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Why Twitter Buying MoPub Is a Very Big Deal ... Antonio Garcia

Burgess COMMENTARY

Peter Burgess

Thanks to Mike Isaac Helen Belogolova in on startups6 min read Why Twitter Buying MoPub Is a Very Big Deal Full disclosure: I’m a former Facebook product manager and was creator and builder of Facebook Exchange (FBX), Facebook’s real-time bidding ad exchange. I also (in)famously(?) blew off Twitter in order to work at Facebook. Currently, I advise Nanigans, a Facebook ads partner and member of the FBX exchange. WTF is MoPub? MoPub is the world’s largest mobile ad exchange. That means people trade eyeballs on mobile devices for money through the technology MoPub provides. And they do it billions of times a day. Why is that important to Twitter? The MoPub acquisition allows Twitter to fundamentally change how mobile ads are purchased and places them at the forefront of how mobile, Web, and social ads interact. This makes Twitter the most interesting company in advertising right now. How so? As Kevin Weil of Twitter, in announcing the deal, correctly notes: “The two major trends in the ad world right now are the rapid consumer shift toward mobile usage, and the industry shift to programmatic buying.” That’s absolutely right. Those are the only trends in the ad world that matter, and by buying MoPub, Twitter is betting big on both of them. It’s a bigger, ballsier bet than my former employer ever made, and it puts Twitter way ahead of any other social media player. I hate the douchey cant of MBA-speak, but to the extent we can use the term ‘game changer’ without puking in our mouths, this move is that. Let’s start with basics. Mobile data sucks right now If you know something about ad tech and want to understand where mobile is right now, just imagine what ad tech was five to ten years ago: no real ability to target individual users, no real reach and frequency caps, minimal transparency into where the ad is appearing, minimal ability to bid on individual ad impressions, and no real targeting data. You bellied up to the ads bar with your budget, it disappeared, and you got…something…in return. You couldn’t even tell what. (Incidentally, this unflattering description more or less describes the Facebook Ads system as well, outside FBX, but that’s another matter altogether.) With real-time bidding (RTB) exchanges, this changed. You can now trace every individual ad to every user who saw it and back to every piece of data you know about the aforementioned user. It’s the ultimate culmination of the various ad technologies that have grafted themselves onto the Internet in the past fifteen years, and it is the future of digital advertising. But what about data? There are only two real sources of data in this world, both stemming from browsing: There’s the browsing data the advertiser knows (e.g., you looked at a Canon 6D camera on my site, and I still want to sell you that camera), and there’s the browsing data the publisher knows (e.g., you were on the Wall Street Journal Technology page today). The former gets used by the advertiser to hunt you down and figure out what ad to show you. The latter gets injected into the data stream in some way that hopefully increases the value of advertising to that publisher. The data about the camera the advertiser will never part with, as it’s too valuable. The data from the publisher is only occasionally valuable, and if so, it’s of fluctuating quality. The publisher is willing to part with the data, but the question is whether the data is any good and will anyone pay for it. Often, the answer is ‘no’. Enter Twitter: They know whom you’ve followed, what you’ve Tweeted, as well as what pages on the Web you’ve browsed. Remember, there are Tweet buttons over the entire Internet, which means they know what websites you’ve visited. That’s very valuable data they can suddenly inject into the real-time ebb and flow of browsing data. It’s also longer-lived. What marketers call the ‘intent window’ of camera shopping might last only last a week or two, but your interest in Lady Gaga indicates a certain demographic category that won’t change for years. And only Twitter knows that (well, and Facebook, but they’re not doing much with it). It’s also longer-lived data because it’s tied to a Twitter user ID, rather than to a mere cookie, so cookie churn doesn’t kill it. (Don’t worry if you didn’t understand that; we’re on the extra-credit points now.) Overlaying an interest graph over desktop or mobile RTB inventory is sure to increase MoPub’s monetization and place them among the first ranks (if they aren’t already) of mobile inventory monetization. As a publisher, you shop for monetization the same way the guy who owns the building with the billboard on top does: by picking the advertiser or middleman who can maximally exploit that billboard you own. With Twitter’s interest graph behind it, that maximal person will be MoPub more often than not. But that’s not even half of it. Identity, identity, identity This is the real win. What does identity mean? It’s not knowing your age, gender, and rough whereabouts. That has some value in the ads space, but it’s pretty minimal. Despite the various social media paranoia memes, no one cares about your baby photos either. No. It’s about knowing that the same person who is browsing for a pair of shoes on Zappos.com on their work computer is the same person who’s whiling away a few minutes on their iPhone later that day while waiting for a friend. And also knowing it’s that same person who’s checking Twitter on their iPad when they get home that night. Threading together all those experiences (one desktop computer + two mobile devices) is something nobody actually does these days. There’s a tiny minority of companies who can even do this, but Twitter is one of them (Google, Apple, Amazon, and Facebook are the others). How does this technically work? Since you’re logged into Twitter on a desktop browser and on a mobile device, the browser cookie from your computer and the device ID from your device are joined. Twitter will join those two in a data-safe way on their back-end that allows the data to flow across user experiences, without losing control of the underlying identity. Doing that, they have within reach that heretofore unattainable Holy Grail of marketers: a permanent, stable, and immutable key that identifies everybody online, on every device, all the time. MoPub lets Twitter monetize that magical fact. How does that actually play out? Two things: targeting and attribution. If the person who is browsing your shoes site can’t be found online again (via a desktop ad exchange, for example), there is nothing you can do with that data. Please note: That data is absolute gold to you and the most important data you own. It is the stack of leads the characters in Glengarry Glen Ross fought over like dogs. However, if that person never uses that exact browser again, the data disappears, turning from gold to lead just…like…that. However, if Twitter can find that person for you while they’re playing Candy Crush Saga, that changes everything. Suddenly that Candy Crush Saga ad impression goes from some bargain basement $0.20 per thousand ad impressions to $20, you have your lead again, and the entire mobile ads world changes. Likewise on the attribution front: If an ad impression on Twitter led to a sale on your mobile app, you can properly credit Twitter for that sale, and you are willing to bid higher for that on the next go-round. No one else can string those events together right now other than Twitter. You can see where we’re going with this. This isn’t just some little targeting twiddle: This is Twitter providing the source of truth for ads on mobile (and potentially on desktop as well). There are all sorts of clever technical ways an identity layer can be superimposed on the fairly chaotic world of real-time exchange buying. I’ve personally worked out lots of them. It was (obviously) discussed more than once at Facebook, but never implemented, and the reasons why could fill a library. But here, I’d find it very hard to believe that Twitter would not now make the bold move in that direction, given they evidently possess the nerve (and the checkbook) that Facebook lacked. In 2011, through the comedy of dubious decisions that often accompanies a startup acquisition, I ended up at Facebook while the rest of my company landed at Twitter. Twitter then was the gang of clowns who couldn’t even produce a proper term sheet, while Facebook was playing cold, professional hardball. In the two years since that decision, I never questioned it much. Now, Twitter is making the big, bold bets on the future, while Facebook is playing internal politics, and wallowing in their incumbent position. Times do change. Thanks to @MikeIsaac and @pkafka for reading early versions. 1 Suggest a link for further reading Recommend