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Joe Apprendi, CEO of adtech startup Collective, is really enthusiastic about Google’s new interest in transparency in the online advertising business. He thinks that the buying and selling of ads online is going to go through a “complete reassessment” in the next couple of years as clients figure out just how much of their money is wasted or taken in online fraud.
And that, he told Business Insider during a break from a visit to Collective’s London office, could make a bunch of companies think twice about whether they want to file IPOs or not.
Some of those companies are looking at the experience of Rocket Fuel, an ad network that went public in September 2013 and months later was the subject of class action lawsuits, alleging the company’s stock fell after it failed to disclose that a significant portion of its ads were being clicked on by fraudulent botnets.
Earlier this week, Google disclosed that 56% of the ads appearing on its platforms aren’t actually seen by anyone. While that seems bad for Google — why would you want to run ads that don’t get seen? — Google is probably betting that by alerting its client base to the fact that it cares about non-functioning ads it will gain those clients’ trust in the future. Those “unviewable” ads are ads that are served on a page but not seen by the user, perhaps because they were low on the page and the reader didn’t scroll down that far. Currently, advertisers are paying for those ads even though no one sees them.
“Non-viewable ads will be worthless by this time next year,” Apprendi says. “They’re already technically worthless.”
Apprendi is betting that his company — which offers clients complete transparency about how their money is spent, the cost of the inventory bought, and the results they get — is well placed to gain clients that want to know whether consumers can actually see the ads they’re buying. Or whether bots are clicking on them.
But the industry’s switch from its current Wild West condition — Group M once offered clients pricing on a controversial “non-disclosed” basis — to one of full disclosure will be wrenching. Dirty laundry will be aired. Rocket Fuel will not likely be the last adtech company facing allegations from shareholders that it served lousy inventory. (And to be fair to Rocket Fuel, everyone is in the same boat here.)
That will have a knock-on effect in terms of the larger adtech companies considering going public. (You can see a list of them here.) “Do I want to be a public company while that happens? No,” Apprendi says. “A year ago [headlines about transparency were] not even top of mind. Now it’s a consideration.” (Another major issue: a bunch of adtech companies that did hold IPOs saw the value of their stocks sink in the months afterward.)
Collective has previously been regarded as an IPO candidate. It has 400 employees and gross revenue of about $200 million. But Apprendi sounded unenthusiastic about the prospect this week. “Being well-capitalized and private is better than ‘open kimono’ right now.”
This story originally appeared on Business Insider. Copyright 2014
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