my college lifestyle and road trips and things like that. But it was my first introduction to entrepreneurship but also to marketing and advertising.


RUBENSTEIN: And so when I graduated in the late 90s or mid-90s, the internet was just starting to take off, the consumer internet. And I just felt like it was incredibly cool and something that I wanted to get involved in. And I found this company in Toronto. I moved back to Toronto after McGill. And I found this company in Toronto—small company. I think they had 11 employees or so. One of my cousins was in the finance department. And they were pioneering a new technology to allow people to do email marketing.

BALDACHIN: Was this Flow?

RUBENSTEIN: It was Flow, but it was even before it was flow, it was called Media Synergy.


RUBENSTEIN: Which is like the most generic named company ever. And I joined Media Synergy as the company’s first account manager, basically. And it was pretty wild. We rebranded the company to Flow Network, and email was just becoming a thing and people were just starting to get email addresses. And corporations were figuring out that they could communicate very effectively with consumers over email, and cataloguers were figuring that hey, why am I going to spend $2 on a piece of mail when I could spend a penny to send an email. And email marketing began to take off, permission based email marketing, and we were the leader in that field. So, it was actually one of, if not the only example of a successful .com 1.0 era company in Canada. There weren’t too many of those as you know.


RUBENSTEIN: But you know, we became successful and ultimately Double Click bought the company in 2000, or 2001. And Double Click…I got to know the folks who are running Double Click at the time, like an amazing group of entrepreneurs and executives, folks like Court Cunningham, David Rosenblatt, Kevin Ryan, and many more, who are still a lot of them, you know, executives here of prominence in the tech space in New York City. And we hit it off and I ended up moving to New York and my career…Whereas Flow Network is a more marketing technology, Double Click was an early leader in the online advertising space. And so that was sort of my introduction to online advertising.

BALDACHIN: Okay. What happened to Flow within Double Click? Did they continue that email marketing business or did they kind of… How did that evolve?

RUBENSTEIN: Yeah, they did, they rebranded it Dark Mail. All of Double Click’s products at the time were dark for this, dark for that.


RUBENSTEIN: Dark for publishers. So for instance, they rebranded it Dark Mail. And you know, it was an industry leading ESP, Email Service Provider until Double Click which had been a public company and it had a huge IPO in web 1.0. Had a terrible fall after that and had a painful existence as a public company in the early 2000s. And ultimately, in 2004, we sold the company to a private equity firm Hellman and Friedman, which turned out to be an amazing thing for the company. But as part of that transaction, H&F broke apart a lot of the divisions and sold them to other businesses. The interesting thing to sort of like follow the thread through, is ultimately what had been Flow Network, then Dark Mail ended up as part of Epsilon. And Epsilon, just in the last couple months was sold to Publicis for $4.4 billion. So, there was a lot of that Toronto, early web 1.0…


RUBENSTEIN: DNA in a really noteworthy large transaction recently as well.

BALDACHIN: So, following the Double Click thread through, what role did you take on, sort of at Double Click? How did your career there evolve sort of up through the acquisition of Double Click by Google in 2007, which I want to talk about—in that period?

RUBENSTEIN: It’s great question. So, when I moved to New York, I joined Double Click as an Account Manager basically. And one of the things that became evident in the year or two afterwards was I was really good at building big strategic client relationships for the company. And I think it was in 2003, I was still working on that email product and I went to Virginia, which was where AOL was based, and was able to convince AOL to deprecate, I think it was 11 different email systems around the company and centralize everything on the Double Click email platform. Which, at the time was a huge deal for us. I mean, you know, far, far bigger than anything we had done to date. And even though AOL was probably starting to get right past its peak.


RUBENSTEIN: It was still, huge. It was a massive company, you know, maybe analogous to Facebook today or something like that. And it was a huge deal for the company. And then after that, a year later, I was able to convince them to also deprecate their homegrown ad serving systems and to use Double Click as the advertising platform for all of AOL.

BALDACHIN: On the supply side, obviously.

RUBENSTEIN: Exactly, yeah.  AOL was all very proprietary technology. It wasn’t designed to interoperate with the open web. And it didn’t work very easily with technology that agencies and other media buyers were standardizing on.

BALDACHIN: It was holding, it was being held back by its closed system.

RUBENSTEIN: Yeah.  And at the time, they were managing a transition from being primarily a subscription-based product to more of an advertising based on business. Ultimately, they did make that transition, but it didn’t work out very well for them for a variety of reasons. So, it was a seminal moment for Double Click and for AOL. For double click because after the sale to H&F, we were really trying to find or really in the lead up to the sale to H&F. We were trying to find our footing It had been a number of years of just sort of getting beat up. And I think the AOL deal helped us to find the floor and…

BALDACHIN: Almost find your identity.


BALDACHIN: So, you managed that process. And then, as I understand it, you were instrumental in developing, what became the first Ad Exchange. Can you talk about that at Double Click?

RUBENSTEIN: Yeah. So, up until that point, just given, what I’d done at Double Click, I was sort of known as AOL Ruby.


RUBENSTEIN: I remember, someone stopped me on the street [inaudible 9:42]

BALDACHIN: Anyone still calling you that?

RUBENSTEIN: I was with my wife recently, and we were on 8th Avenue and I saw an old colleague, and he said to his wife, “Hey, that’s AOL Ruby,”

BALDACHIN: That’s amazing.

RUBENSTEIN: And she said, “Can you explain that to me,” At the same time that I’d been doing those deals with AOL and getting on the radar of the company’s senior management board, I also was in business school. I did the executive program at Columbia Business School. It was a really cool experience sort of being in school and in the workplace at the same time.

And I had decided that I wanted to pursue an entrepreneurial ambition. And I went to talk to the person who was the CEO, after the H&F transaction, David Rosenblatt, who’s an incredible executive and a mentor. And I said, “I’ve decided I want to go start something or do something new.” And he said, “I’ll tell you what, I’ll make you a deal. Why don’t you build something new inside Double Click, and that way, there’s a win-win. If the business works, you’ll have the experience of building a start-up, but also it’ll pay off for the company?” And so he offered me the opportunity to be an intrapreneur inside Double Click, which, fast forwarding a little bit now seeing the kinds of things I’m doing inside at AT&T is highly relevant and a really cool experience. And so a core team and I formed around this idea. At the time, it was just called Project Wolf, we had this idea that if we were going to defend ourselves against Google, which was the big insurgent in the field of online advertising, we needed something to be able to offer to customers because previously we’d been a SAS company. And so, when we went to a publisher, for example, a web publisher, we were asking them to pay us we were saying, “Hey, license our software and write us a check at the end of the month”. Google really turned that on its head with AdSense and a free ad server that competed with Double Click that they were taking out to market. They were saying to publishers, “Hey, use our software, we’ll pay you at the end of the month for monetizing your inventory”, which is a much better sell and a much easier sell for web publishers as an example. So we were terrified of that. And so, the idea was, well, could we leverage our install base at Double Click.

BALDACHIN: Your install base of publishers?

RUBENSTEIN: Publishers and agencies.

BALDACHIN: On both sides?

RUBENSTEIN: Because we had the leading ad serving platform for both buyers and sellers.


RUBENSTEIN: And so the idea was, well, can we leverage this installed base that we have to create a marketplace in the middle that can compete against Google, so that we can offer more than just software we can also offer buyers monetize, audiences, and we can offer publishers monetization as well and compete. It was the only way we could really see to effectively compete against the immense threat that Google represented to our business. And so we’ll just close that out.

BALDACHIN: Yeah, sure.

RUBENSTEIN: We had this code-named project, Project Wolf, and the concept was effectively that and the reason it was called Wolf was Wolf is Flow backwards.

BALDACHIN: Wow! That’s incredible.

RUBENSTEIN: Yeah. And the basic idea was that we were going to take the inventory that existed in our platform at an enormous scale and flow it backwards into a marketplace and leverage the competitive advantage that Double Click and established in the ad serving space to create a marketplace.

BALDACHIN” So was that inventory that you were flowing back, so to speak, was that sort of remnant inventory, if you will?



RUBENSTEIN: In the earliest days of what is now known as programmatic, disruption came from the low end. And I think, if you read a lot of literature, that’s often how these markets develop. And so, yeah, it was the remnant inventory that publishers couldn’t sell otherwise, it was the performance budgets that advertisers were prepared to kind of let run on an ongoing basis. That’s what we created the initial marketplace around and then of course, we went up and up and up the value chain until today when this trend of programmatic advertising is, kind of eating the entire world of advertising.

BALDACHIN: Yeah. So good opportunity to sort of put a pause and maybe have you just explain programmatic, what we mean by that. I think many people will know, but certainly many people listening and watching will not.


BALDACHIN: Maybe take a crack at that.

RUBENSTEIN: So, if you looked at digital advertising in the early 2000s, it actually was, it looked a lot like the process of buying or selling magazine advertising or TV advertising or newspaper advertising just ported to online, where, you know, effectively, what Double Click had created was the leading software platform for reserving and forecasting available ad space. And that’s very similar to how other media worked.

That allowed the industry to get to a certain level. I think what started to awaken us and others to the greater potential was when Google introduced AdSense and AdWords. AdWords was the first key; it was a bid marketplace and auction marketplace for keywords and in Google’s case. And we saw, everyone, saw the enormous scale that Google was attaining, through creating a more automated marketplace where people could leverage data and leverage the enormous scale that existed in a large scale internet platform to be able to create, more automated, more always on, more performance driven media. A marketplace model for the advertising space.


RUBENSTEIN: Yeah. And so, Google has done that successfully. But really just in the text-based advertising, keyword driven advertising space. What we had the opportunity to do a Double Click was to do that, but for graphical advertising sites, sound motion advertising on the internet. And so that effectively was the idea.

BALDACHIN: Banners principally at the time

RUBENSTEIN: At the time banners today. I mean, again, not to fast forward too much, but if you look at what we’re doing at AT&T, it’s taking those same principles and applying them to connected TV for an example. So, it’s really gone far beyond where it was initially…

BALDACHIN: All built around this initial disruptive concept of auction; buyers and sellers, in a marketplace bidding.

RUBENSTEIN: Yeah, not necessarily bidding, but applying…It could be bidding or applying automation, applying data and applying algorithms and real time information to be able to optimize on an always on basis, the media buying and selling happening in a digital environment.

BALDACHIN: Maybe you could unpack that concept because while I understand that I’m not sure I totally understand that. And so, that distinction, when we talk about programmatic, and we talked about an Ad Exchange, w e’re not talking about the floor of the New York Stock Exchange, where it’s like, people yelling numbers out and finding the highest price that way. When we talk about programmatic, how are those transactions? What’s the sort of the flow of those transactions? How is the optimizing done? What are the algorithms trying to do? Are they trying to find sort of the highest yield for the publisher, and the best analytics for the buyer and matching those and how does that work?

RUBENSTEIN: Yeah, well, of course, even the New York Stock Exchange, I’m sure as you well know, is a relic today, and most of the trading volume is algorithmically driven, high frequency trading. And the world of digital advertising is no different. For an advertiser, there are billions of available ad impressions every day that you can purchase around the world. So there’s many, many opportunities to get your message in front of consumers. What programmatic allows you to do is use data, whether it’s your own data or intelligence or that belonging to others and analytics, to be able to make decisions in real time about what messages to show to which consumers across which devices. And as more and more of the advertising world becomes digitally delivered. I mean, even as we walked down the street in New York today, and this is just recent development, the billboards are electronically delivered, and you have electronically developed delivered messages when you’re watching Hulu on your mobile device.

So, it presents more and more opportunities for brands to be able to use these techniques to deliver greater relevance and achieve greater results from advertising. And for the sellers of advertising, it allows them to manage the yield of their advertising business much more dynamically. So they can determine in real time maybe they want to set price floors different in a particular geo or a particular time of day, as an example or across different media. They have display ads, they have video ads, they have different ads that they’re able to surface to buyers. And so, all of this is requires intermediation by a very sophisticated technology platform instead of technology capabilities. It’s high scale. It’s high frequency.

It’s happening 24/7 with no downtime around the world. And ultimately, it’s not small business anymore. I mean, if you look at the last 10 years, and the rise of companies like Google and Facebook, and now even Amazon and advertising, I mean, these are huge, in some cases, almost trillion dollar companies being built off the back of similar techniques.

BALDACHIN: Going back to the moment in time, where you guys had established your footing with Double Click, and you are looking to compete with Google, you then get into…I don’t know how involved you are. But I’d love you to sort of reflect on this period of time. Double Click, it gets into an effect, a bidding war between Google and Microsoft. Ultimately gets acquired by Google. Its main competitor, I guess, and absorbed by Google, and we’ll talk about that story. Well, I guess part of that story is then Google becomes really the behemoth in online advertising; controlling buyers and sellers. Some would say acting monopolistically. Others would not but, you know. But becomes really the dominant force. Arguably Double Click, arguably Google gets a bargain with Double Click, because it accounts for now, so much of Google’s revenue. What was going on inside DoubleClick at that time, in terms of Google, Microsoft and potentially even staying independent?

RUBENSTEIN: Well, I think, a lot of it goes back to the exchange. So, we did launch as I, as we talked about before, Double Click ad exchange, out of that project that we launched Project Wolf. And I think there started to be a recognition among large companies who had aspirations to be forces in the internet, that they needed an advertising play. And that Google was likely to disrupt their businesses as well, if they didn’t act. And so, there was something in the air where the major players at the time, really started to gain that recognition all around the same time. So, folks like AOL, Yahoo, Microsoft, really awaken to that. Around that same time, as I mentioned, we were owned by H&F so we were private equity own firm. And I think they decided to run a market check. I mean, they knew that at some point, they were going to sell the asset. And I think what they were able to figure out through an initial check was that there was a high level of interest, and in particular people really were grabbing on to this exchange marketplace concept that “Hey, could we leverage our assets at even greater scale to build a marketplace and display ads or something like that, that could compete with what Google’s built”. And so, there was interest. And very quickly to your point, the price of Double Click got bid up. And ultimately, Google stepped in I mean, every one of those companies, as I mentioned, was a bidder.

BALDACHIN: Was involved?

RUBENSTEIN: Yeah. And it got intensely competitive. And ultimately, Google came in and just took it off the table. And I’m reasonably confident that had they not it would have continued to get better. And the next month or two after that was a pretty wild period where not only did Double Click get purchased for $3.2 billion dollars. Less than two years after selling that core advertising part of the business for probably around a billion, and I think Google had passed by the way and purchasing at that [inaudible 24:04]

BALDACHIN: Back when H&M bought it?


BALDACHIN: I’m sorry, H&F.

RUBENSTEIN: Not only did Double Click go but then the bidders who had not won in that auction went and bought competing ad tech companies as well.

BALDACHIN: Yahoo bought Right Media?

RUBENSTEN: Yahoo bought Right Media. Which was great New York City exit. And relevant for me later on.

BALDACHIN: Right. Because those guys ended up starting up.

RUBENSTEIN: Exactly. And Quantive, which had been the number two company behind us at Double Click in ad tech, ended up selling for twice our price because Microsoft…

BALDACHIN: Had to have it.

RUBENSTEIN: Had to have it. And they ended up ultimately writing down the entire value of that company. But things like that were happening in the month or two after the Double Click sale. It was like this entire sector, which had been frowned on a few years earlier and then sleepy, all of a sudden became red hot. All these companies were acquired for record prices. And then what followed afterwards was, A, we were at Google and charged with helping to build, extend their lead in digital advertising. But then the other thing that happened was Venture Capitalists woke up to the potential of digital advertising importing enormous amount of money into the space after those exits in the next few years after that. And those two forces I would say, have dictated a lot of what’s happened in digital advertising in the decade or so since.

BALDACHIN: So, do you think Double Click would have survived and prospered as an independent company had it said, if these guys are willing to pay me 3.x million right now when we sort of barely gotten started, and we see this massive market opportunity, why don’t we you know…Putting aside H&F’s goal to have a private equity timeline and exit an IRR. Had it been founder-led and the founder said, “Nope. I’m just going to stick with what I’m doing. I think this can be a $50 billion company.” How do you think Double Click would have fared as an independent company had that, as I say that counterfactual sort of taken place?

RUBENSTEIN: I think we would have fared pretty well, because I don’t think Google understood how little at the time they really understood about advertising outside of search advertising. They kind of view the entire world through the prism of search advertising, and search advertising is a very specific thing that’s really different than banners or television advertising. And at the time, I don’t think, without us, they would have been super successful at expanding beyond that. But I think it would have been a competitive space and we would have been under a lot of competitive pressure. Sure, both from independence and from new entrants like Google trying to get into the business. But we had a really good company. I mean, Double Click was a strong, independent business and a growing company when we sold it to Google.

BALDACHIN: So now let’s, sort of next phase of your career. As we mentioned, a couple of guys from Right Media start app Nexus, they recruit you over. What was attractive to you about app Nexus at that time? Was its independence? Was it you were just going all in on the Ad Exchange? Programmatic? What, tell me a little bit about that decision? Or was it sort of a flyer? I just like being in start-ups, I don’t like this big, big company at that time.

RUBENSTEIN: Yeah, I spent a little less than two years with Google after the transaction and my job there was to commercialize, re-commercialize the Ad Exchange as a Google product. And that ended up becoming a huge home run for Google, a multi-billion-dollar business.

BALDACHIN: I mean, its many people don’t, I mean, this is a huge, huge part of their business now.

RUBENSTEIN: It’s massive. And I think was the thing that took that. I mentioned that like early energy that companies like Double Click and Right Media had around what became known as programmatic advertising. To me when we launched Google’s Double Click Ad Exchange, that was the moment that the entire thing went mainstream.


RUBENSTEIN: And ultimately now became sort of the way forward for buying and selling ads. I think that for me, I really enjoyed my time at Google. I learned a lot. But I felt from pretty early on that it wasn’t the place where I was going to grow the next phase of my career. I think there were a few things that just made me feel that way. I mean, one is Google was, and I think to some extent still is, it’s a very engineering centric company. Where if you’re not an engineer at the time, you couldn’t even be a product manager. And so, Larry and Sergey and Eric, who are running the company, all out of Mountain View, really, I felt like engineers were the ones who are getting the best career opportunities inside Google. Number two was, I spent a lot of time in Mountain View, and the other locations during my tenure with Google. And even though it’s a beautiful part of the world and a great place, I always felt a strong draw to come back to New York. And that was interesting, because at that time, I hadn’t lived in New York that long. I probably only lived in New York City [inaudible 29:46]

BALDACHIN: Yeah, I’ve had the same experience.

RUBENSTEIN: Yeah. I’d really miss like that energy. And I remember one day, I’d spent a week in California, came back to New York and I was walking down the street in New York on a beautiful spring day, and it was one of those days where you just feel the energy in the air and just like this incredibly pulsing diverse…

BALDACHIN:  Stimulating the senses.

RUBENSTEIN: Exactly. And just that incredible cultural experience of being in New York. And I just knew right then that I really wanted to be in New York. And so, as I started thinking about it, I was like, well, I really, I don’t want to throw away this incredible experience I’ve had pioneering this new marketplace. And I think that, programmatic advertising is going to be the…It still wasn’t even called programmatic yet. It was exchange traded advertising; it would be the future. So, I’d love to have signed. That sort of builds on this experience that I have. And I also knew that I wanted to do something in and around New York. And I wanted to do something entrepreneurial, and I always love and always have loved partnering with really talented world class people in an environment where a non-engineer could thrive.

I started sort of, just almost in the back of my mind developing like criteria for what would be interesting to me. And then in, I think it was April 2009, two people almost in the same week introduced me to Brian O’Kelley. And Brian and I’d been competitors because I was Double Click Ad Exchange and he was Right Media. So, we were pursuing similar, programmatic 1.0 aspirations. And, I had gone to Google obviously, he hadn’t gone to Yahoo, he had left to start at Nexus. And two people who I knew and trusted said to me in the same week or two, “Hey, if you don’t know Brian O’Kelly, you should really meet. You’ve had very complimentary experiences. I think you’d like one another.” And Brian and I were put in contact, he skateboarded over to Google.

BALDACHIN: And he still that guy. I don’t know him personally, but he still has that kind of overgrown kid vibe, doesn’t he?

RUBENSTEIN: I mean, he doesn’t skateboard anymore.


RUBENSTEIN: But yeah, I mean, Brian, is this incredibly brilliant, energetic, big hearted and, entrepreneurial person, one of a kind. He’s certainly I think one of the most influential people in building the New York City technology scene as well. He’s a really fantastic entrepreneur, and executive and he came over, we sat down, spent an hour together at Google and hit it off immediately.

We’re nothing alike in some respects. I’m much more like, buttoned up and polished, and he’s much more of that raw energy. And he had the skateboard and the flip flops and all that sort of stuff. But we really hit it off and liked each other a lot. Understood that we would each be better by virtue of collaborating with one another, and so forth. And so, over the ensuing months, we spent a lot of time together, got to know each other pretty well. And I made the decision to leave the cozy confines of Google and make the jump to a New York City start-up. And that Nexus at that time was, you know, real scrappy start-up. I mean, there were fewer than 20, maybe 20 employees, something in that.

BALDACHIN: Where was it located physically?

RUBENSTEIN: 594 Broadway, so Broadway and Prince or between Prince and Spring, I think. And one of these buildings where there’s just, a million start-ups.

BALDACHIN: We looked at space in that building way back then.


BALDACHIN: Yeah, we did. And for whatever reason, we didn’t take it but at that time, I was like, “We should be here.”

RUBENSTEIN: Yeah.  The energy in that office was sort of…

BALDACHIN: Was Huff Po, was Kem there?

RUBENSTEIN: I don’t remember if they were in there.


RUBENSTEIN: There were a lot of companies that ended up spinning out and like, everyone was in one room and rickety chairs and yeah, I remember going from my comfortable Chilean sea bass lunch at Google in the cafeteria to the bag of peanuts in the kitchen at App Nexus. It was really, really…It was thrilling, though. I mean, the energy, the passion, the talent, you know, very young, but that entrepreneurial energy was so palpable in that room. It just got me so excited and maybe want to be a part of it.

BALDACHIN: What was the vision that you guys talked about for App Nexus? Like, where did you see it fitting in ultimately?

RUBENSTEIN: Yeah, the vision has really not changed that much over the years. The idea was programmatic or what has become known as programmatic advertising is going to be the future, you know, applying data, applying automation, applying technology, contemporary technology to advertising is going to be the future of how this business runs. And the internet in order to be able to fully capitalize on this is going to need a technology platform that can connect buyers and sellers in very, very sophisticated ways. And the principles of it were that it would be highly transparent, highly cost efficient, and really, really effective at creating a marketplace, basically, between buyers and sellers. And that’s still is the vision today. I mean, the company has evolved so much over the years. But if you look at who we are and what we do today, we’re still that innovative, transparent, technology platform that ultimately is trying to empower the principles in the advertising transaction, the publishers and the brands, the creators to capture the spoils of internet advertising. And it’s a fundamentally different vision than that advanced by a Google or Facebook. Those narratives, their narratives have definitely won the last decade, the narrative of the walled garden. And, obviously, in those instances, those companies are the ones who are capturing by far the benefit of what’s happening online.

BALDACHIN: Their shareholders, basically.

RUBENSTEIN: Yeah. And the advertisers and the publishers are effectively feeding the machine. And we just felt like that’s not the model that we want to represent. We think that there’s a far better way to do this. And that platform approach is the approach that has guided the company ever since.

BALDACHIN: So in terms of thinking about at that time, competing with Google, what I’m hearing, I think it’s based on technology, but also based on openness.


BALDACHIN: Not being the closed system that Google was and still is.

RUBENSTAIN: Yeah, absolutely. I don’t think we knew when we first got going the extent to which we would be competitive with Google. I mean, I think we always knew there would be some competition. But in the earliest days, actually, I thought that Google…Maybe Brian looked at it different, I’m not sure. But I thought that Google would be a supplier, that they’d be the New York Stock Exchange or something like that. And we were going to build this business on top of it. But it became evident, pretty clear, pretty soon that that wasn’t going to work. They started buying companies, including competitors of ours. And it became clear that they were going to go for a vertical integration approach where they would own the entire supply chain and extract all the profit out of it. And I understand why. I mean, I saw this first-hand at Google when you’re the size that they are at. You can’t take small, extract small rents from a market and grow your market cap. You need big multi-billion-dollar revenue streams constantly.

And I think that as a start-up, we didn’t need to take that approach, right, we could live off small transaction fees. But once it became clear that Google was going to go for the whole enchilada, then I think the die was cast. And ultimately, the thing that probably really sealed the fact that we would be competitors with Google was, ultimately, Microsoft came in in 2011, and made a sizable investment in our start-up. They invested $50 million dollars at the time, which was a lot of money in 2011, New York City tech world, especially for a 50-person start-up. And they outsourced their own programmatic advertising business to us. And when the biggest software company in the world outsources something like that to you. And at the time, there was also a lot of friction between Google and Microsoft. I think Google saw that as a competitive move. They actually cut us off from access to Double Click Ad Exchange, which was a major, major problem for us that happened over Thanksgiving 2011.

BALDACHIN: In response to the Microsoft investment?

RUBENSTEIN: Yeah, and it through our business into like, temporary chaos and, probably half of our revenue at the time of our fledgling start-up, beautiful fledgling start-up was based off of buying ads from Google. And so, I think, ultimately, we ended up sort of negotiating a cold piece there. But, things like that, ultimately, just sort of, like, committed us and them, I think, further down our respective paths. And, we effectively became the anti-Google, we became the platform that companies would choose when they cared about ownership of their data, when they cared about transparency when they cared about take rates and margins and keeping the economic benefits for themselves and maintaining control over their own businesses. And that wasn’t for everyone. But there was a portion and continues to be a sizable portion and probably a growing portion of the market that does care about that. And that was our customer base.

BALDACHIN: Well, interesting. There’s been this back and forth between Google and its publishing community with respect to pricing and transparency, and their sort of right of first refusal, their unified pricing, header bidding. How do you see that playing out, particularly now that App Nexus is an AT&T company? Are there going to be outlets and alternatives for publishers who wants that alternative going forward?

RUBENSTEIN: Yeah, absolutely. I mean…

BALDACHIN: With you guys?

RUBENSTEIN: Yeah. I mean, one of the reasons that we decided to sell the company to AT&T was because, again, we survived and thrived in an era of unprecedented

growth and market concentration. I mean, it…Remember back in 2009, or 2007 2009, when we were getting going with this, the iPhone hadn’t yet been launched. We wouldn’t. We didn’t think of Google and Facebook and Amazon as the dominant market forces that we do today. And under what has effectively become this era of like unbelievable market growth and concentration in these companies. We built a successful company. But I think the thing we recognized was that if we were really going to take it to the next level, we needed more, we needed more assets, we needed more partners, we needed more capital, we needed more of everything, to be able to play on a bigger stage. And that led us to the conversation, the strategic conversation about what to do next what to do with the company. And the answer wasn’t,” Hey, let’s sell it.” The answer was let’s explore a series of options, each of which could potentially have, each of which would have the outcome of giving us more. And so maybe that means we raise an additional round of capital or deepen a partnership with a strategic. Maybe that means we take the company public or maybe it means if the circumstances are right, we sell it. And we embarked in a process to kind of go down those paths simultaneously. And in the end, we made our decision and we sold to AT&T.

BALDACHIN:  That’s so interesting, because I was going to ask you exactly that about what was involved in that process. Presumably, you’re working very closely with your board at the time. Was Microsoft involved in that at that?

RUBENSTEIN: Yes, Microsoft was on the board dating back from 2011.

BALDACHIN: Okay, and they were supportive, obviously?

RUBENSTEIN: Yeah, Microsoft was fantastic the entire way, I have to say, I mean, great customer, great partner and great board member, and they were always supporting us and we’re looking at whatever was in our best interests.

BALDACHIN: Let’s switch gears a little bit here. Because I do want to ask you sort of stepping away from App Nexus and AT&T, just your take on the industry and sort of… Do you think that there are? What do you think are the green fields to come? Are there any left and sort of? What do you think are some opportunities? You’re now a start-up guy, you’re now thinking about your next company. In this hypothetical, what are you sort of focused on? Where do you think opportunities are going to come from in the digital ad business?

RUBENSTEIN: Well, I think we’re we’ve entered a new phase of competition in the digital ad business, where the competitors aren’t…Think back to the early 2000s and scrappy entrepreneurial companies like Double Click and Right Media and a Quantico slugging it out. That’s not the market we’re in today. The market we’re in today is Google, AT&T, Amazon, Facebook, and companies of that size and scale. So what was sort of a street fight that in a lot of respects was happening on the streets of New York, has become major, major business here. A lot of the techniques that were sort of developed in digital advertising are now taking over the entire world for advertising. So, if you look at the percentage of overall advertising, that’s digital, and the percentage of overall digital that’s programmatic, there’s still a lot of room to grow. And I think that look at what’s happening in television, I mean, television, and television advertising in the years ahead. Television is still the biggest advertising medium. And it’s only beginning to be disrupted. I think over the next 10 years, that’s going to be the fight. And that’s a fight that we are really pleased to be teamed up with AT&T to win. But everyone is focused on that, right? I mean, that is a big prize, and Google and others are obviously targeting it as well.

So, I think the next phase of this marketplace is…The world’s largest companies and most powerful companies competing against one another to attain big portions of the advertising business worldwide. And it’s across all media. I don’t think it’s just confined to the web browser on your computer or on your mobile phone. It’s in app, it’s on your connected television, it’s on the outdoor billboards, it’s on the radio or the streaming music that you’re listening to when you’re driving your car. All that is addressable from a market size perspective. So, the overall pie is going to continue to grow significantly. And arguably, if advertising becomes more relevant to consumers and more effective, then you know, there could be room for higher CPM and more growth in the system overall as well.

So, I think there’s a lot of room for innovation. I think for entrepreneurial companies, the likelihood of building an ad tech company that competes and wins against those companies is probably pretty low at this stage. But look, go back to the Double Click example of when we sold to Google. I mean, when you have a situation where you have multiple powerful potential buyers who are each seeking to achieve success in a market, that’s a good place to be if you’ve developed something cool and innovative and unique. So I do think there are a lot of opportunities for start-ups in this space, and probably will be a lot of M&A opportunities in the years ahead.

BALDACHIN: I thought you said something really interesting, which was, you said many interesting things, one of which it, as you just mentioned, was App Nexus teaming up with AT&T with respect to this world of television advertising. Is that a function of AT&T fibre optics and AT&T in-home? What’s that? And then how does that play out with Verizon, the cable companies? And what assets are people sort of stockpiling for that next five years of market share and rent.

RUBENSTEIN: If you look at the transformation that AT&T is undergoing right now, it’s quite stunning. And it’s being led by the company’s Chairman and CEO, Randall Stephenson, who is a phenomenal executive and someone with a very bold vision. Effectively, he has made enormous bets to transform a legacy telecommunications company into what he calls the modern media company. And that’s what guided a lot of the moves that have been made at AT&T. For example, the acquisition of Time Warner, an enormous, enormous transaction. Bringing in-house assets like HBO, Warner Brothers, CNN and many more. It’s about content, and it’s about media. And you can’t be, I don’t think, the modern media company without being really expert in advertising. And without that being like a real core competence, real core competency. So, it wasn’t too much of a surprise when two weeks after the Time Warner transaction finally closed, the acquisition of App Nexus was announced. And so the common thread behind all of those moves is AT&T has enormous content assets in the premium video, premium content, new sports, things like that. And we are going to leverage the assets of AT&T, be that the content assets, the data assets, the direct to consumer, the 170 million direct to consumer connections, the partnerships and relationships that the company maintains worldwide, work. And obviously our technology platform and relationships as well. We’re going to leverage all of that to create a premium advertising marketplace and platform, not exclusively designed to disrupt the television, video advertising space. But, definitely like that will feature very, very prominently in what we’re doing. It will anchor I think, in a lot of ways the marketplace and there’s a huge opportunity there too because if you look at Google’s position today, I mean, they have a dominant position in digital video, but it’s YouTube. And so you wouldn’t call that premium advertising opportunities. And the same with Facebook, they have a huge business as well. But again, it’s not really premium. And so I think the combination of real-world class premium content, the data, the relationships and the advertising are…Those are the ingredients we’re cooking up here.

BALDACHIN: And the technology and the team.


BALDACHIN: That’s fascinating. I think that’s a great place to end, Michael, I must say, I thought we were going to talk about ad tech. You’ve really given a masterclass in what’s going on in media. I’m really grateful.


BALDACHIN: So, thanks for coming in. And maybe we’ll shoot for a return visit at some point in the next year or two.

RUBENSTEIN: Thanks for having me. It was fun.

BALDACHIN: Thanks, Michael.

OUTRO: That’s a wrap on this episode of The Medium Rules with Alan Baldachin. For more information, go to our website at and you can also follow us on Instagram, Twitter, and Facebook. And don’t forget to rate us on Apple Podcasts.