Update: In the comments the founder of the Rubicon Project indicated that they will not be working directly with advertisers. My misperception was based on the TechCrunch write-up. The article below is based on the assumption that they would approach both sides of the problem. Since this is not the case, take this into account when reading the post.
The Rubicon Project is by far the most promising, exciting and revolutionizing startup of the moment. Their business has the potential to completely change the entire web-advertising industry.
They are trying to become an intermediary (of intermediaries) by offering:
- Publishers: automated ad revenue optimization between networks
- Advertisers: a central point to setup online advertising (wrong)
They display it in a graphical way in their beta overview video.
The Changing Industry
An intermediary like Rubicon profoundly changes the competitive landscape for ad networks such as Google Adsense.
Currently startups in the ad network business face a so called chicken and egg problem. Even if you have a technically great product, you will still need advertisers to get publishers and vice-versa. The advertising and sales efforts required in this industry are substantial and present a major obstacle for new companies to enter the market.
Now imagine a new market where Rubicon is the intermediary. Any new advertising network could instantly get its product of the ground by joining Rubicon. No longer are millions in capital needed for sales and promotion. When a startup is able to outperform the market incumbents, in terms of matching advertisements with visitors, it has its road to success paved. Not only does this benefit those startups, it also gives Rubicon’s clients access to the best performing advertising solutions.
Google was the first to get the match between ads and viewers somewhat right. Eager to be next in line seems to be the currently hyped Facebook, with its personalized advertising. My impression is that the current solutions are tremendously under-performing. When an intermediary, be it Rubicon, establishes a position for themselves, innovation in online advertising will boom.
An intermediary like Rubicon changes the balance between required core competences for ad networks. The focus moves from sales&marketing to clever algorithms, extensive data and intelligent models to match the advertisements with the viewers. The market’s changes effectively open up this 27 billion industry to a far larger array of entrepreneurs.
Rubicon effectively lowers the barriers to entry into this Google Adsense dominated market. In the new market situation it will be harder for Google to stay ahead of its competition. This fact makes you wonder, will Google move to the Rubicon position or remain where it is. Or in other words, will it defend its sales competence or its ability to match visitors with advertisements?
If Rubicon succeeds we will soon have some very interesting entrepreneurial possibilities ahead. I certainly wish them the best of luck. Given the experience and progress of the founding team, I think they have a good shot.
@Frank, Good luck starting your sixth company!
Blog of Frank Addante (I subscribed to it, great readings)