Forbes Interviews Dr. John Malatesta, CEO of Codewise, on AdTech and Poland Success in the Global IT Market
You joined Codewise one year ago. Why Codewise and why Poland after 22 years of software experience in Fortune 500 and in other larger companies?
Despite its extremely solid technological and product achievements, when I was approached, Codewise was a young company with a virgin opportunity to shape a fully customer-oriented and operational excellence-based organization. I was appealed by this rare chance, so I naturally accepted the mission to evolve in a fully customer-missioned company. And customer orientation is really in the DNA of Codewise from the day it was founded. Codewise at the beginning was a small startup, which had the intelligence to reverse-engineer the customers’ unmet needs, and developed a whole-new category of technology products to satisfy those needs. The current owner of the company, Robert Gryn, was the first customer of this new type of products, and a grand part of the rapid growth of Codewise was driven by building the product based on the inputs from Mr. Gryn and thousands of other customers from around the world.
Why Poland after assignments in almost all the continents of the world?
Poland has all the makings of success in the IT industry and a tremendous potential to be very competitive on the global market.
The academic system in Poland generates yearly a huge reservoir of talented engineers and this has attracted many Fortune 500 and multinational companies, which have created in Poland their EMEA and global technology centers. Thus, Poland provides both education and on-the-job development for thousands of engineers.
According to the Kraków Business Centre, Krakow alone has an academic staff of 12,000 individuals, including 2,400 professors and yearly some 160,000 students, of which 40 000 are in engineering studies. Poland as a whole has an outstanding tradition of technical education and sciences, which helps it compare favorably to many much larger countries.
According to GUS, over 77,000 technical students graduate from Polish universities every year. While that doesn’t sound like much, for comparison, it is roughly twice the number of people Facebook employs worldwide. So every year, the Universities of Poland graduate enough students to man two Facebooks. And it’s not just the quantity. Foreign employers say they’ve been delighted with the quality of Polish graduates, who leave Universities with a strong base in mathematics and programming. Google, Motorola and IBM are just the biggest names in the rush of Western companies to open development labs in Krakow.
I believe that tells you everything you need to know about the country’s global potential.
This, combined with a progressive injection of domestic and foreign venture capital, favoured by highly competitive financial and labour market conditions, is a recipe for massive multiplication of successful Polish technology companies.
In a nutshell, Poland is ideal for software ventures.
But engineering excellence alone, while being a foremost ingredient, is not enough. The Polish Tech ecosystem needs more international expertise and knowledge of foreign markets to channel the engineering potential into solid and sustainable business models.
I hold that Poland will succeed very quickly also in this area, as the Polish culture is extremely friendly, welcoming and open to intellectual cross-pollination, making it pleasant and natural for expats to feel quickly at home and integrate.
How would you define the mission and goal of Codewise? Revenue, Profit?
The mission is to enable, better than any other competitive vendor, digital marketers to easily and efficiently achieve their online advertising business goals by delivering best-in-class measurement, management and optimization platforms. Our foremost goal is not financial. Instead, we continuously listen to the customers through the product adoption and through the interactions with our customer facing units, and based on this input, co-build the product experiences that our customers expect. Fulfilling customer goals naturally leads us to meeting our objectives of sustainable revenue growth
Artificial Intelligence is the latest craze. How is Codewise concretely adopting AI to the advantage of digital marketers?
AI is playing an important role in a number of Codewise’s platforms, such as Zeropark and Voluum DSP.
Essentially, both platforms carry out the mission of linking digital advertisers to supply partners (publishers, owners of digital ad space), but in different ways.
The main goal of a typical digital advertiser is to bring as many customers as possible to their products by running digital ad campaigns within their target budget. These campaigns are processed by both Zeropark and Voluum DSP and distributed across different formats of digital ad space in real-time, thanks to the real-time-bidding technology. The buyer (advertiser) pays the highest price wins, and his ad is displayed on the site of the publisher.
To succeed, advertisers need to choose the right strategy – “What kind of ad space to buy? What kind of ad format is most suitable for my service or product? Where my potential customers can be and how to reach them?”
To simplify this difficult task, Codewise uses the benefits of artificial intelligence. Thanks to some seriously innovative technology developed by our experts, we were able to implement in both Zeropark and Voluum DSP an AI-based feature called Auto-Optimization, which stores all historical data of each advertiser’s campaigns (it operates on over 20 different metrics). Based on this data, AI identifies the key traffic segments responsible for bringing the best audience to the advertiser’s ad. AI will adjust the buying strategy to prioritize and pay more for these segments of traffic. This saves our customers hours of analyzing the data, applying different buying strategies and re-assessing the results. AI does it all on his behalf in real time. The end result is considerably higher ROI for the advertiser.
As to Voluum Tracker, our third platform for advertisers and media buyers that allows them enabling to track, manage and optimize all digital marketing efforts, it is also fully AI powered.
To facilitate the work of thousands of advertisers that use Voluum Tracker, we incorporated AI-based technology there as well, by building the Traffic Distribution AI. It automatically matches traffic with the best performing distribution paths (offers and landing pages) with an accuracy that a human cannot achieve with manual A/B testing. Any traffic fluctuations or changes in the performance of campaigns are automatically reflected in the way how traffic is being distributed. That enables digital marketers to save time on optimization tasks, and gives them a way to easily scale their operations and significantly increased ROI.
When it comes to AI, you actively cooperate with the European Internet Forum at the European Parliament. Can you tell us more about your role?
We strongly believe that knowledge has to be shared to bring value and that the business ecosystem can be truly pushed forward only through productive collaborations. By sharing our insights and expertise via media, keynotes, public talks, roundtables and panels throughout the world, we try to create discussion angles with the public to get to the bottom of the most interesting aspects of our industry but also share our success story so that others can benefit from it.
The European Internet Forum (EIF) is a great example of a perfect knowledge-sharing and future-shaping space, through which we try to contribute to society. EIF’s mission is to help provide European Parliament leadership with the insights needed to develop policies responsive to the political, economic and social challenges set by the global digital transformation. By presenting and participating in live debates and special projects featuring open and inclusive dialogue opportunities, Codewise aims to bring to the EIF table its unique AI, AdTech and MarTech expertise and experience to help the Parliament in producing the best possible legislation for the European citizens.
We also work closely with a number of other international organizations, such as the World Economic Forum, largest publishers, including Facebook, and national governments in democratic countries, in similar ways, sharing our expertise and providing assistance where it can make a difference. We trust that our efforts will help build a better, more prosperous future for everyone.
In the beginning of March, the Financial Times included you in its annual list of Europe’s fastest-growing companies, FT1000, for the third year in a row. What does this accomplishment mean to Codewise and you personally?
?Our entire team is extremely proud of this achievement. What’s more important, it demonstrates the long-term potential of our company and the healthy foundation of our business.
Less than 8% of companies that have ever been listed on FT1000 managed to remain there for 3 years in a row. Most companies stop growing fast or even close shop after a year or two, while Codewise has been able to sustain its incredibly rapid growth since 2012.
This is a testament to the hard work of our incredibly talented team, the unrivalled dedication, creativity and work culture that I have the privilege to witness here every day.
Last year, we have made a number of conscious decisions to prioritize long-term growth projects and invest in new products that will be the drivers of our success for the years ahead, such as Voluum DSP, Zeropark ad exchange with the world’s largest network of push ads, and Voluum Tracker, the industry first AI powered, Offers Marketplace integrated and Anti-Fraud fused online ads measurement and optimization SaaS platform. So we have no intention to slow down.
In addition to AI, Codewise is also a top innovator in the area of Ad Fraud resolution. Can you tell us more about Ad Fraud? How big is it and how to solve it?
Allow me to take the opportunity to provide you with a lengthy, but necessary explanation.
According to Juniper Research, ad fraud, in 2018 alone, caused $19 billion in losses to advertisers, which is expected to reach $44 billion annually by 2020. That’s a lot of money. But what is worse - and often overlooked behind these numbers - is that ad fraud forces thousands of reputable publishers to unintentionally deceive their readers, and as a result, hundreds of millions of unaware consumers have been unconsciously manipulated and compromised. And the scary question is, what are the social implications of ad fraud? How many businesses have been ruined by it, and how many political elections have been distorted?
This said, to fight and solve ad fraud, we must first understand its genesis.
If you are a large advertiser and you want to advertise on, say, a popular publication, it should be simple and straightforward. You get in touch with the publisher, you buy the ad space, and you start your campaign (Graph 1).
Unfortunately, it is not that simple due to the highly complex nature of the current ad ecosystem.
If you are an advertiser and you would like to advertise on a website (publisher), you need to work, at the bare minimum, with the following:
- a payment solution provider (e.g., PayPal)
- a hosting solution provider (e.g., Amazon Web Services)
- an ad tech company (e.g., Codewise) that helps you effectively and efficiently match your ad offer with the right traffic (publisher)
- a media agency that represents at one time, in front of the advertiser, the ad space opportunities of multiple publishers
Thus, the actors (Graph 2) in the ad ecosystem are:
- Many
- With multiple interconnections and not necessarily direct (so an actor does not see all other actors)
- Digital, thus potentially anonymous
- Interacting in real-time (<200 milliseconds)
All this creates fertile conditions for a lack of visibility and transparency and, consequently, fraud. Moreover, for geopolitical reasons, information on actors that operate in certain countries is completely shielded. The existing privacy regulation (e.g., GDPR) is great for protecting privacy — but it often blocks information sharing and, therefore, visibility. The latter can potentially compromise the safety of the entire system.
So, how do we solve ad fraud?
A solid long-term solution is ads and traffic compliance. Unfortunately, compliance remains a very expensive practice because technology (e.g., AI), despite the latest advancements, is still imprecise. Thus bulletproof compliance still requires a great deal of human intervention/correction by extensive teams, making it extremely expensive.
Given the costs associated with it, only large publishers (e.g., Google, Facebook, CNN.com) and large ad tech companies (e.g., Codewise) can afford to invest in compliance to spot bad actors (red actors in Graph 3) in the ad ecosystem and filter them out of the process.
Meanwhile, let’s imagine how this situation works for a small website, say, IowaDaily.com. Contrary to a large publisher, it has a limited budget, so it cannot invest in compliance. Furthermore, IowaDaily.com has small revenue streams and cannot afford to be picky when selecting advertisers. This will likely lead the website to end up working with a malicious advertiser that is apparently advertising milk but, in reality, embeds a virus in the ad. Additionally, imagine that the consumer of the malicious ad on IowaDaily.com works for the government or for a large corporation operating in the critical infrastructure space (e.g., power plants). If the said government organization or company does not have a strict BYOD policy and if, therefore, the consumer of the ad is using his laptop to perform his job in the office, the critical infrastructure—and thus, potentially, millions of lives—could suddenly become at high risk.
However, budgets are not enough to deploy compliance. An advertiser with huge revenue streams (e.g., a transnational FMCG) can definitely invest in compliance, but that alone, when not coupled with simultaneous compliance practices by large ad tech companies and publishers, is not sufficient.
So, the transnational FMCG (Graph 4) may, unconsciously, end up working with an ad tech company that, due to its small scale, cannot invest equally in heavy compliance and will likely unconsciously place the ad on a fraudulent website behind which, instead of a real consumer, there is a bot. Conclusion: the transnational FMCG will pay for clicks that will never be seen by a human but rather by a bot.
So Ad Fraud has serious commercial implications. What about election meddling?
Unfortunately, manipulation of elections is extremely easy. Consider a small fashion blog in France (Graph 5.1), and suppose that France is running elections for its new president in two weeks. The fashion blog has a small budget, so it cannot invest in compliance and has small revenue streams; thus it will not be picky when screening the legitimacy of the advertisers that want to buy its ad space. So the blog could unwittingly end up accepting, in a matter of milliseconds, an ad saying that the next president of France dresses Italian (Graph 5.2).
The audience of the French fashion blog will hardly vote for a candidate that supports the Italian fashion industry instead of the French one.
In addition to compliance what else should be done to solve Ad Fraud?
There is a number of measures that can mitigate or even defeat ad fraud, but most of them will take time and consistent effort to have a visible impact. The top ones I would name are:
First of all, we need to raise awareness of the magnitude of the ad fraud phenomenon, its causes, and effects. Ad fraud is often overlooked or dismissed by policymakers and the public who don’t realize its impact on the global economy and society.
Another important step is the self-regulation of the advertising industry. By creating one global association we could unite not only advertisers but also ad tech platforms, publishers, financial institutions, payment and hosting vendors, and internet providers to define strategies for dealing with ad fraud and setting common ad standards and requirements. This would enable the whole ecosystem to establish a robust framework for data sharing between AdTech platforms, mitigating the complexity of the ecosystem and facilitating faster and more efficient measures against known bad actors. Today, most ad platforms are dealing with fraudsters on their own. A global database of offenders will make their lives a lot harder.
Lawmakers will also need to optimize privacy legislation (e.g., GDPR) by balancing consumer privacy and consumer safety from ad fraud. The existing GDPR regulations require that some of the data is anonymized due to privacy restrictions (like the end users’ IP address), makes it much more difficult to recognize and block fraudulent clicks.
I can also foresee the unification of many fragmented controllers and national ad regulators under one single global body, overseeing the chain of connections in the ad ecosystem. We have already seen successful examples of such global regulators - e.g., the International Telecommunications Union. Today, the ad ecosystem is fully globalized in nature, so the challenge of regulating against ad fraud requires a truly global approach.
And lastly, an ultimate solution to ad fraud could be the creation of a global ad blockchain (graph 6), a distributed ledger of online interactions that unites all actors in the ad ecosystem under a single and open platform, driving transparency, detecting and eliminating fraud nearly instantly. But that solution is still years away from being implemented in a meaningful way.
Any concrete examples of how you assist marketers in fighting fraud through your solutions?
Defeating ad fraud is not easy for the whole digital media industry, let alone single digital marketers who burn their whole budgets on non-human traffic. They experience extremely low campaign performance, very often not being aware of the scale and cause of the problem. Our mission is not only to raise awareness but also to enable advertisers and media buyers to protect their advertising budgets from fraudulent traffic. That’s why we play our part in defeating ad fraud also by offering ad tracking software with built-in anti-fraud tools. Early this year, we released the Anti-Fraud Kit that enables marketers to protect their advertising budgets by instantly detecting fraudulent traffic generated by bots. The invalid traffic is identified based on the predefined list of 10 metrics, such as unrecognized devices, fast and frequently clickers, library robots and more. Precise reports can help advertisers in the chargeback procedures and also give them actionable insights showing which publishers they should stop buying traffic from.
You mentioned that Compliance is key practice in fighting Ad Fraud. How is Compliance structured in your company?
The purpose of the Compliance Team at Codewise is to protect both advertisers and publishers by minimizing the damage caused by fraudulent behaviour (such as malicious offers and fraudulent traffic). For advertisers, the most important part of their business is to buy ad space of highest quality sources, not affected by bot traffic (non-human impressions) or from legitimate sites/applications with safe content. On the other side – publishers require clean advertisements, with no malicious intents (such as phishing or damaging scripts which can affect end user). Compliance stands in between both supply and demand partners, ensuring quality and eliminating any potentially harmful elements of the ecosystem.
These anti-fraud measures proved to successfully maximize the lifetime value for customers by protecting them from wasted budgets on fraudulent traffic. Also, all these efforts help the whole digital advertising ecosystem by filtering unwanted ads.
The structure of Compliance at Codewise consists of business analysts and technical team. Business analysts are responding to ongoing issues and proceeding with investigations. On the second line of defence, there is a technical team which gathers all insights from the analytical team and quickly automates the “investigation & cleaning” process to ensure that such cases will be much easier to detect and eliminate in the future.
On top of that, besides manual and automated checks, Codewise works closely with 3rd party companies specializing in fighting ad-fraud, which adds another layer of defence. This structure is crucial for both Zeropark and Voluum DSP platforms as they directly involve both demand and supply partners.
You’ve recently released new functionalities that make your Voluum platform an ALL IN ONE solution for digital marketers. Tell us more
Yes, 5th of March was another milestone on our way to an ultimate suite for digital marketers. The Offers Marketplace, that confirms Voluum being the most comprehensive, all-in-one tracking and optimizing platform on the market, was built to ease the lives of thousands of advertisers by reducing the number of tools that they use on a daily basis. Now, performance marketers can do almost everything in one place, without the need to leave the Voluum platform.
Advertisers not only can buy traffic through integrated DSP, automate their optimization processes or detect fraud traffic but also find, filter, compare and add 3rd party offers to their account. The tool connects media buyers with offer owners from the various selected top affiliate networks, by giving the option to view and apply for the best performing offers and easily add them to the tracker.
The number of tools aggregated under one product may be overwhelming for those who just started their performance marketing journey. Of course, we are aware that not every marketer has the same needs, thus we diversified our offer to address different demands. Both those marketers who want a reliable and easy to use ad tracker at a competitive price, as well as professionals who seek sophisticated tools, including custom alerting system or configurable time-to-install metrics will now find in Voluum subscription plans tailored to their needs.
Other than AI and resolving ad fraud, what are the other key trends in the ad tech industry?
Definitely, ad restrictions. For understandable reasons that we fully respect and endorse, Google, Facebook and most mainstream web sites are introducing more and more restrictions on what advertisers can advertise. As a result, at least a dozen or more of multibillion industries that provide services and sell their products to billions of people around the world can not advertise on Facebook, Google, or other large websites.
For example?
We are talking about, among others gaming, medication, financial services, student loans or mobile applications. Regardless of what our moral feelings are about these industries, they produce legitimate products and services, the demand of which will never go away. Yet these industries are prevented from the possibility of advertising on mainstream sites. Codewise, via our Ad Exchange network, Zeropark, allows ad offers from these industries to be effectively and efficiently matched with user traffic (i.e. web sites) that allow such ads in the jurisdictions where they are legal. I think this is a very important trend, because due to the increasing number of restrictions, an increasing part of the $300 billion spent on advertising annually will progressively migrate to these niche industry sites.
I also think that platforms like Zeropark can be attractive to those advertisers who are not prevented from advertising on mainstream sites. Why? Because ad spaces on mainstream sites are saturating and as a consequence their cost is levitating. Thus the digital marketer and CMO, rightly more and more measured based on direct business contributions instead of vanity metrics, are considering more and more ad investments on non-mainstream sites to reach their audience at a more efficient ROI. Zeropark is a perfect gateway to this objective.
