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Ernie Cormier, CEO of Nexage, the real time-bidding exchange for mobile ads, took us to task over lunch recently for a piece we wrote in July bemoaning the fact that even though there’s a gold rush in mobile advertising right now, no one seems to be making any money.
Nexage isn’t profitable either, Cormier says, but that’s not the point.
Scale is what counts, not covering your operating costs, he says.
“It’s more accurate to say it’s a land grab than a gold rush,” Cormier says. There are a large number of fairly small companies in the mobile ad space, so the industry is ripe for consolidation. The survivors, Cormier believes, will be the ones controlling the largest pieces of the business—and that requires scale.
“I could get profitable quite easily,” Cormier says, but “anyone who is trying to be profitable and grow at 10% a year [within their revenues] is going to fail.” The future belongs to the companies that have the best and biggest real-time transaction servers, and, of course, Cormier believes that’s Nexage.
Anyone whose mobile ad business relies on apps being served by a simple server is doomed, Cormier thinks.
I ran this theory by another mobile ad mogul, Jason Young, CEO of Crisp.* “He’s right,” Young says. “It could be a $10 billion market in five years. You don’t want to shortchange yourself in the name of being profitable now.”
“iAd is not scaleable,” Young notes, darkly, referring to Apple’s mobile ad system which offers amazingly rich content for browsers on the iPhone and iPad—but requires a laborious level of custom content creation to be effective. (This goes some way to explain why Apple’s iAd revenue may be only $92 million a year.)
Both Nexage and Crisp are fairly small right now, with about 42 and 40 employees, respectively.
Nexage represents about 300 premium publishers and serves 12-13 billion impressions per month.
Crisp has about 150 brands running across a similar number of publishers, Young says, and he believes he will do “eight figures” in revenue this year. He’s projecting an operating profit in Q4 and doesn’t plan on taking more VC funding.
*Disclosure: Crisp is an advertiser on Business Insider.