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Today Madrona Venture Partner Len Jordan sits down with Sean Muller, Founder and CEO of iSpot, which measures TV advertising for both conventional cable and streaming. It includes audience size and characteristics, creative effectiveness and performance, both attribution and outcomes. iSpot works with virtually every top advertiser and has helped manage more than $500 billion in advertising spend across more than 60 trillion advertising impressions. Len had the pleasure of hosting Sean on this show back in 2019, where they covered the early days of the company and evolving business ideas. Today they’re picking up with everything they’ve been up to since. In this episode, Sean shares how he lands strategic partnerships and acquisitions to enhance the data, iSpot can provide, his approach to new opportunities and ad-supported streaming, and how and why it’s so different from traditional TV network advertising. He also discusses the strategy and timing for competing against large incumbents and startups by using deep product differentiation and tight alignment with strategic allies. You won’t want to miss this one.
This transcript was automatically generated and edited for clarity.
Len: I would say of all the things that have happened over the last four years since you and I last spoke, the rise of ad-supported streaming has taken a lot of people by surprise. I spoke to one of our investors at our annual meeting four or five years ago, and we were talking about iSpot, and this person’s observation was, “Well cable is dead, right? It’s going to be gone in a couple of years.” That was one observation. And then the other was, “No one likes advertising, so why does that matter?” And it turns out both are wrong.
I think $83 billion was spent last year in the United States on advertising through a television device of some kind. The most interesting thing is cable didn’t die. $62 billion of that advertising was over cable, but $21 billion of that was streaming. I’d love for you to talk about streaming in general, but also the surprise that for a lot of people, advertising over streaming is now a really big business and is projected to become an even bigger business despite the fact that some people thought that only subscription would be the way people pay for media.
Sean: We obsess over streaming. Streaming is the future. The fact that advertising has grown so much in streaming has not surprised us. We knew that that was coming and we’ve been investing in streaming measurement and technologies for well over five years. One of the reasons we invested in smart TV data was because we foresaw streaming taking off. That’s what is allowing us to measure both streaming and linear in a consistent manner. There are a couple of key trends that are important to streaming and important to marketers. First of all, audience viewing and streaming has been big for a long time. Right? It’s just that advertising has lagged behind it. It’s mostly because of Netflix. Where Netflix has been a subscription service, and there’s so much viewership in Netflix, viewership has been shifting to streaming in a decisive way for a while now.
Today, it’s probably almost 50-50 in terms of viewership. Now, the ads always follow is one thing everyone should know. It might take longer than some people think, but the ads always follow. That’s simply what we’re seeing now. We’re seeing all of the subscription services, including Netflix going to AVOD or advertising video on demand. They’re all bringing advertising in a bigger way, and it makes a lot of sense. Consumers have been conditioned to advertising on TV. Advertising on a television side is part of the experience. There’s really not that much disdain from it.
Advertising has been growing rapidly on streaming. I would say it’s more like 70% linear or terrestrial cable — broadcast is how we should refer to it — and 30% streaming. That trend is going to continue. What’s going to tip it is sports. One thing everyone should know is sports drives a massive chunk of advertising dollars on television. What happens with sports is what’s going to dictate, and this is the dynamic to watch right now. Sports is still largely controlled today by broadcast and cable, by the traditional media companies, but that’s starting to change. You’ve seen Amazon Thursday Night football is now squarely on streaming. It’s a great experience.
It’s something that is going to continue to trend towards streaming, and one of the reasons is the companies that control streaming, the Amazons of the world, the Googles of the world, and the Netflix of the world simply have more capital than the traditional media companies. You’re going to start seeing more and more of the streaming-first companies investing in sports. It’s sports that will be the tipping point of when the advertising dollars shift to be streaming led.
The biggest challenge for marketers today is how to shift their dollars across traditional broadcast, cable, streaming, and social. Like how much to invest in TikTok, how much to invest in YouTube and things like Mr. Beast and other content distribution on social video. That is the number one challenge for marketers today, and that’s why we’re seeing so much success and growth in our business and helping marketers understand how to intelligently shift those dollars, validate, verify, and tie it all to outcomes. That’s the bottom line. That’s the biggest challenge today.
Len: One of the things I perceive, and maybe it’s because I have four kids who generally do a lot more streaming than watching old-fashioned linear cable television like their dad, is the audience could be different. I’m curious how that affects advertisers. I don’t just think of streaming as a different way of delivering the exact same content. The nature of the audience seems to be different, and generally younger. The opportunity for interactivity is different too, right? With linear cable, if I’m watching on a television that has no interactivity, I could watch and consume the content and then later on interact with it. In a world where I’m watching over a digital device, my opportunity to respond to the ad in real time or close to real time is new. Maybe that’s a few years away. I’m curious how you think of the advertising opportunity as different, given that the audience may be different and given that the level of interactivity may be different and maybe there are other things that are different too.
Sean: That’s an important question. There’s a lot to consider here. Generally speaking, you are correct that older audiences watch on cable and younger audiences watch on streaming. However, that’s not always the case and it’s much more complicated than that. Let’s take the NBA for example. Where are these games broadcasted? They’re on cable. When you think about NBA, that’s younger audiences. It also skews diverse African-American audiences, and these are audiences that are very, very important to advertisers. The dollars will keep flowing there. That’s cable. That goes back to the sports trend that I was talking about, and sports in general. However, with streaming, you can now target the audience on a one-to-one basis. You can’t do that with broadcasts and cable. So that is very, very attractive to advertisers as well.
You have to weigh all of these things right now. You have to look at everything holistically, in a completely deduplicated manner. That’s where we come in. We help marketers see it all across whatever channels they’re advertising on. There’s another thing to consider. The younger audiences are spending a lot more time with short-form video like YouTube. And there becomes a question, “Well, how much attention are you going to pay?” A 30-second ad is very intrusive when you’re watching a two-minute clip. But when you’re watching an NBA game that lasts multiple hours, that advertisement is not intrusive, especially when you’ve got some timeouts and breaks and whatever else is going on with the game.
It’s become an interesting world where the strategy today for marketers is not to abandon any one thing, but it’s to achieve the right balance and understand the impact and effectiveness. The world of advertising is way more complicated today than it was 10 years ago when you only had cable and broadcast today it’s very, very, very, very complicated.
This question that you just raised, this is our company in a nutshell. We obsess over these things. We obsess about how do you deliver the right message to the right audience and the right medium? There’s a lot of mediums happening here and you want to deliver the right outcome.
Len: I remember growing up when people would have one team that they would watch, but that’s completely changed because there are so many channels to watch. Cable, I don’t think, is going away anytime soon given the dominance that they still have across sports and a lot of other types of programming, but sports in particular. Another area that is definitely new for iSpot over the last four or five years is this area of helping advertisers, networks, and agencies plan their advertising upfront. iSpot started really by helping brands and advertisers figure out how to measure the effectiveness of their ads after the ads ran. You’ve also started to take that data that you’ve built over 9 or 10 years and start to help advertisers figure out how to use that data and that audience information to figure out what ads they should be buying in the first place to get better efficiency, return, and economics.
Part of that has led to maybe more of a frenemy relationship with Nielsen, and I think Nielsen will be around for a long time. You all have been very thoughtful about how you’ve entered this newer space of planning. I’m curious how you think about that because as a startup CEO — now iSpot’s not a startup — but you had to be very thoughtful about how to enter that newer space and think about who the other companies were in that market, Nielsen being one of them. You’ve navigated it and leveraged streaming. I’m curious how you’ve thought about entering this new market of using your product to help people plan for the ads they want to purchase up front.
Sean: All of our data at iSpot is delivered in real time, which has brought a lot of optimization capabilities. Where a lot of our clients before iSpot came along, you would get a report every quarter or two after the fact on how your TV campaign did. iSpot brought real-time data to the table for the first time, which means now you could optimize your media in real time. We started moving upstream, if you will, quite a bit ago, from measurement to optimization, and now into planning. Because now, it’s really important to make optimizations and decisions even before you buy, and that’s going to become bigger and bigger as the shift moves to streaming and programmatic buying of advertising on television. In fact, part of the deal that we announced with Roku includes optimization before the buy where you can become very predictive and plan on that data to deliver better outcomes before you make the buy.
We have a relationship with the Trade Desk, where the Trade Desk uses our data. Iit started with measurement, and now they use it for planning before the buy. We see this notion of planning, also known as pre-bid in the programmatic digital world, becoming more important as we continue to move our capabilities upstream. We’re also on the creative side doing a lot of predictive analytics where we can predict with our measurement how well a creative will do before it even goes out into the market. So yes, there’s this movement of going from measurement to optimization to planning, and we’re in the midst of that move. That becomes a lot more important in the streaming world, whereas in the traditional linear world you would once a year look at the data to create your plan and make upfront commitments.
That’s where Nielsen has really been strong is their data has been used in the front in TV and creating plans that sort of don’t move, you set them and forget. In this new world we’ve been moving into, it’s much more real-time optimization, and it’s driven before the buy is even made.
Len: Do you think that gets pushed a little bit by the advertiser’s experience with what I think of internet advertising? With Google, Facebook, TikTok, and other platforms that have been around now for a couple of decades, you could make a change on your ad buy within minutes. You could know that this search word is or is not working within minutes or this banner ad is or is not working within minutes. And then, you could automatically have the system self-tune and start purchasing more of the ads that work, and less of the ones that don’t. You close the loop and figure out if consumers are taking action. My sense is that advertisers feel like, “Hey, I want that level of accountability that I get on search. I want that eventually for video advertising because it’s a lot of money that I’m spending here and I want it to work.” Do you feel like that influence happens or am I overstating it?
Sean: Oh, 100%. You’ve described exactly why streaming is growing faster than any other advertising medium today. In fact, more dollars will go into streaming in the future. The reason is you have the video experience on the big screen. There’s no better, more effective medium than still that traditional 30-second spot on a big screen. Now, combine that with the ability to target it in digital and then measure it like you do in digital. No question one that is one of the major driving forces behind why streaming is growing, and it’s our measurement that’s helping prove the effectiveness of that medium and closing the loop. Also, deduping it with traditional linear of understanding how much incremental audiences you are getting as you’re shifting to streaming. These are some of the technologies that we’ve also brought to traditional linear.
In traditional linear, you can’t target it as precisely as you can in streaming. Think about streaming as sort of this holy grail of having the most effective and compelling medium in video on a big screen, plus the targeting and the ability to do the closed loop of digital. Quite honestly, there’s more demand right now for streaming than supply, and that’s why the CPMs on streaming are so high right now. It’s just there isn’t enough supply. As the industry shifts more to advertising-sponsored streaming, the supply will start catching up with the demand. This is why it’s so exciting. It’s such an exciting world right now in streaming for advertisers.
Len: So Sean, I think you all have done a really masterful job of navigating your path for creating value in the advertising measurement planning space. And you’ve also done that in a way where you’ve managed not to kick sand in the face of the big gorilla in the market, which is Nielsen. Partly, that’s because you have a different business model and a different product set. Now with streaming maybe a different opportunity. It would be interesting to hear your thoughts on how you’ve chosen to navigate the sequencing of your entry into different parts of the market because I think you’ve done it really smartly in a way that’s been strategic and hasn’t drawn a deep competitor to come after you in a way that I think is smart.
Sean: We’ve built our business by focusing on advertisers and marketers, and for those who don’t know, Nielsen is the largest measurement company in the US, but Nielsen’s revenue is almost entirely generated by the TV networks or the publishers. The TV networks pay Nielsen to be the arbitrator, or what’s known as the currency in our space where they measure the programs and thereby the ads. That gets used as the data that sets the fees for the ads as they’re traded between the buyers and the sellers, primarily between agencies and TV networks. That’s Nielsen’s entire focus. What we noticed coming into the space is the advertiser’s interests were not represented, so we set out to build software measurement and software solutions that are specifically meant to help advertisers assess the effectiveness of their advertising. It turned out that section of the market, which, by the way, funds the entire ecosystem, is the most important part of the ecosystem, was actually not being served directly. Their needs were not being served, and that’s the reason that iSpot exists and why we grew so quickly.
Today, we have very powerful software across creative, audience, and outcome that serves that sector of the market. The other thing that’s happening is as the marketplace shifts to streaming, there is opportunity to be the arbitrator, if you will, across the streaming landscape. That’s a big area where iSpot is investing in and how things worked in traditional linear are not going to be how things work in streaming. For example, in traditional linear, you measure the audience for the program, and it’s always the same ads that travel with the same programs.
By measuring the programs, you can basically create a currency for the ads that doesn’t work in stream. In streaming, the ads are targeted, so what’s happening in streaming, whereas in linear, 90% of the money that was being spent there was on arbitration or on the currency, and only 10% was being spent on optimization, planning, verification, and the outcome. You’re going to see that change in streaming. For streaming, it might be the opposite of that. It might be that 90% of the value is going to sit in all of these things that help optimize, place, verify, and measure the outcome. That’s how we see the measurement landscaping shifting as we get into a streaming-led world.
Len: Another area that has become a big area of focus for you all is agencies and networks. When iSpot got started, I think you were selling primarily to the advertisers themselves, but two other important constituencies are the agencies that those advertisers work with, number one, and number two, the networks. The networks and especially the streaming networks, are increasingly using iSpot as a way to prove to their advertising customers that their ads are effective. I’m curious how you’ve gone after agencies and networks as part of your ecosystem and allies over the last several years because that feels like an important new initiative that you’re driving aggressively.
Sean: Our core business is selling enterprise software solutions to brands and advertisers. We especially do well with larger advertisers. So that continues to account for the bulk of our revenue, I’d say probably 70% of our revenue is that. We also have a very massive and fast-growing business with TV networks and publishers. We work with every TV network with every publisher to help them measure their audiences and then prove to advertisers the effectiveness and the outcome of their advertising on their platform. So that is a quickly growing business for us, especially on the emerging streaming side.
We have for a long time worked with advertisers because they are an extension of the brand, but now we’re getting a lot deeper with agencies, and we’re providing solutions that are specific to agencies, and we’re providing business models specifically in the ability to buy on a CPM basis from US measurement services on a CPM basis. We view this as an ecosystem play. The fastest growing piece of our business is what we call the emerging business, which is a lot of capabilities and streaming, and those capabilities are being adopted by advertisers, by publishers, and by agencies at a fairly rapid pace.
Len: One topic where I probably will have to eat some crow because I’m historically, as Sean knows, pretty cynical, is acquisitions. I have not seen that many technology acquisitions work well. I’ve been a pretty outspoken person, at least on a few board calls where I’ve poo-poo the idea of acquiring companies. I’ve been wrong in the case of iSpot TV in at least two cases that I can think of. Sean, you guys successfully acquired Ace Metrix, and you also acquired 605. There are probably a couple of others that maybe were a little smaller, but you all have done a really good job.
It’d be great for you to explain those two companies, why you acquired them, how they fit into your strategy, and what you’ve done to successfully integrate them into iSpot. A lot of founders struggle with this same question. They feel like it’s a good idea to potentially acquire other companies, but getting the acquisitions right and then executing well on them afterward is a lot easier said than done. And you guys have done it well.
Sean: Buying companies is a lot easier than integrating the companies and making an acquisition successful. It starts with very careful vetting and thinking about an acquisition. For me, it always starts with our core mission to help advertisers measure the effectiveness of their marketing, specifically in video. Again, like I said earlier, it’s very, very, very simple. The first question becomes does this help advertisers measure the effectiveness of their investments? Is it synergistic with what we do? Is the business model synergistic? Is the culture of the company synergistic? Is this something that we believe we can take to our clients, and will our clients buy the service and find the service value? In the case of Ace Metrix, which checked all the boxes, they were already working with a lot of brands, a lot of our own customers, and our own customers raved about the capability.
They had a great product. Again, it was creative, and in the area of measuring creative, which we didn’t have at the time. We had the audience and outcome piece, and we said, “Wow, wouldn’t it be powerful if we can go to marketers and bring them the full end-to-end solution of what they really care about, the creative, the audience, and the outcome?” We believed that we could do that in the case of Ace. So, long story short, Ace Metrix has been a runaway success for us. We’ve nearly tripled the revenue of the company since the two and a half years or so that we’ve acquired them.
More recently, we acquired 605. What we really liked about 605, they had a very talented team that we thought could be very additive to us. They were good at outcome measurement for the KPIs that iSpot didn’t measure. iSpot was good at measuring outcomes to website and digital. 605 is very good at measuring outcomes to sales, offline sales, CPG sales, auto sales to foot traffic to credit card transaction data. It really was very accretive and synergistic, and it’s important for what marketers want in terms of measuring marketing effectiveness. Not to mention that they also had the charter data. We now have Charter, LG, Vizio, and Roku. We have over 100 million devices that we can measure off. 605 is more of a recent acquisition, so I think the jury’s still out on our execution and integration. Again, it’s much easier to buy the company than it’s to integrate it. If most of the effort is going to the actual acquisition and not enough to the integration part, that’s a problem.
Len: You guys have done a great job and there’s a lot of good lessons in there for other founders. One last category of questions is around innovation in general. We’ve known each other a long time and one of the things that I’ve been the most impressed with by your team and you in particular is you out-innovate yourselves. I don’t think I’ve been in a board meeting where I’ve heard you say, “Well, company X is building this, and we need to build this too because that’s our competitor, and so we’re going to build it.
It’s a challenge for a CEO to listen to customers but not look in the customer rearview mirror as it relates to what to build next because you have to have the vision for where markets, platforms, ecosystems, and consumers are going. How do you, at a process level, ideate? You cooked up a lot of really cool ideas over the last 11 years since I’ve been involved, and I know there are more in the works. I’m curious what process you and your team have used to innovate because it’s impressive and maybe there are things to be learned for other founders.
Sean: It does start with customers — not as much with prospects. Prospects will tell you all sorts of things. “I would buy it if you had X, Y, and Z.” So listening to customers is fundamental, but that’s the easier part. That’s basic blocking, tackling, and having an organization in listening to customers and collecting feedback by meeting often and discussing it. The harder part is understanding where the trends are headed. For me, I do a lot of listening, and talking to people in the industry about trends in general. The problem is you sort of have to become obsessive about it. I obsessively think about what I hear, but then I also have to block out the noise. There is so much noise, especially the media.
A lot of what the media is talking about is drama and hype. You also have to obsessively think about where it’s really headed. Who do you trust? Who do you listen to, and what do you not listen to? That is the trick. It’s so hard. At some point, you have to think about where your own core competency is at and not get drawn into directions where the company doesn’t have core competencies.
This is the tricky part. Even when we started iSpot, it was all over the media. “TV is dead, TV is dead.” One would ask, “Well, why are you starting a company in TV? TV is dead.” But you have to obsessively think through that. And it’s like, what does it mean TV is dead? Are people going to go to their wall and rip off this device off of their wall? No, I don’t believe that. I don’t believe anyone’s going to do that. Who doesn’t love a big screen on their wall? I mean, come on.
I spent a lot of my time listening, thinking, and doing a lot of obsessing. Sometimes, it takes courage to ignore noise and things that people are saying when you know deep down you don’t believe it. Here’s the problem. There isn’t a playbook for this one. This is what makes this job harder. You can’t pull up a playbook. If I was running a sales organization, I would have a playbook, but making decisions about the future is a bit trickier.
Len: One last question, kind of a crystal ball question. If you and I are here talking in four and a half more years, I’m just curious if you had to bet, what types of things will you and I be talking about several years from now?
Sean: One thing that’s probably not going to change over time is the investment in advertising. We know advertising works and is effective, but advertising can become a lot more effective than it is today. We were talking earlier in this area of planning and moving upstream, a lot of the planning is going to move to be AI-driven, both on the creative side and on the media side where you’re going to be able to auto-generate storyboards, imagery, and creative and have a lot more variation, and then also do the testing for those in a very quick AI-driven fashion. These are a lot of the technologies that iSpot is working on and has available and deploying. And the same on the media side. You’re going to be able to predict before you place an ad what kind of impact it’s going to have, especially in the streaming world where you can target it one-to-one.
Imagine a creative now instead of one variation, we now have 20 variations that are by different demographic cuts or interest cuts, and maybe there’s now the ability geographically to insert something that’s more relevant. There’s just going to be a lot more dynamic elements in both the creative and the placement of the media. As effective as it is overall, it’s way under-optimized. There’s a lot of upside there today and a huge opportunity in advertising for personalization, targeting, and optimization. It’s all going to be driven by real-time technology and machine learning AI.
Len: Super exciting. What a pleasure. It’s always great, Sean, to get to see your view of the future and remind me of the best stories from the past. It’s been a real pleasure for Madrona to get to be a partner of yours along this journey. Thank you for taking the time, and I’ll let you get back to the business of running a fast-growing company. But thank you so much, Sean, for spending time with us.
Sean: Thank You, Len. And for the viewers, Len and I talk more often than every three to four years in case somebody might get that impression. We talk quite often. And thank you, Len. You and Madrona have been awesome partners, and continue to be, and it’s an exciting time. So, thank you.
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