The rise of Nasdaq-listed PubMatic’s Goel brothers

Digital advertising company PubMatic Inc. made head turns when it listed on Nasdaq last month, to raise close to $115 million, and saw a sharp rise in its opening prices marking a 10-fold jump in its market valuation to $1.4 billion.

With its public debut, the 14-year-old Pune and California-based firm leapfrogged co-founders and brothers Rajeev Goel (42) and Amar Goel’s (44) worth in the company - who together own close to 23.7% - at more than $300 million.

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Post-IPO, co-founder of PubMatic, Mukul Kumar, said the aim is to expand revenue opportunities by focusing on digital advertising in mobile video and connected TV (CTV) offerings.

“Mobile purchase inventory continues to be a significant channel, and we believe that mobile video, connected TV and OTT will be growing channels of revenues. Hence the company will see further expansion in these areas as we continue to introduce new products in the header bidding space for OTT and are well positioned to address the growth in the space,” said Kumar, co-founder and president, engineering, PubMatic.

Programmatic advertising is the automated real-time process of buying and selling ad inventory, with firms like PubMatic operating as a seller-side platform connecting buyers and publishers. In header bidding or pre-bidding, publishers offer their inventory to multiple seller platforms and ad exchanges, in real time to improve their revenues.

“IPO was just one step of the journey and we really have not been thinking too much about it. We want to keep building great products and keep delivering value for our stakeholders. Nothing much has changed,” Amar Goel said in an interaction.

For the Goel brothers, the entrepreneurial culture prevailed in the family, with their parents, who moved to the US from India, working in Silicon Valley.

For the brothers, who also grew up in the Valley, it’s been a journey of continuous trial and error. PubMatic is their second venture after the duo took a shot at e-commerce in 1995, while still in college, when they founded Chipshot.com, an online retail platform for customised golf equipment.

Chipshot was started by Amar when he was 19, in his sophomore year at Harvard University, with just $350 in the bank from three of his golfing mates. By 1996, younger sibling Rajeev joined the business, while still a freshman at The Johns Hopkins University in Baltimore, and by 1999 the company was already expanding to international geographies like Japan.

The 2001-2002 dotcom bust got the better of Chipshot which had raised close to $50 million and had a 200-member team.

“Between the two, Amar is the one who is always thinking about growth and expansion. He’s always excited about these prospects of moving into new geographies or trying new things. While, Rajeev is always hard at work, with his feet firmly on the ground. He’s the one always thinking on how to maximise profits and increasing margins,” said the person quoted above,” said an executive who has worked with the Goel brothers in the past.

After brief corporate stints at German software multinational SAP, Mckinsey and Microsoft Advertising, the Goel brothers hit the road again and founded PubMatic in 2006, which was first launched as a service under the Komli Media brand and focused on the Asia-Pacific region.

Adtech platform PubMatic focused on programmatic buying of advertisements across display, mobile and social media, and was carved out of Komli in 2008. However, Komli’s CEO Prashant Mehta’s exit in 2013, after a five-year stint, left Amar to juggle between Komli and PubMatic.

In spite of amassing top global publishers including Facebook, Twitter, Expedia and Miniclip among others in India, and raking in almost $100 million funding, Komli was making losses, setting itself for tough years ahead.

“By 2014, Amar knew that Komli would bleed in losses, losing market share to Google, InMobi and wanted to calibrate energies towards PubMatic,” said a person, who was part of certain discussions during Komli's sale.

Active talks with Snapdeal and Paytm for a $300 million acquisition fell through over differences in valuation and Komli decided to merge with SVG Media in 2015.

“PubMatic was global from day one, while Komli was focused on India and expanded to the South Asian market. Pubmatic was in a much larger market, with digital advertising being almost a $25 billion opportunity in the US versus $500 million in India then. So that was an interesting comparison point for me,” added Goel.

“The SVG-Komli merger was a good opportunity for both products, and one of the best handshakes in the form of people and digital transformation, as we were entering the brand representation business. Till today, SVG’s real time bidding platform and PubMatic also share some advertising dollars together in India,” said Deven Dharamdasani, co-founder and CEO, SVG Media, which was acquired by Dentsu International in 2017.

Neither has PubMatic had it easy, as it faced stiff competition from competitors including supply-side digital advertising software provider Rubicon Project. However, it’s early bets on programmatic advertising and mobile app inventory have paid off.

"The continued focus of PubMatic to use technology to monetise inventory and launching products like real-time header bidding, in favour of their publishing partners worked for them. Invariably, their decision to partner with Verizon, worked and Verizon became a force amongst the publishers. Of course, Verizon acquired AOL and Yahoo, but the PubMatic association was a strong factor,” said Sagar Pushp, co-founder and CEO, ClanConnect, a tech-driven influencer marketing startup.

In the third quarter of 2020, mobile and video advertising contributed to almost 63% of PubMatic’s impressions and revenues. The company reported $93 million revenue in the first nine months of 2020, up 16% year-on-year.

In the September quarter of 2020, PubMatic served around 1,100 publishers and app developers, the company said in its IPO prospectus.

“What really makes PubMatic special is its ability to weather the market circumstances and reach a level where it is a global player. It has cornered 5-10 of the biggest publishing clients contributing a large part of its revenues, which otherwise are very difficult relationships to build," said Rajiv Dingra, founder and CEO, RD&X Network, a a deep tech network for deep-tech startups.

In recent years, owing to tough competition from larger firms like Google, the digital advertising space has seen a slew of acquisitions, which PubMatic has weathered.

For instance, during the early part of the decade Google snapped up Invite Media and Admeld to build its arsenal in the demand and supply-side advertising business. Other notable acquisitions include Verizon acquiring AOL and Yahoo to bolster its publishing business, and AT&T buying programmatic advertising player AppNexus.

Despite the growth, PubMatic continues to be in an industry which reinvents itself every three years.

The company’s balance sheets significantly rest on the top few publishers and can send plans spinning in case they change their strategies, analysts warn.

Verizon Media accounted for almost 29% of PubMatic’s revenue in 2019 and 21% in the first 9 months of 2020. Other big publisher clients include Zynga, Electronic Arts and News Corp.

This year, technology giants like Google and Apple have taken a strong stance on consumer privacy, making it difficult for ad networks to target consumers. Google is phasing out third-party cookies, while Apple is making changes to its Identifier for Advertisers (IDFA) platform, which is used to track data for customized advertising.

While entrepreneurship continues to be an arduous climb, Amar is back at it with his latest venture during this pandemic, Safeter, which allows employers to open their spaces for employees in a safe manner.