I listened to the conference and having not heard of Adveritas...

I listened to the conference and having not heard of Adveritas previously was very impressed by the presentation. I enjoyed Mayorcarrotface's summary however A LOT of details were covered in the 30 minute session. I also conducted further research and was particularly impressed by the recent capital raise and exercising of options at market price by insiders and tech consultants, the growth in ARR, revenue and cash recents, and the quality of reporting from the company at such an early stage. I've build a decent position this week since the presentation and thought I would spend my Saturday transcribing the interview between Matt and Ronn (the Managing Director at Market Eye).

For those that missed it, here it is:

R: I’d like to introduce you now to Matt Ratty, co-founder and CEO of Adveritas. Adveritas is another one of these global technology success stories, technology developed in Australia, in this case in Perth and sold globally and working with some of the biggest global companies - unicorns using google ads and other digital advertising. Adveritas creates the software that actually prevents ad fraud and I’m sure Matt will have plenty to talk about during this session. Matt as I mentioned in the co-founder and CEO of Adveritas, he’s got an extended background in technology investment and has been involved in several technology companies building and growing them. So Matt, thank you for your time, maybe if we could just start first of all in terms of Traffic Guard (TG) and a bit of background on how that came about. Why did you build an anti-fraud platform?

M: Yeah sure, firstly thanks Ron, and thanks for having me on this, I think you got quite a good turn out so far. TG was actually born out of desire from a legacy business that we used to run. We used to run an adjacent business, we needed to solve an internal problem that we were experiencing. So we looked out in the market and we tried to employ a bunch of different anti-fraud solutions to solve the issue for us, but nobody could actually solve it for us. So we tried to solve it ourselves. We did the traditional things that you do when you have an issue in business. And that is you create a hypotheses, or in our case many of different hypotheses. We built a proof of concept. We then tried to break that proof of concept to try and make it better, and we successfully did that and when we did that we realised that we had something extremely special. So we spoke to a number of high profile advertisers around the world. We asked them what would you want to see in a good antifraud provider? We took that feedback and then we built out our data science and engineering team. Over in Perth and Croatia, we have quite a talented software and data science engineering team that have joined us from around the world. So, we built out this minimum viable product, and then we started the road to commercialisation of TG. So initially we won some inaugural clients and we had to fight really hard to win their business because we were the new kids on the block, but they saw massive benefits in using the TG solution and when they started using it, we collected feedback, both good and bad feedback and we made the product better and better and 14 months into commercialisation we are now being used by major global companies around the world.

R: So, in terms of the digital ad fraud ecosystem, where does TG sit relative to others in the market?

M: When we created this product, we wanted to be the world first in something, so TG is the world’s first full funnel and cross channel anti-fraud and analytics platform. We really sit across all channels of digital advertising. TG sits across mobile advertising to ensure you’re not paying for fake downloads; we sit across desktop and display channels to ensure that you’re not paying for fake clicks on your ads. We sit across programmatic channels to ensure that you’re not paying for fake impressions. So, think every time that you go to a website and there’s an ad that’s being shown to you, that advertiser is actually paying for that, but 50% of the internet’s traffic at the moment is bot driven so you don’t want to be paying for stuff like that. And then we sit across your traditional channels like PPC “pay per click” and search so the benefit of being cross channel is that we can service a single client across many different channels that they are advertising on. Most of the clients that TG is dealing with, they are major global listed companies, massive Nasdaq listed companies, they’re spending money on all digital channels, so there’s no point protecting them on just one, you’ve got to protect them across many different channels

R: And TG is the only one that goes across all the different channels?

M: Correct it’s the world’s first cross channel and full funnel analytics and antifraud platform

R: So how big is this problem globally? What are we talking about in terms of market size?

M: For every advertiser at the moment it’s quite a big problem and its getting worse, so $42B was lost to ad fraud last year and forecast to grow to about $100B in the next couple years, obviously latest stats that are going to come out in a couple of months will be higher than that because the shift to online has really started to increase the amount of digital advertising spend. So, around a $42B problem growing to about $100B

R: Why is it a problem? Do people seriously undertake ad fraud? What do they have to gain? Seems a bit odd

M: Yeah so there’s massive fraud syndicate rings at the moment which are highly financed, they put money into R&D to start to avoid the traditional players out in the market but if you think about if you’ve got an app for example and you’ve landed 10M worth of VC money the first thing you want to do is go out there and get as many downloads as possible because you want to try to monetise that app. Let’s say it’s a game, you want to try and get as many downloads as possible, you want to try and get as many daily users as possible because you want to try and monetise that app. But I could own a performance marketing network out there for example and employ a bot to sit there and download your apps and let’s say for example you’re paying me a dollar per download, all those downloads are useless but you’re paying me money for that so ill happily collect that money and go on to my next victim. So, there’s massive fraud syndicate rings out there that do this day in and day out. There’s a famous case that was released earlier in this year, the famous uber case, where uber was suing their performance marketing agency for $50m because they provided them $50m worth of fake downloads, these are downloads that will never get monetised. You just paid $50 million away to someone for nothing so there’s a lot of money to be made in add fraud.

R: Given there’s so much money to be made in add fraud and it seems to be quite industrial in scale and I’m sure there are still those click farms with people standing there with phones on the walls. You’ve got a bunch of companies that are now using TG. What benefits are they seeing from using the platform? What benefit are they seeing from the technology that you’ve of developed?

M: Traditionally we see around 30% ad fraud going through in general. Some clients that have come on we’ve seen around 80% ad fraud going through their digital advertising channels. So obviously when you have that much ad fraud it starts to impact the traditional metrics that investors and boards and CEOs look at such as ARPU. So you can imagine if you’ve got a million downloads for example you think you have a million users but really you only have 100k users so your average revenue per user is not real because its actually being distorted by ad fraud. Your retention ratios will go up using TG because obviously with bots and fake users they don’t hang around so your retention ratios are really low with ad fraud but really high when you take away ad fraud. You’re lifetime value of your users go up because you’re getting real users and then your just better decision making in general right so if you’re high level metrics are looking good because of ad fraud you’re going to go and scale up with the partners you’ve just scaled up with but if you know its fraudulent, you make better decisions on where to allocate budget and we see this all the time with guys who sign up with TG, their ARPU goes up, their retention rate goes up, their LTV of the user goes up and they make better decisions all those 4 things shows you the health of the business.

R: Given you talked about being across the entire spectrum of ad fraud, do customers that are brought on to traffic guard have they used you across the lot of have they started with one call it PPC then started to move across, because you’ve talked in the past about land and expand strategy.

M: Yeah so most clients who come on board with TG come on with one product at first, sometimes in a corporation, different teams govern different silos, so if I’m talking to the head of search or the head of PPC, which operate google, that same guy doesn’t operate their mobile app for example, so what we typically do is we sign them on to our TYG PPC platform, we give it a couple of months, we start to show there’s been a massive return on investment, then we present that return on investment to the mobile guys, the mobile guys then come on to trial, and then we start o expand the contract, so we’ve done that successfully so far and I think that you know, everyone that’s signed on in the last couple of months have only been signed on for one product at the moment but are in trials now for another product that TG offer.

R: You’ve been teasing us for the last 15 minutes or so with the t-shirt as you’ve mov ed backwards and forwards, can you tell us a bit about what’s on your t-shirt and what it means for the company?

M: So the google cloud marketplace, yes, it’s a t-shirt that I wear every single day into the office now, we went live on the google cloud marketplace a couple of weeks ago now, i think it was a Thursday morning that we announced it, it’s a pretty bug deal for the company, number 1 because none of our competitors are on the marketplace, so we are the world’s first pay per click verification and optimisation company on the marketplace, so its actually quite substantial, its been a key priority for this company for the last 9-10 months. This technology sat with the google guys over in San Francisco, basically vetting this technology to make sure it works and there’s 3 main benefits to entering that marketplace, number 1 is just the reduced contracting time, so given the shear size of the businesses that TG are dealing with, legal and procurement times really start to impact our sales cycle, the whole trial with traffic guard should take around 2-4 weeks in general and the guy wants to sign on then it sits with legal and procurement with another 2 months, so by being part of the marketplace, traffic guards terms and conditions are the same ones that the client has already signed in the first place, so number1 its reduced contracting times. Number 2, the client is able to transact through the marketplace. Typically, a lot of these clients that have come on to trial are using google cloud for a lot of their infrastructure. They have a committed spend with that google cloud contract, so let’s say for example that a client comes on, they have a committed spend with google for 500k per month, and let’s say for example that they’re only using 450k, then they can actually procure TG for say 20k and that 20k will go towards that committed spend, so a lot of the time they’re actually getting it for free anyway. The 3^rd bit which is the most exciting is we actually have the support of the google cloud marketplace team, so that team is responsible for the rollout of TG so we’re working closely with that go to market team, we’re producing a lot of case studies and fireside chats and content so we can start marketing TG solution through the marketplace and to their clients

R: Are any of your competitors on the google cloud marketplace?

M: No. None. So we’re the world’s first

R: Why did google cloud put you on vs anybody else?

M: A couple of reasons I think. The amount of machine learning and AI behind traffic guard is pretty impressive, we’ve got a massive data science and software engineering team, and secondly, we are a true solution to ad fraud, whereas other guys are using blacklists for example, were actually using machine learning and making exclusions in real time so each client that comes on, I was looking the other day, for one client we’ve made 5k exclusions within a week so that’s not a blacklist that’s just constantly rotating so they were impressed with the AI that we have got. So that’s originally why they were interested.

R: How’s the initial response been for companies that are on google cloud starting to access free trials or otherwise accessing the traffic guard solution

M: So far really good, first trials have already begun through the marketplace, and it’s been well received, but obviously with more content, more case studies and more fireside chats, we expect it to really kick in halfway through next quarter and then be in full swing by Q2 CY22

R: A theme in some of the earlier presentations which had really incredible technology was it still revolves around, obviously, people and it was whether you need really good technologists or a really good sales team or both, obviously you need both but can you give us a sense of how your sales team restructure helped bolster your pipeline of large enterprise opportunities, you’ve won a number recently, but off the back of the restructure that you did can you talk us through that please?

M: Yeah, we made a number of sweeping changes across the organisation, especially in sales and marketing. Which has resulted in a massive increase in our revenue line as shareholders could see. So, we just redesigned our onboarding process, we streamlined a lot of our contracts, we built up a really good sales enablement and customer success team, which educates our clients on the power of the TG platform so now we’re hosting workshops with a lot of our clients on how to use the TG platform over and above its anti-fraud component and going more into analytics. So, they’re actually using the analytics in the platform in order to optimise every dollar that they’re spending. A lot of our clients are now in the platform every single day, making decisions based on clean data, and for me, from my perspective, that’s how you build loyalty and that’s how you build retention, and that retention has come through with a lot of our contracts starting to come up for renewal and our clients actually extending their contracts.

R: So we’ve got a couple of questions that have come in just on how the technology works, first of all is the technology patent approved yet

M: Its patent pending but we expect it to be approved in the next 6 months

R: Great so how does it actually work? How do you detect the fraud in the first place? And are you just policing the marketing companies or are you performing marketing?

M: No, we’re not performing marketing, we are actually policing everyone involved in the ecosystem. When I say we are a multi-point platform I mean we look at everything from the moment an ad is served. So imagine you’re going past news.com.au or whatever it is your on and you see an add, so that ad is an impression, so we’re looking at things like where was the impression served, what percentage of pixels was actually displayed? Did anybody click on it and if so we’re looking at what device clicked on it, what version of the browser are you using, if you start to see a bunch of old mobile phones with a bunch of old versions of safari for example and its coming in at rapid scale you’d start to think to yourself, so what’s actually going on here? This is highly, highly… it’s a statistical anomaly, everybody’s not using old phones. Then we look at location, a lot of the fraud we are actually capturing is like, so you’ve downloaded an app in London and then 10 minutes later the same device is downloading something in Italy, it’s impossible that you got from London to Italy in 10 mins with the same device, or it could be that a particular app is being downloaded at 2am and everyone coming from that particular affiliate or that particular guy who’s driving installs is using a VPN, like 100% of the traffic is using a VPN. Again we are looking at cohorts of data and we’re looking for anomalies in that data and we are looking at 200 different things that are happening in real time and essentially what we are doing is looking at the attribution journey, so that the fraudster doesn’t get attributed with the download. So, if the fraudster’s not getting attributed with the download, they’re never going to get paid and if they’re not going to get paid they’re going to go onto somebody else who’s not protected by TG.

R: Just on that, you find fraud, does google then reimburse the customer for that fraudulent activity or is it more a case of it then gets stopped going forwards and then the amount of fraud reduced?

M: Both, so a lot of times Google is really good at providing credit for invalid traffic and then a lot of the time TG is mitigating that going forward so it’s a combination of the two things.

R: Given Google’s revenue is generated through the pay per click and other means and what your doing is actually reducing the fraudulent activity and therefore reducing that revenue, why is this good for Google?

M: Google is actually a really transparent company, I think they look at this and they are thinking to themselves, we want to be as transparent as possible number 1, and number 2, if a client can optimise their spend by using TG on Google, well then they’re going to be spending more money on Google because as a marketer you will be allocating money where you are getting the best return. Let’s say you start off with $100 and you have got 2 different channels, google is one and whatever else you’re using is another, over time you’re going to be getting better returns with google combined with TG so you’re going to take money out of the other channel and put it with google. That’s the logic behind that.

R: Why doesn’t google just do ad fraud prevention itself?

M: That would lack independence, a big thing as to why our clients use TG is that we’re independent. So were not making money off of advertising, and it doesn’t matter how much fraud we capture, we don’t charge on the amount of fraud that we capture. Would they actually be independent, would you actually believe them if they said, “well hey, it’s only like 5 or 10%?” You’re lacking that whole independence there. But not only that, don’t forget it’s the point of being multi-point and cross-channel.

R: In terms of your way of getting clients, one way is obviously the freemium trial, moving them into paying customers. How are freemium conversion rates going? It seems like its higher than average recently, can u give some more colour on that?

M: Yeah, so, freemium is designed for our google pay per click (PPC) platform, so you get fraud detection, not prevention, only detection up to $2500 of add spend that you’re spending per month. The moment you go over $2500 you have to wait for the next month for it to reset. But if you want prevention, you have to sign up and pay for that. Then you get as much as you like and we charge around 2% of reported google ad spend. Our conversion at the moment is I believe around 15% so far from freemium to paying, I think that as we start to promote the company a little bit more and as we start to get more client wins, like all the client wins we announce to the market we also announce to our whole freemium [customer] base and just give them the sheer size of the companies we’re dealing with and that we’re winning, you know, JD, Deezer, a lot of the guys we’ve announced over the last couple of months, it starts to really endorse the product even more. So, I think that’s part of the reason why it’s converting so nicely at the moment.

R: Just to touch there, as you’re going from freemium to paying customers, and the conversion that’s going on and clients signing up, there’s been a rapid scaling of annual repeat revenue over the recent months, do you expect that to continue rapidly expanding over the next 12 months?

M: Yeah definitely, so we expect growth in 22 to be a lot stronger than what we’ve seen so far. Our outbound sales team will only really kick into full strength in Q2 of CY22, but they’ve already started to make a big impact as you can see right? Like a 50% increase since June 30 and growing. So, we saw growth in Q1 CY, Q2, Q3, and obviously we’re halfway through Q4 and it’s looking pretty good. So yes, I do expect a very strong FY22. So that’s just on sales and then in marketing, you know, we’re having our marketing team starting to gain pace as well, so you’ll start to see a lot more explainer videos a lot more case studies, a lot more interviews with clients and obviously enterprise feed enterprise. Once you have one you have the validation to go and speak to another enterprise in the same vertical and then when you get case studies on that, it starts to feed the mid-level and mid-level starts to feed your freemium to conversions so it’s this whole unicorn down strategy that we adopted that’s really started to come to fruition now, and obviously you’ve got the upside optionality of the google cloud sales team helping us sell this product into their clients.

R: We’ve got a minute or 2 left, so just quickly, you recently just closed a successful cap raise with a lot of the listed options being exercised and then those that hadn’t covered by investors exercising the shortfall options, can you give a sense for what that capital will be used for? What does that mean in terms of your growth strategy?

R: Matt, exciting times ahead, as you said you’re in year 3 of your traditional start up cycle where you’re now into scaling mode and we’re seeing that quite early on in terms of the rapid scaling of ARR and looking forward to seeing that trajectory continue. So thanks for presenting today, there’s still a heap of questions that I haven’t been able to ask that people have put through because we only have a half hour so I’m sure there’ll be plenty of other opportunities going forward, well done on where you’ve taken the business today and really exciting to see where you can take it over the next 3 years

M: Thanks Ron.