Marketecture: Get Smart. Fast.
00:04:32 · Eric Franchi, Ari Paparo
[00:04:32] S2: An expert. Everybody's an expert. My man Tim [00:04:36] S1: is the expert. We got him. We got Tim. Tell us what what does it mean, man. Flow's living under a rock. T Mobile acquired Vistar, which is probably the most well known ad tech company in the digital out of home space, was $600,000,000 reported price. And what does it mean, Tim? Give us give us your hot take. Just let's So start it
00:04:57 · Tim Rowe
[00:04:57] S3: what does it mean? I thought a lot about this in in preparing for today's conversation. Initially, I thought this is T Mobile's way of creating defensible moat around some of the investments that they already have going on. Obviously, Eric, the the acquisition of Octopus was two years ago almost now at this point. Yeah. They started in the fall of two thousand twenty three to make a serious investment and play into retail media. I know that they were having large conversations about the hardware associated with that and actually got to spend some time with the T Mobile ad sales team last February at their sales kickoff. And we talked about things like first party data and connectivity. And what was interesting was when we talked about first party data, there was obviously the privacy limitation between sharing the actual T Mobile user data with a ad application. But one of the exciting things that the team shared then was how they were starting to pilot the T Mobile and this is one of the notes here I see. In prepping, they started to pilot T Mobile connectivity to power the digital signage infrastructure. And that stood out as interesting, and I think that that's one of the the interesting details on this deal is Vistar... Because none of this existed, Vistar created an SSP, a DSP, and the hardware themselves. So I think that T Mobile might be looking at it from a few different angles. Obviously, the the the plug into the install base of advertiser of Vistar, but then also there's a huge ecosystem of hardware that needs connectivity to monitor ads.
00:06:28 · Ari Paparo, Tim Rowe, Eric Franchi
[00:06:28] S1: Yeah. I think unit economics are a big part of this. But before we dive into that, let's do some refreshers for those of us... For the listeners who aren't experts at the There's so much. 99% of listeners. What was Octopus? What is Octopus? [00:06:40] S3: I would actually love to defer the question to to Eric. [00:06:43] S2: Eric, you're an investor in [00:06:45] S3: Octopus. Right? Invested. [00:06:46] S2: Yeah. Yeah. We we were an early investor in Octopus. So if you have ever been in a Uber or Lyft in a major city and there was a tablet behind the headrest of the passenger seat, that's Octopus. They basically pioneered this idea of like back of the car video gaming content advertising. And T Mobile acquired them to Tim's point a couple years ago because they have a strategy. You know, I don't even know what what what you would call it, you know, sort of around digital out of home, but, you know, kinda like unique places, unique screens, unique formats. They've done a great job with it, by the way. It has grown a top. [00:07:25] S1: That's great. They don't do top of cab, though. That's a different sort of thing. [00:07:29] S2: No. Nobody looks at that stuff. You... You're inside. You're captive. [00:07:32] S1: Like the top of cab business, but let's let's move on from that. So, Tim, what does Vistar do?
00:07:32 · Ari Paparo, Tim Rowe
[00:07:32] S1: Like the top of cab business, but let's let's move on from that. So, Tim, what does Vistar do? [00:07:37] S3: So Vistar is a dedicated digital out of home DSP. And they've done a great job of building really the the the requisite sales motion to advocate for digital out of home, the networks that are on the platform. And that's fundamentally what they are, a DSP, but also functioning as an SSP, having to build that connective tissue and the hardware associated. [00:07:59] S1: You said just a moment ago they had screens too. Are they... They've physically owned screens or rent screens? [00:08:05] S3: They don't own any screens. It's the... Rather the networks. The publishers plugging into to create the supply available on the platform. [00:08:13] S1: Right. So you have you have a retail location. They have a screen that's provided by another party, and then that also is monetized by another party, you know, to an ad network for lack of a better word. And then Vistar is buying into that. Now does Vistar also have an SSP, or is it only, like, an SSP to the extent their DSP can bid? [00:08:31] S3: That's a good question. I believe it's to the extent that their DSP can bid, but I would let the audience correct me if that's incorrect. [00:08:39] S1: Yeah. I kinda think that a DSP, like, a a Trade Desk or MediaMath type DSP can buy from Vistar, but probably... You know, this has always been a very small amount of volume.
00:08:39 · Ari Paparo, Eric Franchi, Tim Rowe
[00:08:39] S1: Yeah. I kinda think that a DSP, like, a a Trade Desk or MediaMath type DSP can buy from Vistar, but probably... You know, this has always been a very small amount of volume. [00:08:49] S2: Yeah. Yeah. I mean, they... All of the DSPs at this point have, like, the omnichannel capabilities. And then to your point, I think it's, you know, very de minimis part of this. [00:08:58] S1: Okay. Cool. I'm really interested in the unit economics. I mentioned this earlier. Because if you think about an individual screen, we're not talking about Times Square here. We're talking about a Wawa that has an individual screen above the cash register. Right? The return on investment of that screen is largely a function of the cost of the screen, physical... How much does it cost to buy the screen, the installation cost because someone has to go in there, turn it on, screw it in, the bandwidth to receive the content and the ads, the mixture of fixed and variable costs. Right? [00:09:33] S3: And all [00:09:33] S1: those... And the maintenance, it breaks. It goes down. Someone has to come out and check it out. And all of those things, although they're kinda boring, they're outside of, like, us fancy programmatic speed of light people. Right? Those are things that a telecom can do. They have people in vans who go to places. Right? They go and buy, you know, acres of digital screens, not a couple screens. So how much do we think that was a big factor here?
00:09:33 · Ari Paparo, Tim Rowe
[00:09:33] S1: those... And the maintenance, it breaks. It goes down. Someone has to come out and check it out. And all of those things, although they're kinda boring, they're outside of, like, us fancy programmatic speed of light people. Right? Those are things that a telecom can do. They have people in vans who go to places. Right? They go and buy, you know, acres of digital screens, not a couple screens. So how much do we think that was a big factor here? [00:10:00] S3: It seems like... And I don't know necessarily on the hardware side, but I think that I think that that's maybe what's most interesting about the deal, at least from my perspective, is how can T Mobile unlock synergies between the things that they were already doing and what Vistar does? Right? They were going out and having to source their own hardware, build an ad sales team, build this technology. Now they own it, and it's the biggest piece of the pie. So I think that it it creates that moat for them, but then also obviously they can unlock the the unit economics that you just described. [00:10:31] S1: They also have team... 5,000 or so T Mobile stores. They can promote their products. They're one of the largest advertisers in The US. Yeah.