Viral site LittleThings is building a $50 million ad business largely from programmatic

LittleThings started out by using “waterfalling,” a technique that lets publishers move their inventory from one ad network to the next to sell the most inventory possible and at the highest rate possible. But, as is typical in waterfalling, each time it would go down the ad network chain, the publisher saw only minor financial benefit, and risked data leakage.

So LittleThings switched to header bidding, where publishers offer inventory to multiple exchanges at the same time to get multiple buyers bidding at once to get the highest rate possible. LittleThings built its platform using a Yieldbot wrapper, a sort of starter kit that creates rules to organize buyers.

Building the system itself gave LittleThings more control over things like how how fast each bid has to come in. Favoring fast-loading ads could ensure that the winners would be highly viewable, and people more likely to click on them. “We wanted more control over the process ourselves,” Speiser said. “The first ad on mobile, you can’t wait at all — it’s 600 milliseconds. For other further down, you can afford to wait and get higher CPMs. You can get pretty granular.”

By selling this way, LittleThings grew its ad revenue by 30 percent over the waterfalling solution, for an average CPM of $10, Speiser said.

Monetizing programmatic inventory still has its limitations, though. Branded content and other lucrative custom campaigns require a human touch. That’s why LittleThings is hedging its bets by building a small direct sales team, starting with seven people. By the end of the year, LittleThings expects non-programmatic revenue to be about 10 percent of the business, up from about 2 percent now. “We’re selling our impressions for a lot less than if we sold them ourselves,” Speiser said. “You’re not going to get high $20s in programmatic.”

As digital spending moves away from the traditional direct-sold business and agencies cnarrow the number of digital publishers they work with on this basis, programmatic has become an efficient vehicle for emerging publishers to break into a very crowded marketplace, said Scott Bender, global head of publisher strategy & business development at Prohaska Consulting.

For publishers selling direct and programmatic, the challenge often is to make sure that inventory is distinctive from what buyers can get cheaper programmatically.

To make sure its sales forces don’t compete, LittleThings is limiting direct-sold ads to products that can’t be sold programmatically, such as sponsorships and video product placement, Speiser said. “That’s something you can’t do with programmatic.”

Image courtesy of LittleThings.