Memory app Timehop built an ad server to go from near-death to profitable

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Timehop had three months of runway in the bank when it decided its current advertising solution wasn’t going to cut it. The app — a way to reminisce on photos and posts across social media — had raised $14.1 million since its launch in 2010. If it was going to ever return that money to investors, the company had to do something else.

“Millions of people use it every day. We can’t just shut it down. At that point, we had so many ideas of what else to do. Maybe we fail and it still ends but we should not end it here?” said Matt Raoul, CEO of Timehop.

As Twitter knows well, you can just shut apps down. But Raoul, Timehop’s design lead who was promoted to CEO after his predecessor left for Snapchat, decided against a quick demise. Instead, the plan was to boost its programmatic advertising. The 15-person team ended up building its own ad server. A year and a half later, the app’s CPM has grown from $2 to $28. Timehop is currently profitable with 50 percent margins this quarter.

Timehop’s leadership team, seated in a conference room within a Soho office featuring framed photos of the app’s mascot Abe the dinosaur, described a journey of exhausting ad tech solutions from January to October 2017. During that time, Timehop hired David Leviev, who worked in ad tech prior, as director of programmatic and partnerships. They moved from using a bunch of SDKs to trying a third-party ad server, which initially gave them a nine-fold increase in revenue.

“We didn’t really understand our own inventory because all we had was the viewability of these two demand partners. We were kinda content with that $2 [CPM] because we thought we were valued at that,” Leviev said.

But after their third-party ad server was down for a weekend, Leviev began to consider moving it all in-house. He declined to name the company’s previous partners.

“Typically reporting is down, and you wait 24 hours. We sent them an email, another email. Three days worth of revenue down the toilet. We got no reassurance we were a priority so we understood the need to have control and viewability in-house,” Leviev said.

In November, Timehop instructed some of its product engineers to begin building an ad server that focused on its own inventory, mobile-only. Leviev said they also wanted to maximize CPM and fill rate, not just choose one or the other. Currently, the system integrates with about 15 SSPs and DSP, the exact number depending on the day.

On Aug. 28, Timehop’s server was filing 74 percent of its inventory at $14 CPMs. Compared to a year ago, the company’s revenue is up 1,000 percent. About 85 percent of that revenue is programmatic, rest direct sales. The startup’s making close to $1 million per month, said Rick Webb, Timehop’s chief operating officer, who served as a revenue consultant the year prior to his full-time involvement.

Timehop is still perfecting the process. This week, they implemented Moat’s SDK for viewability and verification measurement.

“Our biggest regret is not doing sooner. If you have the resources the best solution is to get rid of the SSP. There’s no low-balling of a $2 CPM, no skimming off the top. Publishers if they have the control themselves can determine how much they’re truly valued,” Leviev said.

As for the future growth of the company the team said they hope to use this new financing to hire more employees, in particular, a marketing team, which they currently don’t have. Part of its future marketing initiatives will include reminding people that while Facebook and Snapchat may have a memory feature, Timehop provides it all within one app.

Timehop’s user base is about 80 percent in the U.S., 80 percent women and 80 percent millennial. In July, the app was hacked, affecting the personal data of more than 21 million of Timehop’s users. The team declined to provide exact user numbers but said it has “millions” of daily active users. Timehop did lose between 10 to 15 percent of those after a redesign at the end of 2016, but it’s also adding users each week.

“We lost some users in the redesign, but we still have the core user base that we want to improve things for, that has stuck with us through thick and thin,” Raoul said.

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