23
April
2014
|
03:17 AM
America/Los_Angeles

Centro: Chicago's Ad Tech Giant Aims To Revive Journalism

ShawnRiegsecker 1

I recently met with Shawn Riegsecker, the CEO and founder of Centro, a large ad network and technology company based in Chicago. It's doing extremely well but there's been shockingly little coverage of the company -- even in Chicago. 

Centro has been profitable for more than a decade and has revenues of about $300 million a year, with more than 500 staff. Riegsecker is very driven to help reverse the shrinking fortunes of the media industry, and journalism in particular,  by helping publishers rebuild revenues.

The successful new media business model is what I call a "Heinz" business model - 57 varieties of revenue.  Not every media company needs 57 but each company has to develop and manage many different revenue streams to prosper. Centro has several products to help media companies add new revenue streams and improve existing ones. 

Riegsecker's background as a journalist, and his belief that the "Fourth Estate" is essential to a healthy society, underpins much of his company's vision and strategy.

It's rare to meet a CEO who understands both businesses -- media and advertising -- and sees the connection between the two, and that each is dependent on the good health of the other, which is not true today: both industries are in trouble.

Riegsecker has also crafted an interesting corporate culture. Centro is founded on the idea that the happiness of its employees is the best metric of a successful company.

It has an inspiring manifesto. ("The future of our lives, our community, and our country lie in our hands, and we have the ability and responsibility to change them for the better.")

And it has been named the best place to work in Chicago four years in a row by Crain's - no company has ever won this accolade even two years in a row.

Centro is a company that richly deserves far more recognition than it's had so far. 

Here are some notes from our conversation:

- Centro was founded in 2001 and has been profitable for more than ten years. Riegsecker has avoided taking VC investments too early and waited until late 2010 before raising a $22.5 million Series A round from San Francisco based VC firm FTV Capital, a small amount compared with Silicon Valley ad tech startups. The capital was used to expand its salesforce, and add to its 18 offices, which work with advertising agencies and brands.

- Centro's key distinction is that it doesn't just work with advertisers, it can see very clearly that ads work best when they are paired with high quality, trusted media. It has created an invitation-only network of more than 1900 media companies, all of which must employ journalists and other media professionals -- rather than employing bots to scrape and steal content and then buying low-end traffic to scam ad revenues. 

[Rival advertising networks are riddled with such scraper "media" sites, netting as much as  $18 billion a year.  I'm shocked that media companies aren't up in arms and raging about these massive losses. It demonstrates how little they understand the economics of their digital business.]

- Auditors Trust Metrics gave Centro's ad network a quality rating of 93% compared with the industry benchmark of just 22% -- it means that 4 out of five sites can't be trusted. I asked why do media buyers put up with such low quality ad networks? He said it's very cheap and there's a huge inventory. [Media buyers seem more interested in high numbers rather than real conversions.]

- Riegsecker is betting that brands will soon get smarter about their media buys and Centro's Brand  Exchange publisher network is in the right place at the right time to earn premium advertising rates, which flow back to the publishers, who use the money to create more quality content. [It's a virtuous cycle that constantly creates content and which brands can use for their ad campaigns -- instead of having to learn how to be their own media companies and feed the beast with daily content.]

- Centro closely monitors advertisers so that they can't use cookies to collect valuable data from publishers and then resell it. He says that brands and publishers are often unaware that third parties are using ad networks to collect valuable data on their customers and visitors, and are selling it to competitors.

- Publishers aren't profiting from their own visitor data, which is why Centro created a data exchange, a data market that provides a new revenue stream for media companies.

 - Riegsecker is not a fan of native advertising because it can erode reader trust however, Centro's technology supports native advertising media buys. 

- Riegsecker says the best outcome for brands is when they can map their own 1st party data with 1st party data from the publisher instead of using 3rd parties. Third party cookies are a blunt instrument. 

- He says most ad networks take 60% or more to serve ads, which is too much money for too little value. Centro takes less than 20% and offers publishers higher ad rates, at least twice as much as Google's (troubled) AdSense. 

- Coming up next from Centro is a universal media buying dashboard integrating all types of  advertising formats such as video, mobile, etc., It will work with all ad networks. It will also be possible to buy directly from media companies, which will cut out middlemen and return more money to publishers.

- Riegsecker believes that publishers will become smarter over the next few years  and plug some of the revenue losses that companies such as Google and Facebook have managed to exploit because of their broader geographical reach.

- He is hopeful for the future of journalism but says that the next two to three years will be tough but eventually publishers will figure out a sustainable business model.

- Riegsecker doesn't see much value in all the data collection on consumers, he says he hasn't been able to find a single good case study where it can be shown that it has helped brands sell more products. [I agree and I've written about this issue, that despite all the data collected -- brands haven't become any better at selling products, tracking isn't selling.]

- Centro will likely seek an IPO within the coming year. It will use the capital to make acquisitions. 

- Being headquartered in Chicago is an advantage in terms of finding talented people without having to pay Silicon Valley wages.

- Its unique company culture has  fostered a very loyal workforce. Centro has an incredibly attrition rate of just 4%.

- Riegsecker is very concerned about the continuing loss of journalists. He believes that a healthy society needs a healthy fourth estate and that his company's success will revive journalism by improving advertising revenues and enable media companies to build new lines of business.  

Foremski's Take: I'm impressed with Riegsecker and his company. Because of his background as a newspaper journalist he understands the problems media companies are facing but he also understands the challenges brands have in finding and engaging with a real audience. 

Like Riegsecker, I believe brands will become smarter, and they will rediscover the unique value that independent media companies provide. [Please see: Content Marketing Problems Will Lead To A Revived Media Industry]

New tools and better monitoring will enable brands to recognize the value of Centro's carefully vetted publisher network. Quality will always trump quantity, which is why publishers should be careful about diluting their editorial standards and chasing pageviews. 

Riegsecker is motivated by civic responsibilities and the opportunity to make a big difference in the world. The leadership of rival ad tech companies is narrow in vision and mundane in ambition.

The choice to bootstrap growth for nearly ten years must have required tremendous discipline but it was very smart move. It's allowed Centro to craft a long term competitive strategy without investor interference - VC money is rarely "smart" money. [The Majority Of VCs Harm Startups Says Leading Silicon Valley VC]

To revive the fortunes of the media industry will require a larger vision than any individual media company can muster.  Which is why media projects funded by billionaires, such as Pierre Omidyar's First Look Media, and Jeff Bezos's Washington Post, cannot change the business of journalism. It requires a systemic analysis and a solution that can scale the entire economy of media and advertising.

Centro's opportunity is to become the largest provider of media technologies and services for media companies and brands. Its media technologies could become core infrastructure for a radical new media and advertising platform.

This is exactly what's needed to take on Google, Facebook, and other tech-enabled Silicon Valley media companies, who rely on free content, and employ bots rather than journalists.

There's an opportunity beyond serving ads. Centro publishes ads but why not media content, too? Why should newspapers and other publishers have to develop and maintain their own IT? 

Centro's long term opportunity is in building a sophisticated publishing platform for all types of media and not just advertising. This platform could then support developers creating new types of media and advertising applications (I have several ideas).

And since every company is a media company -- there are sales to be made into the lucrative enterprise software sector. Corporations have large IT budgets and they will need a lot of media technologies over the coming decade.  

Centro seems to have the right strategy,  the right leadership, and the time is right. I rarely come across companies that tick so many boxes and are this impressive. [Please see: Delphix.]

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More info:  


Shawn Riegsecker | Centro


Shawn is a member of the YPO, a founding board member of The Centrist Party, a new political party for moderate Americans, and sits on the advisory board for TechWeek. He is also on the selection committee for 1871, a community of Chicago-based digital start-ups, and an angel investor in the FireStarter Fund, a group of Chicago founders supporting the next generation of entrepreneurs.


 

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