Lorne Brown is the Founder of Operative. Previously Lorne has held various management roles at internet and technology companies. We recently spoke with Lorne about his current role.
The Makegood: Lorne, you founded Operative, an advertising business management company, in 1999. What motivated you to do so and why was it the right time?
LB: Not a lot of people know this, but when I was at the University at Albany, I went on over 20 interviews with many banks and large companies, fighting for a related job in computer science or finance. I decided to go into consulting and within 18 months out of college, it felt like I had worked at every type of company out there; brokerage houses, software companies, manufacturing plants, accounting firms…you name it, I did it. Then I landed at CMP Media (now United Business Media), in their Online Ad Operations department. My first job was to keep refreshing the screen until the banner showed up—I must have refreshed the screen over 2,000 times on my first day to make sure 200 different campaigns were running. Two days later, my whole day was spent entering data into Net Gravity (an old ad server later purchased by DoubleClick). Eventually I became the Inventory Manger, where Sales would yell at me to update an internal excel spreadsheet. This is not what I had pictured of the online ad industry—scattered, unorganized, and inefficient. All my previous companies ran similar businesses so much smoother, yet all the jobs required were the same. Why? It was then when I realized there had to be a better, easier way.
The Makegood: Although you founded Operative, you hired a CEO to run the company day to day. What motivated you to make this decision?
LB: Around 2003/2004 we were flying high. We were signing major clients such as Microsoft and The Wall Street Journal, frequently invited to speak at trade events, international markets were knocking on or door to expand. Around this time, we decided to take on capital to satisfy international demands, R&D to build on our early product success and hire more sales people; we successfully raised our first round. As excited as I was for the company’s hyper growth, my role as a CEO began to evolve and started to pull me from what I really loved to do—being in the field and interacting with the market every day. So that’s when I decided I needed to find someone who would take the company to the next level—one with proven experience and a serious drive to win. Mike Leo, co-founder of Avenue A, was just the right person for the job. Since his sale of L90’s ad serving division to DoubleClick, he had always aspired to create a single technology stack that would make it easier for publishers to make money in the advertising business. The timing was just right. He hit the ground running, I got back to doing what I loved and we’ve never looked back.
The Makegood: Operative has over 200 clients. Who are they and why do they work with you?
LB: Operative works with many top media companies such as MSN, NBC Universal, Pandora, The Wall Street Journal, and CBS Interactive. Essentially, we help companies who run digital (e.g., display, mobile, video) and print advertising businesses to grow their revenue profitably through SAAS technology and services.
As a digital publisher, it’s not uncommon to have multiple ad servers, a CRM such as Salesforce.com, a billing system, and rich media tools and third party ad servers. As a publisher’s technology stack grows, pretty soon managing all the innovation becomes uncontrollable. Companies typically resort to throwing bodies at problems, and relying on legacy spreadsheets to manage the chaos and the onboarding of new technology. This is unsustainable, and why there’s a huge gap in the cost of running ads between offline media such television or print (5% of revenue) versus digital media (30% of revenue). Publishers come to us to help them close that gap—by enabling all the pieces of their stack to talk to each other, reducing the complexity of scaling a complicated ecosystem. Essentially, we become the business hub all these systems integrate with to provide a single view into their business.
The days of using a closed system to do everything is over. Publishers want best of breed, and someone who doesn’t compete. They want Salesforce.com, multiple ad servers for each type of platform they support and the right tools that fit their business. We give them the ability to innovate with any and all of these technologies, while staying lean and efficient.
The Makegood: Recently, Operative CEO, Mike Leo, talked about the state of the media buying and selling industry, calling it out as complex and the “end-user has to deal with a mess.” In your opinion, how can participants in the ecosystem work towards fixing this issue?
LB: Mike’s right – the industry is incredibly complex and fragmented. It’s hard to pinpoint a place to start. Where to begin? As we have always said from the beginning, companies cannot scale if they can’t bring it all together. Without having the right pipes running through your business, multiple problems end up causing serious revenue leakage—in many cases, you don’t know where it’s flowing.
The first problem is that publishers don’t have one view into a single yield curve. They often have a system like Operative to run their direct sales business, but then they have many other systems in place to manage their remnant inventory. There are several problems here. The first is that operations professionals wind up spending more time, in some cases 80%, dealing with the remnant systems, doing blocks, optimizing, dealing with issues, but this part only represents 10% of their revenue. So it’s a lot harder and the return is small.
The second issue is that publishers are getting ripped off by the middlemen whose business models are poorly aligned with their clients’ success. Most publishers say to me “I don’t understand why my remnant inventory is valued at a dollar, when my audience is desired and can be targeted”. The issues is that the agencies are actually paying $3 for the inventory, but by the time everyone in the middle takes their cut, the publisher winds up getting $1 or less, thereby thinking it’s only “worth” a dollar in their eyes.
In order to get the real value of their inventory, publishers need to own more of the supply chain that makes programmatic buying possible. By getting themselves closer to the trading desks and getting all their inventory in one single system to manage, then the true value of all their inventory will be realized and resources can be allocated to servicing the right revenue streams.
As I noted before, I really believe it’s critical for publishers to make sure they build a strong foundation upon which their business can grow and take off in this rapidly changing environment. You can’t achieve innovation, efficiency, and flexibility without having a solid business platform—one that is agnostic, has scale, and doesn’t compete. If everyone played by this definition, you’ll quickly eliminate all but a few players – Operative being one of the few left standing.
The Makegood: Thanks, Lorne.