32. John Ferber – putting the dot-com in Advertising.com

Paleo Ad Tech

John was the co-founder with his brother Scott Ferber of the very well-known Baltimore-based ad network eventually called Advertising.com, which began in 1998 and sold to AOL for a reported $435 million (plus about $60 million cash) in the summer of 2004. The brothers stayed at AOL for two years, John working as a Chief of Product. Subsequently, Scott went on to found Videology and John is the Chairman of Bidtellect, a DSP focused on native formats and based in his adopted home state of Florida.

At the time of its acquisition in 2004, Advertising.com had about 300 employees operating in the U.S. and Europe and had grown 80% in revenues to $132 million in 2003. AOL claimed it was the largest ad network globally, with about 110 million uniques per month, equivalent to every household in the U.S.

Its business model was simple, if difficult to execute. Advertising.com paid publishers for their ad inventory on a per-impression (CPM) basis, guaranteeing a certain negotiated (often renegotiated) rate. However, it sold advertising based on performance goals, usually clicks (CPC). The network’s profit came from its ability to pay less for (CPM x 1000) x CTR (we might call this eCPC) than it charged in CPC. This mechanism is known as arbitrage.

John Ferber admits that his hard-working father, a tax attorney in Baltimore, observed early on that John would “probably never be able to work for anybody.” His first venture was a shareware video game that featured hoverboard racing, and his attempts to sell ads in the game led only to a question: A casino owner John pitched told him, “I could give two shits about advertising in your game, but that software you have to track and measure the ads is interesting to me.” They agreed on $50K as a price, and John went on to sell about $1 million worth of this software “and spent it all.”

At a prompt from dad, older brother Scott — who’d majored in systems engineering — quit a promising career-track job at a soon-to-explode Capitol One and joined John in a new venture selling ads on the internet.

Their company was originally called Teknosurf and launched in late 1998. From the beginning, its goal was not to sell ad software but rather buy and sell media, with superior targeting and measurement as its intermediary value. Key competitors were Massachusetts-based Engage and DoubleClick, which signed large publishers up to “exclusive” contracts, John says, leaving them with unsold inventory. By necessity, the brothers focused on the lower 90% of pubs at first.

Ferber brothers John, Scott and Larry riding the waves

As John tells Marty and Jill in this fast-moving episode, the dot-com crash of 2001 hit the renamed Advertising.com very hard, inspiring layoffs and removing 60-80% of revenue as their customers disappeared or (like #1 customer Orbitz) cut back their ad spend after 9/11. John says “the worst day of my professional life” was January 5, 2001, when he woke up to find his pensive face on the cover of the Baltimore Sun Business Section over a grim headine:

Just one year earlier, Advertising.com had been named the fastest-growing ad services company in the U.S. by Dunn and Bradstreet, raised more than $50 million, and seen revenues grow from $11 million in 1999 to $45 million in 2000. Scott was quoted as saying the network served about 1 billion ads per month on 5,000 sites.

But slowly, Advertising.com clawed back, relying more on software than its ad rep facility. Ferber claims to have pioneered the scaled use of retargeting, inspired by an L.L. Bean case study, while admitting DoubleClick’s ‘Boomerang‘ may have popped up first. (DoubleClick’s Kevin O’Connor told Jill and me that ‘Boomerang’ was not a profitable product in his day.) The network’s secret to success was its reach; by the time Ferber left, in 2006, he believes it reached an average 90% of the internet population 20X per day.

Long tail no more — the company started to bounce back after the crash
(as shown in this poster, found in Ferber’s parents’ garage no long ago)

AOL already owned some of the company via an investment, and once the Dulles-based behemoth had cleared up its own merger-related tsuris, it sent a team of execs to Baltimore to take a closer look at Advertising.com, which was planning to go public. AOL preempted the IPO, offering cash that came out to almost $500 million, and keeping the Ferbers on board for a couple of years to manage the transition.

John Ferber with some random celebrity
who apparently is quite well-known in Germany

John later gained some notice for a philanthropic venture called MicroGiving, which got the attention of ABC producers and led to an appearance on the reality TV program Secret Millionaire, which aired on March 27, 2011. In it, John lived on “welfare-level wages for a week in downtown Los Angeles.”

(There’s a lucid and detailed account of John’s career and the founding of MicroGiving and later Bidtellect in this article by Ron Jackson in DN Journal.)

Asked whether he’d ever work with his brother again, John pauses a moment and then wonders aloud whether he wants to tempt fate: “You hear about how family businesses can actually end horribly.” Having fought only twice during their eight years running Advertising.com, the Ferber brothers remain “best friends.”