In this interview, I sat down with Mike Seiman, founder and CEO of CPX Interactive. For the first time, Mike publicly shares his battle with diabetes and the death of his brother, which he attributes as his inner drive to succeed in life. Mike also tells us the evolution of CPX over the last 11 years, and how its gone from a comic book business, to web design to a top 5 advertising network globally serving over 2 billion impression DAILY. Mike has lead the growth of CPX as its CEO, having grown it to an Inc 500 company and now approaching $70 million in annual revenue, 70+ employees and offices throughout the world.
About Mike Seiman
Mike Seiman is the CEO & Chairman of CPX Interactive, a global digital advertising media company that he co-founded while still a college student at Hofstra University in the early 2000′s. The company has grown quickly and is now a major player within the crowded online advertising landscape, serving over 60 billion ad impressions in more than 65 countries every month. With offices in the US, Spain, Germany and Turkey. Mike was selected as a semi-finalist in Ernst & Young’s Entrepreneur of the Year initiative in both 2009 and 2010.
Jay: Mike, welcome to the show.
Mike: Thanks, good to be here.
Jay: I’ve known you for a while, and your story is one of the most inspiring stories that has come on the show. You have a company that has grown, and you’ve had this company for over ten years now. I’d like to first ask you, before we dive into your background and the history of CPX, in your own words, describe to the audience what CPX is for those who have not heard of you.
Mike: Well, CPX is a company that buys, looks at, sees, optimizes and delivers 2 million ads a day for advertising companies.
Jay: And now in terms of an ad platform, would you say that you are in the top five or so?
Mike: Globally, I would throw out top five but I will not comment or commit to a definite top five ranking as nobody really verifies on a global scale, so it is difficult to say what the real numbers show. But I would say probably top five, yes.
Jay: So, as I mentioned earlier, you guys made a switch at one point, back in ’04, ’05, ’06… I forget the exact year. But you went from BUTS Inc. to CPX. Can you tell us what BUTS Inc. was, and about the history of moving from BUTS Inc. to CPX.
Mike: BUTS Inc. was an acronym that stood for “brothers under the skin” and is was a little cartoon that my partner and I wrote and a clothing company that we designed during our freshman and sophomore year of college, which was probably around 1999 or 2000. That’s what we formulated the parent company as, BUTS Inc. The acronym stuck and went into the advertising network model at that time and we never shifted it until 2004 or 2005, when the numbers started to really get crazy and we joined the right media exchange and were able to capitalize on the automated buying that was going on in that system, and decided that it was time to grow up, it was time to re-brand, and henceforth coined CPX.
Jay: And what does CPX stand for, those three initials?
Mike: Hopefully for anyone in the space, it stands for cross per x [SP]. It stands for the ability to be nimble, and the ability to meld through the space, as things change in the space all the time. Google is all CPC, MAPWorks are all CPN, the lead gen guys, the other networks like ourselves, it is all CPA and CPL. We like to think of ourselves as “your metric is the metric we’ll go by,” and that is where it started. One day, brainstorming in the bedroom waking up knowing that we needed a new name, thinking of things like “ValueClick” and “ClickThis” -
Mike: Right, there are all these names out there and we did not want to stick to a “click” or an “action,” and decided to just say “CPX,” and it stuck and made sense.
Jay: Even Chris Cunningham, who was at Bolt at one time, and is now the CEO of AppSavvy, he is re-branding himself around activity. Activity is great for now, but I do not know what it will be in ten years, so CPX makes sense: “CP-activity,” who knows what it will be this month?
Mike: There’s always going to be a cross-per-something-Jay-said
Jay: So you’re going to have to perform it on some type of a metric at some point, so that is what the X means.
Jay: And you did that around what year? 2006? 2005?
Mike: That was early ’06. In late ’05 we started thinking about it, what the next name of this company would be.
Jay: Was Wright Media a defining catalyst to the growth of your business when you joined the exchange?
Mike: Yes, I think it was definitely a pivotal moment. At that time we were creating our own technologies in-house. We did have our own makeshift ad server, and at that point we used Incipitor [SP], PHPS, we were using everything and trying to build something on top. We had our own interfaces with optimization technologies built on top, and it was at that time that we probably spent three to six months getting ready to build our own real-time ad server, something very similar to what [inaudible] was doing, that kind of scale, and we saw what they had to offer and decided it was time to make a big decision: is it going to continue with focusing on this tech side, or are we going to really focus on the core of creative arbitrage, being value added to publishers, value added to advertising, and decided that we didn’t have enough people to really do both, but let’s see what the core is, let’s partner with Wright Media and see if we can capitalize on what they have built, and vice versa, and I think it was the right decision.
Jay: And what year did you start working with Wright Media? Was that 2004?
Mike: Yes, it was late 2004. We were an early adopter, maybe the third or fourth network to join.
Jay: Yes, I think Bob Regular from Quitar was saying he was one of the earlier ones, too.
Mike: I believe Adtegrity and Aridean [SP] were the first two and we were number three.
Jay: Wow, it’s amazing. Just to give the audience who doesn’t know, you guys are an Inc.-500 company, you were 19th in advertising and marketing, you were ranked 19th and 154 overall in one of the years, I forget which year it was. When you joined WRITEME was the revenue at that time before you joined onto that platform?
Mike: Oh wow, I don’t even know. I could throw out numbers.
Jay: A few million maybe?
Mike: Yeah probably. It was definitely sub-10 millions probably sub five.
Mike: Between five and 10 is my guess when we joined.
Jay: That’s interesting. Now it’s exploded. The last I’ve seen it was around 70 or so right?
Mike: It’s getting there yeah, creeping around that range.
Jay: That’s amazing. Well obviously when you make that kind of money you yourself and your co-founder you guys are millionaires now. When you guys made your first million as individuals what did you do?
What was it like? “Oh my god we finally have money in the bank.” Did you go buy a house? What was the first thing you guys decided to do?
Mike: Let’s see, it was all stupid stuff. Buying a house is not stupid but we bought a house as an investment into the future and wasted some money on stupid cars as we all do. You got to drive a Lamborghini which I don’t have any more.
I grew up from those days and sold it back. I didn’t need it, it was just a fun . . . you’re 26-years-old have some fun, right?
Mike: I sold that and then threw a lot of it away. I wouldn’t say threw it away but I invested it in starting other companies. Chaos Squared which is my production company. We actually created a horror film about three years ago.
We recently sold it about six months ago to Lions Gate. It’s actually in all the stores: Best Buy, Wal-Mart, and Target.
Jay: You sold a movie or you sold the . . .
Mike: We sold a movie, yeah the movie.
Mike: It’s distributed right now you can get it on any of the VODs on your TV.
Jay: I bought it three years ago.
Mike: It’s cool, it’s fun.
Jay: Yeah so that was cool. That was a passion of yours something you always wanted to do.
Mike: It was something I wanted to prove was I was capable of doing. I don’t even know if it will be successful or not yet. I’m still waiting to reap the benefits of that if it’s possible.
I mean the movie industry is really difficult to get into but it was a learning experience. You got to see. At some point an entrepreneur gets to a point where it’s, “Wow I have this one successful company can I do it again?”
Was it just luck? Everything is luck, right?
Jay: There’s a lot of luck involved, yeah.
Mike: Lot of smart people with a lot of great ideas and to some degree there’s a lot of luck that goes into making a successful company. At the same time you want to know if I had a little bit of luck behind me can I do it again.
Am I that smart? At least can I get on that trajectory where I can learn another industry and be successful then. I think that was the test. We’ll see if the test (?)
Jay: It was you and your co-founder both did that?
Mike: Yeah, we did that. We started . . .
Jay: You do everything together when you do businesses and projects now?
Mike: No. The ties have sort of separated a little bit. We still talk all the time, we still work together significantly.
Jay: Oh is he at CPX still?
Mike: No he’s actually moved on from CPX.
Mike: He’s still the owner today and he’s still part of the board. So we still discuss things like that but he’s no longer a regular employee at CPX he’s moved on.
He’s working on more movie projects and helping with that company which is more his passion. Comics, movies and things like that. He afforded himself through CPX I guess the ability to start branching out and doing different things he really loved.
Whereas I kind of stuck with advertising because what we call online trading, that side of the money that’s kind of what my passion is. That’s what I really love.
Jay: You’ve grown a business quite a bit. I know you guys have an initiative where you give back. Would you like to tell us about that?
Mike: Sure. I give back a lot. I’m on a lot of boards. I’m on the advisory board of Children’s International. Children’s International is an international sponsor a child organization.
There in six or seven different countries. I have about 13 sponsored kids it’s something I’ve always wanted to do since I was younger and kind of built it up over time.
Two or three years ago I built a community center with Fem Ecuador (?) it’s in the B.U.D.S. Community center in Ecuador. Something nice to look back on. Me, Paul and a couple of our other co-founders kind of got involved in that and did that together.
I’m on the advisory board there and am still doing some projects with them. I’m also on the advisory board with my alma matter at Hoftra University. I have a scholarship there so I give back there.
I also run a not-for-profit out in Brooklyn a HESJCC that’s in the Brooklyn community which is exciting. It’s nice to see how a not-for-profit operates and be on the board. Those kinds of things give you some color and some initiate.
Then at CPX we run CPX Example which is our film profit fund. We donate to charities. Ad Impressions every month that we donate to bring back to the site and just not do the PSA thing.
Mike: They make sure . . . it’s not just not doing the PSA thing but also to donate actual paid impressions on behalf of publishers that will pay for and then send to those charities. We’re always trying to work on building that to be something greater. Work on it, and then next year, in 2012, we’re actually working on potentially, I wouldn’t say hush hush, but it’s in the works right now, the first venture text summit on Long Island through Hofstra University, where we’re going to give away big prizes and potentially angel investors.
Jay: You are sponsoring that with Hofstra?
Mike: Yes, we hope it’s going to be a mini (?), happening on Long Island. It’s sort of something that’s not going on on Long Island. It’s a really good community out there. There are some good tech people out there and it’s time to unfold its wings and get back to where it was in the 80′s, when it had Computer Associates and Cable Vision and all these companies budding up. Now, it’s a little bit the death of Long Island in the text based engineering, so it’s time to revitalize that a little bit. We’re trying to help that out.
Jay: Bud’s was an incorporated company, right? Did you guys transition your business from an INC to an LLC at any point?
Mike: Bud’s was an S Corp. Still is an S Corp. It owns CPX Interactive Holdings, LLC, which also owns CPX Interactive, LLC. So there are two LLCs. One’s a Delaware Corp, one’s a New York, and the original . . .
Jay: I have a strong interest in structural for tax purposes for people on exit and stuff like that. Why don’t you walk us through the thinking when you did all this?
Mike: Sure. Originally Bob’s was created as an S Corp, I don’t know, because that what’s what we did. We thought, ‘Let’s make an S Corp.’ It seemed easy, and we did it online. It was that simple. We never moved it away from an S Corp, because the S Corp has, from what I’m told, some great tax benefits in terms of an exit when you get out of it. Then we got to the point where we needed separate boards. We had CPX, we should really create a holdings corp., Delaware based for legal purposes, because we always do things in Delaware to make sure you benefit from all the laws that take place there. All the precedents that were accomplished there.
Then we created a sub LLC under it for the employees, for MIS shares, things like management incentive units for the employees, and have the holdings and everything under one umbrella. That all trickles up to the S Corp, and we never changed it since, because of that benefits from the legality . . .
Jay: So if you were to go public someday, the one that the employees own is the one that would go public, and you would be a shareholder for the S Corp and your co-founders. You guys are on the other one?
Mike: I don’t know how we would essentially do it if we were to go public or if we were thinking about that. I think most likely you’d want to go C Corp once you go public. I wouldn’t even comment on that.
Jay: Let the bankers handle that stuff, right?
Mike: Let the lawyers handle that stuff. They get paid for it.
Jay: One of the things that I always bring up on these interviews, is what drives you? When you get up in the morning, you don’t have to do this anymore. Carl[SP] moved on. So, he’s not as passionate as he was at one time, but he went full circle, and he went back to the cartoons and comics. So, what makes you say, ‘I gotta do this. I’m going to continue to do this. I want to see it through to wherever the end is.’ If there is one. Maybe it goes on infinitely for the rest of your life. You don’t know. What’s your drive?
Mike: There are a lot of things that are my drive. It’s hard to pin point. I mean, I can get all psychological with you. I’ll put a few things out there that I’ve said in public on an interview, just to give you the benefit to have something to fancy, to throw out there. This is more sad than it is anything. I’m a type 1 diabetic. I’ve been type 1 diabetic since I was 17 years old. I lost my brother about five years to heart disease. I think in general, I’ve seen a lot of pain and death. I’ve seen that life is short.
What drives me every day is the fact that nobody really know how long it’s going to be and every day, if you can’t accomplish something, if you can’t feel good about what you’re doing every day, all the time. That doesn’t mean that you have to accomplish something great every day. You also want to have fun too. Every day, if you’re not having fun, if you’re not enjoying yourself, if you’re not making the most of it, if you’re not getting out of bed and bettering your health, life, and what you put forth on this earth.
I think there’s psychologically something in my brain that makes me wake up and say, ‘I got to get started. I got to do something.’ I go to the gym every single day. I work out every day. I kick box. I fight. I do stuff like that every single morning. And if I don’t do it one morning, I feel awful at the end of the day. Not because my body doesn’t feel right, but psychologically I feel like, ‘Wow. You really could have got up 45 minutes earlier and did it. You were lazy.’
Jay: There’s no excuse.
Mike: It’s that drive that keeps me moving every single day.
Jay: It’s interesting you say that. I had Russ Fraden from Adify, and Russ was saying . . . Again, you don’t need to do this. Why did you start another company? It’s crazy. You had a huge exit. He’s like, dude, there’s three things that make you happy and money is not one of them. I agree with him on this. He’s like, it’s the relationships you have in your life, it’s the experiences that you have with those relationships and those people and what you do right? And then you’ve got to be working towards something all the time, you’ve always got to be working at that and it sounds like what you’re saying is very similar.
Mike: I think every entrepreneur to some degree has ADHD, and I can’t even sit and watch a movie without having to be on my laptop checking statistics or figuring out how to do something. It’s just like I always have to be moving. Who knows if that’s a real medical thing or it’s just the way my brain works. At some point you kind of wake up and you’re like, you know what, there’s close to 100 people that work for me that had no idea what digital marketing was all about when I met them.
Now they’re all in a place where they have real lives and they have families and they have careers that they never really understood before [?] and that makes you feel good. That makes you realize, you know what, maybe I didn’t get the $100,000 million exit yet, I’ve had fun, I’ve made some good money, but that’s not what’s important. What’s important is that I can look at the way I’ve affected hundreds of people’s lives every day and who knows how many publishers we pay that make a living off of what we give them.
It feels good to do that to know that you’re a part of some sort of ecosystem that drives revenue, that drives food to people’s mouths, clothes on people’s back and to me that’s what’s most important, so if you told me I could have a $100 million exit tomorrow and not do this ever again versus be OK and do this until I die, I’d probably rather be OK and do this until I die because that’s what’s more important to me than having a $100 million in the bank.
Jay: You mentioned ADHD right, and that’s Phil Kaplan’s new company, ADHD Labs. It’s so funny. But it’s difficult for entrepreneurs to focus. We want to put our hands in all of these things because we have all these ideas, it’s like spinning around and around. But you have to focus. You guys have done an incredible job at focusing at CPX.
Earlier when it was Buds Inc you were doing whatever you could just to make money right? Then you found a niche and you went after it 100%. Have you created core values to the company and then a mission and division statement and then you stay true to that and you don’t deviate and you try to stay focused?
Mike: Yeah, I think we’ve tried to stay focused on the core competencies and really spent the past 6 months evaluating that and making sure we’re really honing in on what those core competencies are as we dabble in mobile and video and start building out different initiatives is it focusing on the core of what we’re good at and where we add value?
That’s a big reason. We moved from 2 years ago we spent a lot of time building a tech platform, going back to let’s build our own ad serving platform, let’s build our own tech platform and we kind of dropped that to some degree. We kept a lot of pieces of the technology that was so valuable to us at its core, but we gave up on some of the ad serving and some of the pieces and said, you know what, these aren’t our core competencies and they don’t ad value to who we are and what we do, so let’s outsource some of those pieces.
Let’s partner some of those pieces and I think every entrepreneur has to realize that you can’t be all things all the time, but you can focus on what you’re great at and continue to kind of move the ball forward on what you’re great at and see how they fit into other things that are closely related to what you do so you’re not moving too far off the course, but you’re sort of always on par.
Jay: CPX is a huge ad platform. Billions and billions and impressions are going through on a daily basis, not even a monthly basis, but just a daily basis. So what is the one thing that you are most proud of? The one Jaytone that you can say, look, this is the most remarkable thing about our company that we do the best and if you were to talk to an investor or to an advertiser or a publisher, what is that one thing that you guys like to brag about?
Mike: Honestly, it’s really the culture and the people that are here. You’ll find the majority of our staff that’s here are still here since the day they started here and I don’t think, especially as thick of a space as online advertising you’ll find companies that have 70 people who never left. Core people who believe in it. Even though they could go out and potentially earn double they’ll stay here because of the love of the company, the love of the culture, the desire to see it get to that next level because they have such a core belief in what we do and how great the organization is. I’m probably most proud of that. I’m most proud of the employees I have here and dedicated they are to the organization.
Jay: Is there one thing that you try to avoid as a company on a day-to-day basis or a monthly basis? Is there anything that’s like, we definitely can’t do this, it’s a tendency of me as an entrepreneur or us as a culture or a company that we want to do these things or thing. Is there just one thing that you try to avoid?
Mike: Again, I think you try to avoid doing everything.
Mike: I don’t think we have been as good about that in the past, but we’re definitely getting a lot smarter about what really adds value, and kind of prioritizing what those things are and when they should be accomplished, as opposed to just piling things on.
I mean, you know as an entrepreneur you have a million ideas, so every day I come to work, we’ve got to create this, we got to do this, we got to do that. At some point you’ve really got to focus yourself around making sure that, alright out of these ten great ideas that I just came up with, that I think can really change the world, which one is really actually important. And all of these role changes are, but which one of these will actually get some results.
Jay: Yeah, exactly. It’s like if you could have all the money and the greatest minds doing it with you on each one of those ideas then yeah, maybe, but you don’t and so you’ve got to focus on one of them. Right?
Mike: Exactly. What you sort of realize, especially after running the company so long is that you kind of tend to realize is that the way you act, is the way the rest of the staff acts, as well. It’s kind of interesting to realize that, I don’t know if it’s that you hire personalities very similar to yours, or everyone just sort of meshes into that culture that you create. So it’s like if I don’t start isolating what the core things we need to create are, and what we need to drive value and grow revenues, everyone else is going to do that same thing.
So you have to lead by example, and it’s a statement that’s never been more true. You lead by example and people will follow you.
Jay: A lot of the people I have on the show have raised $10-$15 million, to $100 million, from venture capitalists, right. You guys have never raised any VC money, right?
Mike: Not a dollar.
Jay: Amazing. And the second thing is, because I talked to John Lump about this off camera, did you ever raise any debt in your company ever, did you have to get banking loans or anything like that?
Mike: Yeah, I mean once you get to this size, you obviously need bank loans. But, it’s not like we took out a $10 million bank loan to run the business, it’s more we took out a line of credit, so we can make [??] month to month. It’s really about, you know, you want to pay your publishers as fast as you can, and you’re advertisements sometimes don’t comply to that. So it’s really just hedging on your receivables versus your payables.
Jay: The cash flow of the business, right?
Mike: Exactly. So, yes obviously we have bank loans, to support our cash flow, but we’ve never really taken anything significant, anything more than like a million dollars, to really go out and be able to create any core values in the organization, it’s really just bringing dollars in to kind of help keep our cash flow in line.
Jay: You fund yourself through your own sales initiative, basically.
Mike: Yeah. We funded ourselves for years. I started as a publisher so I ran a couple of entertainment websites, like you did. I took all that revenue, dumped the websites and created an ad network. So, it’s funded through its own publishing, through its own advertising sales.
Jay: So, you’ve mentioned the team and the culture, so let’s talk about that for a second. What are the key attributes in an individual that you look for, and you said, it’s sometimes the tendency of an entrepreneur to hire people that are like-minded. Right? So what are those key attributes, like a few of them that you seek out of the individuals that you try to hire?
Mike: Just really hungry, aggressive people, who think it’s not so much about what they’ve learned but their desire, to sort of create their own wealth. To really want to effect change, want to lead and work hard everyday, I look for people like myself. People who want to wake up every morning and work till dawn, and do it again the next day. People who just don’t want to stop, people who want to check stats when they get home at night, just because they’re excited to see numbers grow, they’re excited to effect change, they’re excited to make more money, or grow lines of revenue, or just be more successful for everyone in the organization. So I look for people like that, you know.
Jay: Outside of gross incompetence, what are the attributes of the people that you’ve had to remove from your company? Like, you brought them in, you thought they were the right people, but it’s like I have to get rid of these types of people, because they have these types of qualities.
Mike: I mean it’s sort of the opposite of what I just said, laziness.
Jay: But you thought, at one time, that they had those qualities and then you’re like man, I guess they don’t, they fooled me.
Mike: Yeah. I mean, look, over time, sometimes people lose their appetite for aggression. They get to the point where winning isn’t as important to them anymore, not that they want to lose, but that they’re not so aggressive towards winning and sometimes people just lose their drive, and sometimes they just get complacent.
They’re happy with the status quo, and they’re like here’s where I am and this is OK. I want people who, even if they get to where they’re going, will still want to climb higher, like they’ve gotten to 1,000 feet up the mountain, because that’s their goal, they put their flag in, but they’re like there’s 500 more feet to go, I’m not walking down, I’m going up higher because it’s possible. I don’t like people who go, alright this was possible, I finished it, I’ll just stay here.
No, keep seeing if you can reach the impossible. So I think people we’ve let go, or people who have gone, and we don’t really let go of a lot of people. We don’t really have much turnover at all like I was saying before but I think that’s where it comes. People who get complacent with what’s there and don’t want to keep driving and run.
Jay: Who’s been a great influence to you professionally as a mentor or as an advisor or just a friend, another entrepreneur out there, that’s kind of helped you over the years? Even if you’ve just read about them and not personally known them. Just anybody that’s been an influence to you.
Mike: Yeah, I think Bill Gates, Steve Jobs, Richard Branson, I mean, the guys who were really out there open in the public eye who really just, not your buttoned-up, shirt and tie kind of guys. The guys who made their own way, paved their own way, the way they wanted to do it, albeit differently, and showed success and showed how smart you can be and how successful you can be even though you don’t conform to normalcy.
Jay: A lot of entrepreneurs will tell you, I had a big business, I grew it, I had a close call a couple of times. My company at Bolt, as you know, our close call came due. It was too close. We had to shut the business down. Universal sued us, right? So have you ever had a close call where, and a lot of people say in the advertising business, your one invoice away from going broke, right? So, have you ever had a close call where you’re like oh, man, almost lost it on this one. Earlier in the business, maybe later?
Mike: I mean, you know, it’s sort of like when have I not had a close call? Especially when you’re boot strap, right? And that’s this thing. To me, that’s what something to be so grateful for and so proud of, especially in the core team is that we are always so close to swimming on wine. One giant invoice unpaid could kill us. And it’s not to say that’s why our credit process is so tight. That’s why we don’t extend $40 million a month to one client, because it could break us.
Jay: You’ve got to worry about that, what do they call it? It’s on the tip of my tongue. It’s the risk factor. You’ve got to be able to mitigate that risk. You can’t allow one particular client have 50% of your revenue.
Mike: And you don’t want to. It’s not valuable to investors. It’s not valuable to you. It’s not valuable to the organization. So we always play it that way, but of course, you’re operating in a 5 to 7 million a month business, you’re always going to have that one client that does a million dollars plus a month, right? What happens when you lose that client? Well, we’ve lost that client. We’ve lost another client that was. (?)
Jay: You’ve got to replace it.
Mike: It happens, right? You’ve got time to replace it, but you don’t have too much time to replace it when you’re boot strap. So it’s sort of like, if you lost that million dollar a month client, you might be teetering on that line of unprofitability and then it’s sort of like how long, how much have you saved to be unprofitable for how long?
Jay: And you’re thinking to yourself while this is happening, I may have to lay some people off if I can’t do this. I can only do it for so long, right?
Mike: Absolutely. I mean, we’ve done it. We’ve gone through the unfortunate layoffs more than once. You know, where we’ve had to lay off five people, ten people, people we wanted. People we wanted to keep and didn’t want to see go in the organization, assistants that we loved that you just get to the point where you’re like, you know what, we can’t have an assistant right now. There’s nothing we can do about it because the business will fail. Until we can bring it back to where it needs to be, that’s where it needs to go.
And things stop for any reason. We’re in advertising. Companies decide they don’t need to advertise right now for six months. OK, well that doesn’t help me because (?) for six months. So since we started in 2002, we’ve gone there. 2002 was a little easier. I could ping a couple relatives and see if I could borrow $50.
Jay: Right. Now it’s like Jesus, you’re doing millions a month.
Mike: And we’ll call to borrow $3 million and bankers aren’t so apt to giving you $3 million, especially when you’ve had a down month. So, you just, you do what you can. You ride the waves. You ride the ups and downs and again, it’s all about having a team that can support you, the core people that want to be here, that want to still ride it with you, even though they know there’s tough times ahead. And we’ve been through that and, knock on wood, we’re on a pretty solid growth plan right now and things are looking really strong. So people rode out of that wave and we’re climbing back to the top of the mountain again.
Jay: And it’s a difficult ride to get to where you’re at, right? Along the way, you have to, you basically have to reinvest in yourself, right? You have to take your profits, give it back to the company as a loan so that you can make payroll on time, or pay publishers on time, or whatever it may be, right, for the cash flow. There comes a point where it grows and then banks will take a risk with you. When you guys got to that point, I’m guessing it’s like 10, 20 million in revenue at some point, when you started to look at the banks. When you guys got to that point, did they say, again, they look at you and say we want you to personally guarantee this as well or did you get to a point where you didn’t have to do that anymore?
Mike: No, I mean, we got to the point where we didn’t have to personally guarantee money, which was nice.
Jay: Finally a little bit less risk you had to take.
Mike: Yeah. I mean, at some point, look, you’re making $40 million a month, $50 million a month. Yeah, you don’t have to personally guarantee this, we trust it. But you’re really borrowing your own money at the end of the day anyway. You’re hedging against your receivables anyway. So it’s not like, OK, you have $7 million in receivables outstanding we’ll loan you seven million bucks. It’s not like they’re going to lend you 20 million.
Mike: At some point, you’re beholden to what you are doing in you business anyway.
Jay: Where do you see ad networks going in the next five years? They’ve dramatically changed since you started out. They became, basically, exchanges, real time bidding. What’s the next phase or do you think this is going to last for quite some time now?
Mike: Good question. I don’t know. To me the question that I always ask is, ‘What is an ad network?’ Or I always ask, ‘What’s an ad network?’ I’ll ask you, ‘What’s an ad network?’ The definition of an ad network is a network of advertisers. Well, we are all networks of advertisers. Agencies are networks of advertisers. Ad networks are networks of advertisers. DSPs do networks of advertisers. I mean, we all work for advertisers. So, I kind of say to most people, ‘There’s no such thing as an ad network.’ It’s sort of one of those black holes that we kind of go into and kind of go around in.
Jay: The agencies love to talk negatively about ad networks. But, they are not really much different.
Mike: So, it’s a rhetorical question, essentially. They have problems with certain organizations that call themselves ad networks. But, I think, at the end of the day, it’s all about adding core values to what you do. If you can bring relevance and value to an advertiser, then great. However you can do that, whether it’s through technology, whether it’s through a service, whether it’s through media arbitrage, whether it’s through unique data, and the more pieces of that you can pull together, well, the more successful you’ll be as an organization.
I think the future of this space is you’re going to see a lot of consolidation. There’s a lot of companies out there who pride themselves on, we have the best first party data algorithms, we have the best this. And then, you can look in and say, ‘Where does all you’re revenue come from?’ Well, it comes from retarded. Well, that’s weird, why is 90% of your revenue retarded when you’re core values and all that.
Jay: Right, the story they tell the street. Right?
Mike: Put you’re money on building first party data, no one buys any first party data. So at the end of the day, we’re just all taking a piece of what’s out there. But, when it all comes to hedge and it all consolidates, I think, you’re just going to see the few that add value standing, the few that add real service and scalability, and I think that where this…
Jay: I think I agree with you. I had a debate with, separately, not an interview, with Russ about this. And he’s like, ‘You know, people talk about consolidation in the ad network space.’ He goes, ‘But I don’t really see it in the majority of these companies because you have these guys, one, two, three, founders, running an ad network that make millions of dollars a year. And they’re like, why am I going to sell and trade up for your stock? You know, it’s like egos and things get involved.’ And I was like, ‘Yeah, but, I think eventually it all make sense. Like, when CPX gets bigger, like a value click or something. Right?’ People say, ‘I’m comfortable going under the umbrella there.’ Right? At some point it may happen.
Mike: Yeah, I hope so. Of course.
Jay: When do you see that kind of shift starting to happen though? Do you see that in five years, or do you thing it may take longer?
Mike: For us, I hope it’s by mid 2013. I think we put a really, really strong team in place over the past six months. We revamped our senior management team. At c level, built up a new CFO from within, brought in a Chief solutions officer, brought in a chief revenue officer, really stepped up my game in how we are managing. Kind of really, restructuring and refocusing the team in the core? And I think, hopefully, if everything works out the way we expect to. I don’t expect it not to. You know, 2013 is going to be when we are in that place where we’ve hit that place where we are ready to go to that next level. And to me, I think most people will tell you once you break that hump…
Jay: Mike you broke up, you there? Okay, so we are back. We had a bad connection there. So, I think the last thing I asked you was, ‘in the next five years do you see the consolidation happening? And where do you guys see yourselves in that?’
Mike: I think, hopefully, by 2013 we see ourselves hitting that critical mass point. Where we’ve finally broken through the mold of being a mid-sized company, large sized company. And that’s where we see ourselves playing a critical role in consolidation. Hopefully, it’s not being consolidated unless it’s at the valuation we want. It’s more about us consolidating and kind of building a nice ecosystem under us. In terms of partnering with more technology, some entrepreneurs and partnering with them. You know, create some wealth inside our ecosystem.
Jay: When you thing about buying companies. As an advertising company, because revenues are pretty important point, right? And you talked about, and I think a lot of people talk about this off camera, but I’m glad you said it on camera, I thank you. A lot of people talk about their story. They pitch their story. But the reality is, what are you really doing to add value, what are you really doing to drive the revenue. What is you’re driver. But, a lot of guys talk about things, and then you really look under the hood, like you say. Because you probably looked and evaluated some companies. It’s not really the truth, right?
So what other key drivers that you’re looking for at some point in the future when you’re thinking about buying companies or you’re looking at other companies and say, that’s a valuable company. Is it the revenue when you’re trying to consolidate? Do you think the revenue is the most important thing for the overall revenue of the conglomerate CPX at some point? Or their key technologies that you’re looking for?
Mike: I think it’s both. I think we’re looking to buy technologies that can’t scale that we think are interesting that don’t have the scale and the sales force to really grow it and make it profitable and bring in revenue to it and then you’re just looking at core revenues. I find that just bringing in revenue is kind of tough in that is it going to be here forever and what’s the real value?
Jay: Yeah, is it sustainable. Right.
Mike: How many years are you going to keep that [?] and is it a market driver, whereas technology that really isn’t revenue-based, but it’s just really cool technology that can help add to what your organization can bring to the table when you’re talking to marketers, that’s what you really want. It’s those companies that can’t scale and can’t reach critical mass that quite frankly have an evaluation you have the appetite stomach and can kind of really go out and say all right, I can pay a decent multiple for this technology even though the revenue is not there because it adds really core value to our advertising and we can grow our base and then you’re looking for stuff that adds synergies. Where am I finding the technology that can help my advertisers or vice versa, where does my technology help their advertisers?
Jay: If you were able to roll up a bunch of companies that were doing $5-10 million a piece though and you guys are pushing up toward the hundred, you get into the seventy, the eighty, you start doing that over the next few years and you could consolidate maybe another $50-100 million. Now you’re talking some serious numbers. You’re right up there with anybody else at that point, at several hundred million in revenue.
Mike: Yeah, I think when you break the hundred million mark that’s when the sky is the limit in terms of what you can do.
Jay: Sorry, go head, what was that?
Mike: Then you can buy whatever revenue you want.
Jay: Right. Exactly. You could pull in these fives and tens and it’s not even a big deal for dilution for your team.
Jay: I’ve noticed this, too with advertising businesses. The performance advertising in particular, they go from whatever it is to $20 million, but then they jump really fast to $40-50, but they kind of slow down a little bit. You guys kind of did the same thing. You grew really fast in 3 years, but then it slowed down. Is it because of the organizational structuring and growing a company and people? Is that what slows the growth a little bit? I don’t think that it’s because you couldn’t continue to do it, but you have to layer people on to do it right?
Mike: Yeah, I think you have to add infrastructure to do it, obviously salespeople, but it’s sort of like what they say growing beyond 50 people is difficult. It’s the same thing, growing beyond $50 million is difficult. Where do we get the other $50 million? That’s what it is, it’s just like where do you get those other 50 people? You know 50 people, or the 15-20 people you know all know 2 people. But then you get to a point where nobody knows anyone anymore that’s interesting to add to the organization so you start reaching out and when you reach out what happens? One in three hires ends up being good. It costs you a lot of money to find that next 50 people. It’s just like it costs you a lot of money to find that next $50 million in revenue. That’s why it’s like once you get to $100 million it’s easy.
Jay: You guys have got like a sweet spot almost right now. It’s very profitable. It’s a great sweet spot. We did a lot of risk to get here. Kind of ride it out for a few years and maybe we’ll start making some other investments and growing the next $50 million, but this is a good spot we’re in right now. You’re not declining or anything like that, so this is a good spot to be in for now.
Mike: Yeah, well no, we want to be in a much bigger spot. It’s back to what you asked me in the beginning, what makes we wake up every morning.
Jay: Well yeah, I wouldn’t say you’re complacent. That’s a good point. Right.
Mike: I want to be aggressive, so no, I don’t want to be complacent at all. I want to move the needle every single day.
Jay: You just haven’t seen those right opportunities yet?
Mike: I think we’re breaking into that. We’ve been very DR focused for a long time. We’re finally realizing what’s the difference between DR and brand performance? Naming convention. Brand performance is direct response, it’s the same thing, brand performance just doesn’t like to be called direct response. Well that’s fine, but what we’ve built and the skill that we do is good for that and all our competitors can’t touch direct response the way we do, but yet they can touch brand performance.
Now we’re building into brand performance and our mix is getting a little more 70/30 than 80/20. Right now as we grow that now we get into branding and that’s kind of what we’re building, that’s where that other $100 million comes from. It might take a year, it might take two years, it might take 3 years, but we’ll eventually capitalize on that side of the market and that’s when the skies are the limit.
Jay: If you could give one piece of advice, just one to any other entrepreneur out there, what is that one piece of advice that you will give them?
Mike: I think the advice is fairly straightforward. I think most entrepreneurs would say the same thing. Warren Buffet has this kind of famous quote where he kind of talks about the fact that he doesn’t do it to make big money. It’s not about big money, it’s about making it. Right? He loves to turn $1 into $2 so much. It’s just as important for him to invest $1 and make $2 or make $1.10 as it is to invest $100,000,000 and make $400,000,000 because he just loves to win and to turn something into something more so much.
So being an entrepreneur it’s kind like the same thing. You can’t be driven by money. You can’t be driven by other aspects of why you dream of fame, celerity, whatever it is you want. You have to be driven by the fact that you just love to be an entrepreneur. You love to create a business and watch it grow.
Again, it’s not about the money. It’s like if I could create a $1,000,000 deal business it should excite me just as much as creating this $100,000,000 business. So I think knowing that, that that’s your passion first and then never giving up. It’s the same old story right? Know that you want to be an entrepreneur and you don’t just want wealth and you don’t just want fame. Because there’s lot’s of ways to make wealth. There’s lots of ways to be famous. But there’s only one way to be an entrepreneur. Create your own business, make it successful and your an entrepreneur right? So know that’s what you want and then don’t give up.
Jay: Mike, thanks again for coming on the show. Last question I ask everyone who comes on the show, why did you choose to be a guest on Find Wealth?
Mike: Well, We’ve known each other for a long time. Like you said in the beginning, I respect you and your space. I like what you’re doing. It seems like your interviewing some cool people and at the end of the day you want the story to get out there. You want other people to hear what you’ve done, why you’ve been successful and you hope that at least on other person listens to your story and kind of get some inspiration from it and become another successful entrepreneur, hopefully better then yourself.
Jay: If your story doesn’t inspire one other person, I honestly don’t know what story would inspire another person at this point. You’ve done and incredible job at CPX Mike. Congratulations. It’s just a mid road right? You’re like halfway there. You’re not even done yet. So congratulations to you and the team that you built. And thank you to everybody watching the show.
Mike: Thanks, Jay. I appreciate it.
Jay: Thanks, Mike.