Teads

Teads is working to make advertising sustainable for companies and less annoying for consumers

By Marie Griffin

Photography by Travis Curry

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Read Teads’s cover story in our digital magazine edition

Have you ever been reading an article on your computer, tablet or smartphone when an ad opens up suddenly within the text of the story? If you stop to watch the video, it will play without the sound, which will activate if you hover over the video (or tap, on a mobile device). If you don’t want to watch the ad, you can close it immediately by clicking the “x” on the edge of the video unit, or it will close by itself if you continue scrolling until it is out of view.

This type of ad, called inRead, was invented about five years ago by an ad tech company called Teads, and several other companies now offer similar formats. When a video advertisement is delivered directly into an article or some other area of a webpage, but not within a traditional video player, it is called “outstream.”

Teads is the leading company serving outstream video advertising, reaching 1.2 billion unique viewers worldwide, according to comScore’s Video Ad Ecosystem report. Teads reported $144 million in revenue in 2015, boasting organic growth of 50 percent year-over-year.

Underlying all of Teads’ digital advertising solutions is the principle that the ad must be “entirely respectful of user choice.” The video doesn’t automatically play and jar the reader with unexpected sound; the viewer isn’t required to wait before an ad can be closed, and audiences can be targeted based on context — the content of the story they are reading — instead of their personal online behavior.

Before Teads, video advertising on the web was embedded within video players, where the commercial could be played before (pre-roll), during (mid-roll) or after (post-roll) video content, just like commercials on television.

Bertrand Quesada, Teads’ French-born co-founder and CEO, notes that “the beauty of pre-roll video is it lines up with what brands are used to buying on television, and [media companies] make more money on video advertising” than other types of digital advertising. On the downside, pre-roll ads that cannot be skipped for some number of seconds, or at all, “are forced on people and they hate them,” he adds.

Quesada points out that media companies need to make money through advertising to keep the vast majority of content on the web free for the consumer, “but you should not hijack the consumer to do so,” he says.

Helping media companies make more money is an integral part of Teads’ strategy.

“We exist to help publishers monetize their inventory in a more relevant way without ever sacrificing user experience,” says Jim Daily, president of Teads in North America. “We put the control back in the user’s hands.”

Major newspapers and magazine companies have been supplementing their written articles with original video content for many years, but the fact remains that most of the content they produce is text. With Teads’ technology, video ads can be placed within text-based news stories and articles. This opens up an immense amount of digital real estate within which media companies can now sell video advertising.

Why does this matter? Digital video advertising brings more revenue, and more profit, to media companies than traditional display advertising. Digital advertising rates vary widely based on hundreds of variables, but, all things being equal, video advertising allows media companies to charge a higher CPM (cost per thousand — the M in CPM represents the Roman numeral for thousand).

On Facebook for example, advertisers pay a CPM of about $4 for video ads, more than 25 percent higher than the $3.14 average CPM across all Facebook advertising, according to Kenshoo.

Demand for digital video advertising placements outpaces the supply, according to a survey Teads commissioned and research firm Forrester conducted last year. The study found that 70 percent of agencies and 77 percent of advertisers were anticipating increases in their digital video budgets in the coming two years, but 40 percent of agency respondents and 27 percent of marketers agreed that lack of premium video inventory could hurt the video market in the future.

Video advertising is also growing faster than online banner (or display) advertising, according to eMarketer. Traditional display advertising spending is predicted to increase about 15 percent in 2016, while digital video advertising spending will grow at a rate that is almost double — 27 percent. The digital media consulting firm forecasts that digital video advertising spending in the U.S. will reach $9.8 billion this year and $16.7 billion by 2020.

“If I had 50 times as much video content, I could sell it out,” explains Achir Kalra, senior vice president of revenue operations and strategic partnerships at Forbes. “With Teads, we’re not obligated to have video content to serve video advertising, but we are still able to fetch a high premium CPM for the unit.”

“As a company, Bonnier produces a lot of video, but we are mostly publishing articles and beautiful photographs,” says Sean Holzman, chief digital revenue officer for Bonnier Corporation, which has been using Teads exclusively for outstream video advertising services for less than a year. Bonnier is a large consumer-publishing group, with more than 30 special-interest magazines, multimedia extensions, digital properties, books and events to its name. “Teads allows us to serve a new ad format within our articles on our websites, and to scale our video advertising inventory,” adds Holzman.

BILLION-DOLLAR GOALS

Teads plays multiple roles in the digital advertising ecosystem. “We are a full SSP (supply-side platform),” Quesada says. In other words, Teads’ automated technology helps “premium” media companies sell ads directly to advertisers or agencies, through programmatic (automated) advertising exchanges, or through Teads’ exclusive premium publisher network. To Teads, a premium media company is one where most articles have been written or edited by professionals. Media companies around the world with which Teads has forged relationships include Forbes, Time Inc., Bonnier, Mashable, The Washington Post, The Guardian and The Telegraph in the UK, and Nikkei in Japan.

Quesada calls his company’s total offering — the outstream video ad delivery technology, its network of premium media companies, and a user-friendly ad-watching experience for consumers — “one of the biggest revolutions in the advertising space, period.” He compares Teads’ proposition to Google’s creation of a results-driven search advertising ecosystem with AdWords at the turn of the last century.

“Anyone can build a search engine, but that doesn’t make them Google,” he contends.

Most of us are so used to the Google search advertising model that we aren’t aware of how transformational it originally was. In 1998, Google founders Larry Page and Sergey Brin declared that the company’s mission “is to organize the world’s information and make it universally accessible and useful,” but that vision could not have been achieved without the parallel development of a strategy to make money through search-driven advertising.

Google’s AdWords activated the “long tail” of content creators, allowing individual bloggers and small websites to make money on advertising without the infrastructure that had given traditional media companies a virtual monopoly on publishing up to that point. In contrast, Teads’ technology and publisher platform is designed to return revenue and profitability to the large media companies — to ensure that investing in writers, journalists, photographers, audience development, marketing, sales, and all the infrastructure that sustains professional media remains commercially viable.

“We have a model that is really sustainable for publishers, brands and consumers,” Quesada says. “If we continue doing what we do well and stay ahead of the game in terms of what’s next, we feel we have the potential to become a multibillion-dollar company.”

Forbes’ Kalra applauds the Teads technology, publisher platform and team. “We were one of their first partners when they launched in the U.S., and we have been working with Teads for almost three years,” he says. “Forbes has always been very open about creating and testing new digital products, and this has been a very successful one for us.”

Kalra adds that, like Teads, Forbes keeps the user experience top of mind when delivering outstream ads. Even though Forbes produces about 400 new pieces of content every day and gets some 4 million page views daily, “we’re not shoving these ads down people’s throats,” he says. “We have developed very strict rules, which have changed over time, but we will limit the number of times a viewer sees an ad, or no ad will load until a person has spent a certain amount of time on
the site.”

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“Teads keeps the quality of the publisher network very tight, and that works well for us,” notes Bonnier’s Holzman. “And because they’re delivering a quality audience, Teads can monetize the advertising at a high CPM.” Sales teams from individual Bonnier titles sell outstream video powered by Teads, and the company also sells outstream advertising across Bonnier’s multi-title network. Unsold inventory then goes into Teads’ network, he explains.

“The feedback from advertisers and our consumers has been great,” Holzman adds. “Teads has a very solid team in the U.S., from Jim Daily to business development to local publisher support. If something does come up, they have every time zone covered, so I have never had a problem.”

NAVIGATING A CHANGING LANDSCAPE

For Teads, a sustainable web ecosystem is like a three-legged stool, and the third leg of the advertiser and ad agency is equally important. Teads works with top brands including BMW, Lexus, Disney, P&G, Red Bull, UBS, MasterCard, Cartier, Louis Vuitton, IBM, Sony, Intel, Marriott and American Airlines, as well as major advertising agencies around the globe.

Tim Libby, senior vice president and group director at agency Starcom, oversees advertising investments for Novartis, both its pharmaceuticals business and its Alcon eye care products division. Because pharmaceutical advertising is highly regulated, Teads’ premium publisher network is very important, he notes.

“Bertrand has very strong publisher relationships because he has been able to demonstrate a lot of value to them,” Libby says. “I have him demonstrate his product for clients. He is the right type of person to put in front of clients because he is a founder. He is very passionate about his product and his technology and that comes across.”

While using data that has been collected on consumers, including their online behavior, is currently driving audience targeting decisions, Libby asserts that contextual targeting “is still the best form of targeting because it is based on what the consumer is actually reading.”

Novartis commercials are often 60 seconds, as opposed to the more common 15- or 30-second length of digital video advertising, and Libby feels that having the ad delivered in a contextually relevant environment improves the odds that the user will view the whole video.

“Obviously advertisers have a better performance than when they run a campaign in an environment where the ad is forced and the consumer did not decide to watch it,” Daily says. “We call our advertising attention-based because the user must be engaged and, therefore, paying attention.”

And, with users more engaged in what they’re seeing, metrics such as brand awareness, preference and purchase intent are likely to be higher for advertisers.

Of course, the quality of the ad creative also plays an important role in any branding campaign. And that quality has been rising, Daily points out: “We are seeing our clients building more video content that is short, engaging and emotional.” CEO

Marie Griffin is a freelance writer based in the New York City area. Contact us at editorial@smartceo.com.

BERTRAND QUESADA’S ENTREPRENEURIAL JOURNEY (SO FAR)

The son of two doctors, Bertrand Quesada, 39, grew up in southern France, where entrepreneurship was not discussed as a potential career path, he remembers. Quesada studied business at Bordeaux Business School. His first job was as a financial analyst with multinational electronics company Motorola, which sent him to a plant near Glasgow, Scotland.

While reading a magazine one day, Quesada recognized the man profiled on the cover, who was pictured on a personal water craft living the life of a millionaire. “One of my friends was the founder of a startup called Espotting,” he says. Curious about the glamorous-seeming startup culture, Quesada phoned his friend, who subsequently hired Quesada as business development director. He was one of about five employees at the time.

In Europe, Espotting was a pioneer and early leader in search-engine marketing and pay-per-click advertising — the business in which Google was simultaneously building its dominant position. “We grew the business from inception to 500 people, and eventually sold it to a U.S.-based public company called FindWhat.com,” Quesada says. (The company later rebranded as Miva.) According to Bloomberg, the Espotting/FindWhat deal was valued at $162 million when it closed in June 2004.

Although Quesada had some equity stake in Espotting, he wasn’t ready to retire. In fact, he had caught the entrepreneurship bug. In 2007, Quesada co-founded Ebuzzing with Pierre Chappaz, who had previously co-founded European ecommerce price comparison service Kelkoo.

“Our idea was to connect influencers with brands,” Quesada says, noting that bloggers had started to have an impact on consumers’ buying choices, but brands did not know how to find these influencers or how to evaluate them. “We called the company Ebuzzing because brands wanted to create a ‘buzz’ around their products through social sharing,” he notes.

Quesada and Chappaz wanted to scale their company quickly, so they began to acquire other companies that would help them expand into additional European countries or pick up new technologies that would spur growth. “We saw these as marriages rather than acquisitions,” Quesada says. “We would exchange shares and keep the founders on board so that we could build the company together.”

In 2011, Ebuzzing acquired BeeAd, a French company that had developed a video advertising solution that allowed consumers to choose the ad they wanted to watch before accessing content. “This was a new way of inserting video ads, although it was not the revolutionary technology we have now,” Quesada recounts. Through that acquisition, the Ebuzzing team gained experience in the video advertising world and in working with media companies through a network.

That experience paid off when Quesada and Chappaz first encountered Teads a couple of years later. Founded in France in 2011 by Loïc Soubeyrand, Loïc Jaurès and Olivier Reynaud, Teads had invented the inRead technology and launched a premium publisher platform. “We immediately saw how much potential the technology had to help publishers monetize their content at a higher yield with video,” Quesada says. Ebuzzing acquired Teads in 2014 and officially changed the corporate name of the new entity to Teads about six months later.

After finding considerable success with Teads in Europe, Quesada and Chappaz decided to expand to the U.S. in 2015, securing approximately $30 million in a combination of debt and equity funding to finance the move.

Because raising capital is more difficult in Europe, Quesada says the company is accustomed to funding its growth organically. “We are extremely profitable, and we have cash in the bank,” he says. While raising money made sense when Teads first expanded to the U.S., “we are not looking at raising any more capital,” he adds.

Teads considered filing an IPO to become a public company, but that idea is on hold. Investors are lukewarm about technology IPOs because they are concerned that many companies are overvalued. “Becoming public would be a great trajectory for the company because it is a way for us to stay independent and keep on growing the business, which we are having fun doing,” Quesada says. “The challenge right now is that the market conditions are not right.”

Additional acquisitions, though, are likely. As they have been up until now, Quesada and Chappaz are looking at companies that could help Teads expand faster internationally or bolster its technology portfolio.

THE TEADS MANIFESTO

Championing sustainable advertising

In the unwritten contract of the worldwide web, advertising dollars support much of the “free” content and applications available to internet users. Consumers have generally complied with their end of the deal by accepting advertising or sponsored posts on search engines, websites, social media feeds and videos.

However, users of the internet have gotten tired of dealing with ads that take over their screens, distract attention like billboards in Times Square, slow page loads to a crawl, consume mobile data plans, and have no relevance to the viewer. So more consumers are opting out of the unwritten contract by adopting ad-blocking software.

The Reuters Institute for the Study of Journalism conducted an online survey of web users in early 2016. The study of a representative sample of U.S. consumers with access to the internet found that 24 percent are using ad-blocking software on a personal computer or mobile device. The highest rate of ad blocking, at 44 percent, comes from 18-to-24-year-olds, followed by 29 percent of those aged 25 to 34.

The top reason for ad blocking — “I was fed up with the volume and distracting nature of advertisements in general” — was selected by 68 percent of respondents. Privacy concerns were cited by 55 percent of respondents, and 50 percent wanted to decrease page load times.

Teads released its “Manifesto for Sustainable Advertising” white paper last fall to educate advertisers, publishers and agencies on the magnitude of the ad-blocking problem and its causes. The paper ends with 10 “guidelines to engage, not enrage users:”

1. Avoid interstitials and pop-up ads that prevent users from accessing content on publishers’ sites.
2. Leverage skippable video advertising formats that the majority of consumers prefer.
3. Use strategic ad placement and limit the number of ads per user because excessive ads have a detrimental impact on a site’s performance.
4. Engage in contextual targeting to improve ad relevancy.
5. Advertisers and publishers should adopt a cross-platform strategy that is optimized for mobile first.
6. Adapt video length according to the device; shorter mobile ads are more effective and less disruptive to the user.
7. Let the user control audio within video advertising.
8. Collect user data responsibly and allow users to easily opt out of being tracked.
9. Use caution when delivering mobile ads in markets where data plans are limited.
10. Optimize video advertising based on engagement and viewability metrics (rather than maximizing reach while minimizing costs); brands and agencies should focus on creating ads that engage users.

Pierre Chappaz, Teads’ cofounder and executive chairman, explained Teads’ position in a sponsored editorial column in Adweek. “We are polluting the web with intrusive and annoying ad units, and people are tired of it,” he wrote. “If we as an industry want to protect the ecosystem of free media that consumers have come to expect and crave, as well as ensure that advertising continues to be a cornerstone of revenue-generating business for advertisers, agencies, public companies, technical service providers and publishers, it is imperative that we take action to make it sustainable for the future.”

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