Transcript 0:00 [upbeat music] Hello, and welcome to another episode of Stream Wars, our thought leader series where we learn from industry experts about the latest trends and challenges from across the convergent TV space. 0:16 Hosted by Michael Beach. Today I'm joined by Oren Hoffman. 0:21 Oren is currently the CEO and chief historian at SafeGraph, but he has had a massive impact in the marketing and advertising space, both as an investor and entrepreneur through the founding of companies such as LiveRamp. 0:31 Oren is probably the clearest thinker that I know, and I have benefited more times than I can count from his advice. Please enjoy my conversation with Oren Hoffman. Well, Oren, thanks for joining us today. 0:40 Ah, excited to be here. Excellent. Well, we'll start you off with a softball here that we ask all our guests. 0:45 Um, you know, what was your first job and, and what learnings do you take away, uh, that you apply to your career? First job was, uh, frozen yogurt, uh, TCBY. 0:54 Initially got paid minimum wage, which was 3.75 an hour at the time. I had recently turned 14, and I started working 40 hours a week in the summer. 1:04 Got two raises, so got to $4 an hour and then got to 4.25 an hour, and then I quit because the store owner did not wanna make me an assistant manager, which is probably reasonable given I was 14. 1:16 Yeah, that's probably a reasonable expectation. What was the hot seller back then? Oh, uh, Oreo, Oreo milkshake was definitely the hot seller. All right. 1:25 Sure that's- And if you worked there, you could make it just a little bit more, and then you could have a little bit yourself. Yeah, absolutely. 1:32 Uh, w- how'd you end up kind of the, the, uh, the quick path to where you are today? 1:37 Well, you know, after TCBY, I started a temp firm for high school students, which ended up paying for my first three years of college, and then kind of enjoyed the entrepreneurship life. Excellent. 1:48 Um, obviously m- many successes there. 1:51 Um, yeah, obviously, you know, we'll, we'll get into kinda LiveRamp and other areas, but, uh, you know, SafeGraph, uh, you know, current company today, can you kinda give our, our community a little bit of a background on, on the company, kinda what challenges you're solving and the, you know, business model and go-to-market? 2:05 Sure. SafeGraph sells geospatial data, sells data about physical places. 2:09 So if you wanna find about that local McDonald's on 555 Main Street, we have data about that, including the basic data like the store hours and things like that. Um, and that's it. 2:18 We just sell data, so we don't do visualization, we don't have a UI, uh, we don't sell, you know, core services on top of it, we don't, like, predict things. 2:27 We literally just sell facts about, uh, about, about, uh, physical places. 2:32 [lips smack] And I know, you know, listened to a couple of recent podcasts you've done, uh, both, you know, World of DaaS, which we'll, we'll link to in the show notes, and, and kinda others. 2:40 Y- you talk about the kinda fidelity and accuracy of location data, uh, is just a lot tougher of a challenge than people, uh, people think. Can you kinda give background on that? Yeah. 2:51 It, in, in, well, before we started, we were, we had a little bit of a different business, and we were trying to buy data about physical places, this point of interest data, and what we found when we were trying to buy that data was that it was, you know, uh, maybe 30% to 50% accurate. 3:08 Uh, so it was relatively low accuracy, but the u- for the use cases they were selling to, that was accurate enough. 3:15 The two use cases they were selling to were, like, marketing, so you might wanna, like, send a, a, um, a, a direct mail piece to all the Thai restaurants in New York City or something like that. 3:27 Or they were doing it for, uh, like, real estate brokers to sell to individuals, and then the individual could disambiguate the facts themself. 3:35 We were trying to buy it for a data science or machine learning purpose, in which case you, you can't have, like, humans looking at every single fact. 3:42 You have to kinda trust the facts, and you're building models off those facts. And if you're, well, if you're 50% accurate, it completely doesn't work. 3:49 Even if you're 90% accurate, it doesn't really work that well because if you start timing, like,.9 against each other a lot, uh, you get to a pretty small number. 3:58 So you need a very high level of accuracy, at least in the mid-90s and, and often in the high 90s for a data science or machine learning use case. 4:06 [lips smack] What, you know, just curious, w- kinda what impact did the, the pandemic have, especially, you know, store hours and openings and closings? I'm sure that was just a unique challenge. 4:16 Yeah, the pandemic really accelerated our business at SafeGraph because the b- data was already changing a lot. 4:23 Obviously, the, if you think of a, a, a, the death of a place, uh, let's say a restaurant, um, you know, had a roughly 1% death rate per month pre-pandemic, um, and they're already changing things like store hours pretty regularly and stuff. 4:38 But post-pandemic, things started really rapidly changing. You went from 1% a month to 3% to 4% a month. You went from changing store hours every quarter to every, you know, every year to sometimes every day. 4:51 Uh, so just the rate of change started w- was dramatically different, and that really, uh, helped our business because the need for really accurate data, data that wasn't just accurate a year ago but is still accurate today, uh, went up quite, quite dramatically. 5:07 [lips smack] Interesting. Um, well, kind of our theme this, this season, our, our third season of the podcast, is, is kind of business models and kind of investing. 5:16 And so, you know, we're looking at this both from, you know, operators that are starting companies to, uh, individual investors, um, you know, funds and corporate development. 5:25 Obviously, you know, you kinda cover all these areas throughout your experience. 5:29 You know, curious with SafeGraph, I know you recently did a Series B, but even looking back to the, the Series A from 2017, you, you had more than 100 investors. Was that intentional from the start? Yeah, it was. 5:41 Uh, we, we thought it'd be really great to have, like, these 120 or so folks rooting for our success. 5:48 Time will tell whether it was a smart move or not, but, uh, it was, it was definitely an experiment to, to, to do something like that, and so we got a lot of interesting people on our cap table. 5:58 And because we sell, uh, we sell data and we sell data to diverse industries, we also got, uh, uh, people with very, very diverse experiences on our cap table as well who could help us think through many different challenges. 6:11 That's interesting. 6:11 Well, you know, looking back, you know, to then and, and even to today, um, you know, going through the series A and series B, what's different about the m- the market today in, in, you know, both on the, the business model side and the investment side versus when you started LiveRamp? 6:28 Well, um, I mean, I, I think a lot of things are different today than, than, than, than 10, than 10 plus years ago. Um, it is m- much easier to raise money today. It's way more entrepreneur friendly. 6:41 It's much clearer what you do with the money. The metrics are clearer, so there's a lang- common language that people use, whether it's like CAC to LTV or just, just under... 6:49 Or just even the word ARR didn't exist when we started LiveRamp. Um, so there's just a lot of best practices that exist today. Even just the customer success function didn't even exist back then. 7:02 So just, like, how to run a business is much more, uh, clear today, and it's much more standardized. 7:08 Obviously, you can deviate within companies, but it's generally mu- there are much more accepted best practices today, whereas, uh, let's say 2006 to 2000- 2012 timeframe, it was just kinda making it up as you go. Yeah. 7:25 One area, you know, when we started CrossGreen in, in 2016, it was, you know, at the end of the year it was pretty obvious that, uh, you know, recurring revenue was the, the name of the game for us. 7:34 I mean, that we had to, that had to be our core product is, um, you know, um, kinda removing any kind of unpredictability from the business. 7:42 You know, today I kinda, your point about the customer success function, uh, obviously net revenue retention just seems like a, a much bigger metric even today than just pure, you know, contracted, committed revenue. 7:54 Uh, is that something you're seeing out in the market today as well? Or, you know, what, what, what trends are out there? 7:59 Well, ARR, this annual recurring revenue, is really nice because it just makes you, it makes it super easy to plan, right? So I know what my revenues will be next month exactly, like, basically to the penny. 8:11 Um, and I know what my revenues will be in two months, let's say within 1 or 2%. Um, and so it's really, really nice. It makes it easy. You don't have a lot of complications with your finance. 8:22 Uh, running your books is pretty simple, uh, et cetera. But the fastest growing businesses right now are not recurring revenue businesses, right? 8:30 The fastest growing businesses are some sort of, like, transaction or API based kind of transaction businesses like Stripe, Twilio, Shopify, Marqeta, Plaid, Checker, those types of businesses. 8:42 So you can, there's probably a lot of things you can do to accelerate your business if you get yourself a little bit out of the ARR framework. Yeah. It's interesting. 8:51 So, like, you know, some kind of combination of the two where you've got, you know, customer base. 8:55 Like even a Shopify charges a, you know, nominal fee every month, but then o- obviously drives the majority of their revenue through, uh, through the transaction. Um- Correct... 9:05 w- you know, you tweeted recently about the ad tech, uh, TAM being much larger than people think. I think you used Amazon, uh, and Walmart as examples. You know, what, what... 9:15 kinda what are your overall thoughts on the ad tech and martech market and, and kinda how people are looking at it and, and, you know, what is your thought behind thinking the TAM's so much larger? 9:24 Well, I, I think there's this trope that, uh, the ad tech market is dominated by Google and Facebook and, uh, there are, and, and they ba- like all the money flows into them. 9:36 You know, there's maybe a couple of other players here and there, like The Trade Desk or something. It, it turns out it's an extremely fragmented market. 9:45 Companies like, and, and companies like Walmart have of over 1,000 vendors that they use. 9:52 Uh, all, many, many of these companies are very, very good companies that are doing extremely well, uh, and they're spending money all, in all these different places. 9:59 And then even companies like Walmart themself have an ad tech unit. Uh, in their case it makes 1.5 billion annually. That's billion dollars annually, uh, which is a lot more than most of these ad tech companies make. 10:12 Amazon has over 31 billion that they make annually for, from their ad tech unit. So there's a lot of advertising that happens in all these different places. Um, it's quite diverse where you can advertise. 10:25 And if you think of it as a, probably most of the listeners here are, like, a B2B type of listener. You probably already understand that 'cause you probably have all these different martech stacks. 10:34 You probably have all these different ways of reaching customers. You probably don't have, like, any one dominant thing where you're spending most of your marketing dollars on. 10:41 In fact, probably most of your marketing dollars are spent on people inside of your company doing things. So, uh, marketing's just very, very, very diverse. Yeah. 10:50 It's interesting 'cause that, you know, kinda going, you know, heavy into the video market, uh, five years ago, uh, we've kinda seen the same thing. You know, you've got YouTube, which is a, 10:59 you know, and digital is a, you know, huge player, but when you look in the overall video market they're only about 6% of the, the spend in the US. And so to your point, there's a ton of fragmentation across, 11:11 uh, you know, the remaining, you know, 80 plus percent that does not go to one of the bigger players in, in, in areas. 11:16 You know, ev- everything doesn't look like, you know, Google has a dominant part of search, you know, which gives them a large share of digital, but when you look into indu- individual pockets it's, uh, different. 11:24 I think commerce is gonna be- Yeah. 11:25 And if, then if you think of a TV, so rather than, like, a phone, but if you think of a TV, in phones there's two players that base two operating systems that control all of the phones. 11:35 Um, and let's say in the US they have 50% market share each. 11:39 In, if you think of TVs, there are tons of different TV manufacturers, plus there's places like Roku, plus there's Apple TV and other types of things that are out there. 11:48 So there's so many different operating systems that are underlying, uh, w- when, when people watch TV. So even that is just way more diverse than, than mobile. Yeah. 11:59 Actually interested to get your thought on that 'cause, you know, you kinda take that one step further, you've got the OEM of the TV and then you've o- obviously got the ability to plug in a third party device, whether it's a Roku or a Fire TV or a gaming console, which you didn't have in mobile. 12:13 How much fragmentation do you think you could have there? 'Cause people, you know, they replace their TVs every seven years on average, uh, less than mobile, but you've got more players. 12:22 Is that a, a good thing or a bad thing, and kinda what are your thoughts? Well, I think it's generally a very good thing on almost every level. 12:28 So you're going to have different TV manufacturers which will experiment with different ways of advertising. 12:35 You're going to have different platforms, like Roku, which has been just incredibly successful in just how they've been, um, uh, experimenting with different ways of advertising. 12:45 You've got, you know, from LG to Vizio to all, all, you know, all these other, um, all these different other players like Samsung, uh, that are thinking about advertising in a different way. 12:55 So I think it's generally good. You're gonna have a lot of experimentation. Um, and then it also really means you have to spread your advertising out. 13:02 There isn't any one player where you can use, where you can reach your audience. 13:07 And so if you're, if you really want to, uh, have some sort of like one-to-one advertising, you have to do it over many, many different platforms. 13:14 And so, um, and so in, in many ways, these c- these different platforms are not competing with each other, uh, because if you think of, um, you know, they, they are almost cooperating. 13:25 If you're, if you're a buyer like Procter & Gamble or something like that, you have to buy across all of them, and so they have to make it easy for you to buy across all of them. 13:33 Whereas kind of on the internet, the, a lot of platforms would be more competitive 'cause they could say, "Hey, you could just use us and we'll reach everything," let's say on a mobile device or RTB or something like that. 13:44 And so it's, uh, more, um, uh, uh, um, it's, it's, it's, it's more interesting on TV. Yeah, definitely. 13:52 Well, I wanna get into your kinda, uh, investment thesis as a kind of a, a personal investor in a minute, but kinda one more question on the, the business front. 14:00 Um, you know, I saw the other day you posted that you're, SafeGraph's hiring a CRO, and that's the first C-level position, uh, that you've added. 14:07 And I think that that'd be surprising to a lot of people that, you know, business is successful, that, you know, two rounds of funding is just now expanding the executive team. 14:15 One thing I've always found, um, you know, really fascinating about you is just your ability to build a bench and k- just kinda how successful people are 14:23 even when they, you know, start out, you know, really young in your companies and, you know, they're all over the, the kinda industry now. How do you think about kinda growing talent in-house? 14:32 And, you know, is there a ceiling? Or, or, you know, how should other entrepreneurs be looking, thinking about this? 14:38 Well, the, every once in a while you, you get lucky and you, you, you, uh, um, hire somebody who's a 10X-er and who's just growing. Essentially they're growing faster than the company is growing. 14:50 Um, and if you have a person who's growing faster than the company's growing, then you can give them more and more responsibility, uh, et cetera. 14:58 You have, um, if the company is growing really fast, then you're just gonna have fewer people in your company who are growing faster than the company is growing, and then you're going to have to, uh, bring on more executives from the outside. 15:11 Um, if the company's growing super slow or negative growth or something like that, then you'll have tons of people in your company that are growing faster than the company, and then, um, you'll have more ability, um, to, to grow in the bench. 15:24 But even when the company's growing, like, incredibly fast, there will be some people in your company that are still growing faster than the company. 15:31 And so the key is how do you give those people more responsibility over time? Yeah, I mean, how do you look at that last part? I mean, is that, um... 15:41 You know, I think that's obviously a good, a good problem to have or a good opportunity to have. You know, what's, um... 15:47 You know, do you, when you, when you kinda settle in, you've got people that have maybe more experience, uh, you know, that are, you know, maybe director level or, you know, VP level of your company, but then people that are growing faster than the company's growing. 15:59 I mean, do you hesitate to just leapfrog those people around? 16:02 Or how, you know, again, how should companies- You gotta, you gotta, you have to make room for the people that are growing super fast because the people who are growing super fast are the most valuable people in your company. 16:12 And if you don't make room for them, they will leave. Um, and they might go start their own company, they might go join another company or something like that. 16:20 But they will leave if there, if the, if there's some sort of impediment to their growth. Most people who grow super fast, the number one thing they're optimizing for is growth. 16:29 And so if all of a sudden you say, "Hey, you're not allowed to grow as fa- so fast anymore. 16:33 You're growing at 50% year over year," you know, whatever, "and now, you know, we're gonna cap your growth at 20%," or something, they're going to, uh, be upset and they're going to leave, even if you pay them more money. 16:44 Uh, so, uh, so you need to figure out ways to get these people to grow, and that doesn't mean necessarily they have to, like, leapfrog their boss. There could be another area of the company they could do. 16:53 They're, you could give them more responsibility, et cetera. But you probably have to give them more responsibility than their resume would suggest. Nice one. Yeah, love that as, love that as a thesis here. 17:05 That's, I mean, definitely something that, uh, we try to put in practice and, um... Yeah, I love the idea that if they're, you know, growing faster than the company, you don't give them that, then they're, um, 17:15 you know, they're g- they're obviously gonna have many options. Um, you know, kinda looking at your kind of personal investing, you know, what's your investment thesis? 17:23 You know, what, do you, you know, just look at seed stage companies? Um, and kinda what type of companies today and industries are you most excited about? 17:31 Well, I, I, I personally, uh, get really excited about companies that have an opportunity to get to over 50% market share in their niche. Um, and that does eliminate most great companies. 17:43 Most great companies are in a very competitive industry and, you know, maybe the market leader has 25% market share, and number two has 20, and number three has 15, and all three are probably really good companies to invest in. 17:55 Um, I'm actually interested in more, uh, more of a niche company that has some reason where they can op- uh, dominate their particular, uh, their, their particular niche. 18:07 And that niche might be really small at the time of investing, and if it is small, then you're either making a bet that they're going to dominate that niche and the niche is going to grow dramatically, or you're making a bet that this team is very, very smart, and once they're no longer growing at 100% year over year, they'll find an, an adjacent niche that they can move into and dominate, and there's some sort of reason they can do that. 18:27 And if you think of LiveRamp, my last company, um, it still has 75% market share in its niche, um, and it's a really nice niche. 18:35 They have not yet really been able to move into adjacent niches, unfortunately, but, um, but at least that niche is really, really great. 18:43 If you think of companies like Marqeta, which is probably one of more, um- Uh, one of my best investments, uh, they, they really dominate this niche of creating credit cards. Um, it's an incredible niche. 18:54 Um, they're, they're definitely by far the most dominant, certainly have over 50% market share. Their niche, um, they went public, uh, about a year ago. Great, fantastic company. 19:03 If you look at, um, you know, tons of other companies. If you look at like Plaid, which is one of my favorite companies that are out there, they clearly dominate their niche. 19:11 If you think of Carta, uh, which is cap table management, they clearly dominate their niche. So those are the compa- types of companies that I'm like super excited to invest in. 19:19 Uh, I tend to invest later stage mostly, so 'cause it's a little bit easier to know that, um, when somebody, let's say, hits $3 or $4 million in revenue, that they're going to hit their niche than when someone has $0 of revenue. 19:32 Um, so I, I prefer to see a little bit of cards, uh, flipped over, and so happy to pay a higher price to, um, to, to do that. Absolutely. And how do you think about niches? I mean is it, you know, a, 19:46 uh, a vertical inside of a- an industry, or is it a... You know, 'cause you could look at the LiveRamp example and be like, um, you know, identity and, and kinda data onboarding. But, you, you... 19:56 Or is it a specific, you know, could it be a, a vertical inside of that, or is it- Yeah... how do you think? Absolutely. It can be any, a- I mean, a niche can be very, very small. 20:04 Again, if it is small, then you have to either think it's gonna grow very, very fast or that there's some sort of adjacent niche that you can easily move into if you... 20:13 And, and, and therefore it's often a bet on the team, that the team is smart enough and the team is, um, uh, good enough to be able to move to the adjacent niche. 20:21 You know, LiveRamp, first-year revenue we had, uh, um, about a million dollars in revenue, and we, uh, maybe the total niche was 20 million, um, that we were going after, so really, really small. 20:34 Um, second year we had 9 million, but the total niche was probably still 25 [laughs] million in revenue. Third year we had 20 million in revenue. Niche was probably 40 back then. Then we had, uh, 40. Niche was maybe 60. 20:48 [laughs] Uh, so, uh, you know, the, the niche was growing and, um, but LiveRamp became a bigger and bigger percentage of that niche. Excellent. Uh, we just a couple more questions. 20:59 So, you know, one we kinda ask everybody, you know, a year from now, um, give us three predictions that, that nobody's talking about. 21:08 I don't know of any like super non-cheeky prediction, and I guess my most cheeky prediction is, you know, your podcast will be the number one podcast- [laughs]... 21:15 in your category, and maybe World of DaaS, uh, the podcast I host about data, might be in the top 10 in the technology category. So those would be my more cheeky ones. 21:24 Um, my, my, my less cheeky one might be just a very simple prediction, which is just the number of, we talked about this earlier, but the, the number of technology vendors has grown, um, let's say that a given company, let's say a Walmart or a Home Depot uses, has grown roughly 20% a year for the last 20 years. 21:43 Um, and it's just continued to be growth rate very, very high, and every year everyone says there's gonna be consolidation, and every year it hasn't happened. 21:51 So my prediction is, at least for the next year, there still won't be consolidation and it still will grow at roughly 20% a year. 21:58 So if a company has 1,000 technology vendors today, a year from now they may have, uh, somewhere between 1,200 or so technology vendors in the, in, in, uh, uh, a year from now. Yeah, it's interesting. 22:10 I remember I think maybe right before the pandemic, uh, you gave a talk at SaaStr in, uh, San Jose that we had a couple folks from our team at, and that was a kind of a part of it about using vendors to create leverage in your business when you're small. 22:22 You know, not necessarily, you know, growing headcount isn't the focus, uh, you know, growing the business. And, like, it was kind of a thesis that, 22:30 um, you know, A, how many more vendors a person needs to manage now, that's a skill and a business that didn't really, w- was less important maybe 10 or 20 years ago, but today is, is, uh, really important. 22:40 Can you kinda give more thought on, on how, you know, kinda younger companies should be thinking about that? Yeah. 22:45 I mean, almost every company except the largest companies in the world have more vendors than people, more vendors than employees, right? 22:53 Um, and in many cases you'll have 10X more vendors than employees that are out there. So these vendors are very, very, very important. 23:01 So I, I think if you were in 19- if you were taking a MBA class in 1980, um, the most important thing they could teach you was how to hire, develop, manage, uh, talent, right? 23:13 That's the most important thing you can learn. Today if you take an MBA class, they still teach you how to hire, manage, develop talent. They still think that's the most important thing. 23:22 But the most important thing is actually how to hire and manage your vendors, because your vendors are, are, if you, are really truly the DNA of your company. There's no MBA course on it that I know of. 23:34 There's no book on it that I know of. There's no way to really learn how to do it except by doing it, uh, and there's very, very few people who are good at it. 23:43 Sounds like we got a book coming here, uh, this holiday season. Yeah, absolutely. Uh, well, ex- last question here. You know, what should... We, I know we've covered a lot of ground here today. 23:51 Kinda what do you recommend our audience reading to kinda keep up both on the, the area that kinda SafeGraph focuses on, and then kinda more investment business model thesis we talked about? Well, it's a good question. 24:04 I, I, I think it's always good to read things that are been around for at least, least a couple years, um, and have stood the test of time. 24:12 And so rather than, I think most people consume, m- most people spend probably, probably consume somewhere between 80 to 99% of their media consumption has been made in the last 48 hours. Mm-hmm. 24:26 Uh, and that's pro- it should be somewhat inversed. 24:28 So you should have somewhere between 80 and 99% of your media consumption created, let's say, past a few years ago, uh, 'cause that's something that's more likely to have stood the test of time. 24:40 It doesn't have to be, you know, thousands of years ago, which I know a lot of people, um, uh, 'cause sometimes reading some of those things is quite hard to read and doesn't flow as well or, you know, there's no movie or something like that from thousands of years ago. 24:53 Um, but at least a couple years is probably pretty good. 24:56 So if there's something that's been around for at least a couple years, you know, like, um, I, I would, I would suggest people not read like my most recent things if they wanna read something I wrote, but maybe like the DaaS Bible that I wrote, which was, uh, from a, from a few years ago. 25:09 That's at least stood the test of time, uh, and is something that, that is probably more likely to be true rather than like my most recent tweet that's probably, uh, uh, you know, probably not worth, uh, probably not worth spending time on. 25:23 All right. Where do we put the napkin graphics in this, uh, you know, spectrum? Yeah, exactly. So yeah, my napkin graphs, just skip it. 25:31 Don't, don't worry about my napkin graphs until I get like the, the napkin graph coffee book out, and then you can like buy that coffee book and, and then just wait a couple years and then look through it. Absolutely. 25:42 Warren, I'm, I'm grateful for your time and, you know, uh, we, well, the ton of your writing to link to in other areas. Um, but, you know, thank you for joining us today. Yeah, absolutely, Michael. 25:52 Thank you so much for having me. All right. Thank you. [upbeat music] Thank you for joining us on this episode of Screen Wars. I hope you enjoyed the discussion. 26:01 You can find out more about CrossScreen Media at crossscreenmedia.com. Please don't forget to sign up for our weekly newsletter, State of the Screens. You can find us on social media @crossscreenmedia. 26:13 Join us next time for more insights and analysis straight from the experts.
