Brightroll’s Tod Sacerdoti on Acquisitions, IPOs, and the Company’s Near Future

Last month, San Francisco-based Brightroll made headlines when the video ad company passed Google in terms of the number of online video ads shown in recent months, despite Google’s perch at the top of the Web-search advertising heap.

In fact, the two have been in surprisingly close competition for some time now. ComScore says that in December, Brightroll, which pairs advertisers with roughly 6,000 sites and mobile applications, sold 1.83 billion online video ads, while Google placed 2 billion video ads, largely on Google’s own YouTube property.

Unsurprisingly, investors in six-year-old Brightroll are tickled, particular given that video is expected to account for roughly 14.5 percent of all U.S. digital ad revenue by 2016 – or nearly double what it was last year, according to eMarketer. Indeed, when I recently chatted with Brightroll board member Rob Theis of Scale Venture Partners, he said that Brightroll has already “exceeded all of our expectations,” and that an IPO is “potentially in the cards,” given that it “has the ability to [go public] at any time.”

Brightroll – which has raised $46 million from investors and could now be making $100 million in yearly revenue, according to at least one analyst – doesn’t break out many of its internal numbers. (Theis wouldn’t discuss them either.) But last week, I briefly caught up with Brightroll founder and CEO Tod Sacerdoti about a possible IPO, as well as where the company goes from here. Our conversation has been edited for length.

You now have 220 employees, up from around 30 two years ago. How fast are you scaling? What can you share?

What we typically share publicly is that we’ve been growing [revenue] 100 percent a year for the last four years, that we [count] 90 percent of the top 50 U.S. advertisers [as customers] and that 16 of the top tech ad companies [including Google subsidiary AdMob and privately held AppNexus] use us to build their video business or supplement their own internal video initiatives.

A November 2011 round of $30 million pushed your funding to $46 million, but many ad companies have been raising much more. Have you raised your last round of private capital?

We’d never say anything about a financing before it was in process. I will say we don’t need money, and we’re pretty proud of the fact that, relative to our peers, we’ve raised a lot less money over all. While others started in display or pursued other angles, we were focused on the video ad category and [specifically] on preroll ad units and scaling [them] across premium inventory starting in 2006, and we haven’t had to pivot or change our focus really at all. I think we were smart but also fortunate that what we picked is where the majority of money ended up being.

[As for the money we've raised], this is becoming more and more a technology category. And while we always knew that technology would be the primary differentiator, we continue to see ways that technology adds value to our business. In fact, we went from 15 to 50 engineers last year, and we wouldn’t have been able to do that if we hadn’t been able to raise that money.

Brightroll is rare in that it’s built everything in house to date, unlike many ad companies that appear to be scaling through add-ons. Are you down on acquisitions?

We’re always interested in pursuing acquisitions if they make sense; we don’t have a philosophy against them. But we have a high level of confidence in our ability to grow organically, and we’re fortunate that we have a large engineering organization here in San Francisco and in Palo Alto. So when we’ve made a build versus buy decision about an adjacent opportunity, 100 percent of the time, we’ve pursued the build decision.

But we’re definitely interested, and as this category matures, and some more rational valuations [impact] players that aren’t doing as well, we’d consider acquisitions more seriously.

The consensus seems to be that Brightroll is in IPO territory in terms of the revenue it’s producing. Will we see a Brightroll offering in the next 12 to 18 months?

We view an IPO as a financing event. It’s different from other financing events, but it’s something we don’t talk about publicly as there’s no upside for us to talk publicly about any financing, public or private.

My only comment about IPOs in the video category is that I feel confident the video category will create one and potentially more [than one] billion dollar company. Whether that’s something that’s validated by the public markets or not will be determined in the future.

Brightroll is reportedly stepping up its efforts to target viewers on their mobile devices. What can you tell us about that strategy?

We launched video mobile support toward the end of 2010, and it’s been by far the fastest area of inventory that we’ve ever seen, so I’m very bullish [on mobile] as a long term part of our business. The only caveat to that is the two measurement companies, ComScore and Nielsen, haven’t built out their mobile solutions, and a lot of our large advertisers look to them to confirm; we feel like the only thing holding back the category is the measurement companies’ products. Both expect something this year in terms of [measuring mobile engagement] and until then, we won’t see a flood of money in mobile. But we’re expecting that watershed.

What have you already learned is more effective on mobile versus more broadly online?

In mobile, there’s been a very strong push from the app developers for ads to be 15 seconds in length, as 30 seconds has been much less effective.

And are the rates advertisers are paying to reach mobile customers higher or lower?

In general, mobile is higher because publishers have less supply in mobile than online. But companies like us are oversupplied in mobile so we try to price it the same [as online]. We’re trying to move as much business online to mobile as we can, and if we price [the ads] differently, we have to have a [separate] discussion with the publisher. So we’re pushing for parity between online and mobile.

Going forward, what changes will we see at Brightoll?

A handful of areas [are evolving]. A very significant portion of the business is becoming programmatic, meaning customers are bidding on online commercials in real time. A second area is mobile – that’s a huge area of focus. Third is scaling all of our businesses; we’re in Canada and the UK and Western Europe now but we’ll continue to build out offices in the U.S. Also, as we get bigger, our employee growth rate will decline on a percentage basis.

In terms of employees, how much will you grow in 2013?

We expect to grow by more than 50 percent.

Image courtesy of Brightroll.

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