The Ad Tech Middle with First Party Capital General Partners Kevin Flood, Rich Ashton, and Ciarán O'Kane

Introductions And Tim’s Background

Tim Rowe, Host, State of Streaming Podcast 0:00

Welcome back to the State of Streaming Podcast. I'm your host, Tim Rowe, and this week you'll be hearing a replay of my appearance on the First Party Capital podcast. First Party Capital is a really interesting venture capital fund based in the UK. I chat with three of the general partners there, Kevin, Rich, and Ciarán, all about their investment thesis, what they see working in streaming TV, what they see working in ad tech, where they believe the puck is going, and ultimately what that means for you. Enjoy.

Rich Ashton 0:28

Hello, everybody, and welcome back to another episode of the FPC Podcast. It's been a few weeks since we uh last got together, but we've got a great guest this week in Tim Rowe, uh, who is from State of Streaming. Um, we recently got to know Tim through his coverage of First Party Capital's corporate innovation model uh announcement about two months ago, which happened to coincide with an interesting product announcement from Trade Desk as well. Tim, great to great to have you on. Um, in case our listeners are not yet familiar with you, it'd be great if you could just give us a quick intro on your background, um, and then we can get straight into your perspective on the key subjects of the day around the AdSech ecosystem.

Tim Rowe, Host, State of Streaming Podcast 1:09

Rich, great to be here. Thanks for having me. Uh, Stator Streaming is really the superstore for the streaming TV obsessed. So it's dedicated, unique news coverage. Really, we think of ourselves as like the pattern recognition layer on top of the news, which was how FPC hit our radar a few weeks ago. And we are really dedicated to bringing that perspective to market in a way that's community driven. We just launched a Discord. Our core pillar output each month is called the Unified Streaming Power Index, where we stack rank all of the streaming apps against one another based on estimated addressable household reach and some other parameters that matter to buyers. So that's really where we're focused on existing in the in the space and excited to be here.

Rich Ashton 1:54

Yeah, great. Thank you very much. And it's been you know, it's obviously been an interesting couple of weeks since we last spoke, um, particularly with regards to, I guess, the media buying platforms, uh, you know, SSPs and DSPs continuing to converge. Um, some up and down news uh for the trade desk. But I would love to you know start with your perspective on where the industry is heading right now. In your original piece, uh, which we can link to in the show notes, you have this quite interesting almost parallel between the more open source, modular uh version of the internet and the more closed environment, basically integrated trade desk style platforms. So, yeah, we'd love to just start with that, how you see that evolving.

First-Party Data Shapes The Stack

Tim Rowe, Host, State of Streaming Podcast 2:37

I think there's just a really clear narrative forming around brands and companies who have access to first-party data being the lifeblood of really what they do next, everything from supply chain planning and forecasting down to how the media is executed. That that really is fundamental to I think how brands and companies are making decisions. So then that decision begets another decision, which is how do I want to approach my ad tech infrastructure? Is that something that I want to build, owned, and operated? Is that something that I want to outsource to a partner? Is it something that I need to build a layer on top of? And I don't know that there's a right answer yet, but keeping that first-party data really at the center, that is a trend that we're observing.

Rich Ashton 3:20

Yeah, makes a ton of sense.

Index Cloud And Bedrock Breakthrough

Rich Ashton 3:22

And Kev Ciarán, it's been an exciting week for the FPC portfolio and the FPC family with Index Exchange and Bedrock announcing uh the launch of the index cloud. And with that, Bedrock being the first containerized DSP fed to be doing all of its uh sort of buying decisioning within the index cloud. So that's been a huge step forward and hopefully a pretty transformational update for bedrock and probably the start of a whole new trend of containerized DSPs living within uh you know SSPs. But yeah, Kev, maybe your take on that and how that kind of feeds into the narrative that Tim uh has opened up earlier on a couple of months ago.

Kevin Flood 3:59

Yeah, that's it. I think um uh great news for Bedrock and the team over there, and and congratulations to the Bedrock team and and the index team on uh on what is uh um really kind of cutting edge partnership. Um and uh and I'm sure just the beginning of a big transformation really in the in the business model and and uh integration model across the industry. Um I think this has been coming for a few years, you know, and and you know, the the work behind the scenes um you know has uh has been something that you know has has stretched out over a few iterations. And and I think fundamentally it all goes back to the shifting um uh source of value across the industry, right? So so the value is not uh necessarily just standing up a huge infrastructure, it's not really in uh kind of features and point solutions anymore. Um, you know, software has lost its moat somewhat because of AI um and uh and certainly the software underpinning a lot of the advertising industry has been standardized. You know, OpenRTB and and uh and lots of other different standards have been around for a long time now. And so albeit it might cost millions and millions of dollars to get to table stakes, um, you know, that there's very little differentiation even at that point when you've invested five, ten million. So um so I think the um the the trend of the future is that value has shifted um away from just abtech software towards proprietary first party data or privileged access to second or third party data. Um it's shifted towards finance because this industry is increasingly, you know, tighter margins, stretch cash flow, access to finance and access to cheaper capital is is is a is a real USP, you know, becoming the the bank effectively. Um and then and then the values also shifted to being able to deploy not just large-scale infrastructure, but infrastructure that's kind of um minimizing data leakage, uh minimizing carbon output, you know, all of these secondary um uh requirements now that the procurement teams in big advertisers, big agencies are looking for. Um and so what what I think has happened recently is software development cycles have accelerated, and there's a new generation of companies now uh that are able to start from scratch, start to build for a cloud native world, for a first-party data-centric world, for a world where it's not just about cookies, it's about multiple signals, it's about multiple channels. Um and uh and and they're actually probably able to be more aggressive with business models by uh making the infrastructure cheaper and getting closer to the supply chain. And so for the first time in a long time, I think all the big incumbents are being challenged. You know, it kind of mirrors it mirrors what's happening in search with with the AI companies challenging Google um on a more micro level. Uh the big incumbent ad tech platforms are probably now facing challenges from uh from the faster moving uh edge of the industry and all the innovative startups. And kudos to Index as a more established company for recognizing that years ago and and and moving towards this kind of cloud infrastructure uh layer for advertising rather than actually just selling, you know, taking a margin on media. You know, they're they're they're starting to build out an ecosystem type uh setup that's hugely aligned with Bedrock. Obviously, Bedrock uh are uh picking up where Beeswax and others left off. They're uh a composable layer to support the independent ecosystem. Um, and and and the two of them have kind of found a an alignment of of minds there, and uh it's a great announcement.

Rich Ashton 8:00

And it seems like one of the areas where the technical capability is most applicable is streaming TV, live TV, big events like you know, sports matches, where you have suddenly hundreds of thousands, potentially millions of concurrent viewers hitting an ad start at the same time. Tim, it's something you snatched on in your article. Uh, but yeah, we would love to get in your view on how you're seeing the technology around advertising and in sort of the live streaming environment shift and why the like subindex and bedrock are at the forefront of that.

Live Sports And Real-Time Ad Serving

Tim Rowe, Host, State of Streaming Podcast 8:30

I think that sports are definitely the the key driver. It's the number one ask from advertisers. I've got to be on sports. How can I be on sports? And sort of a misnomer with streaming is that a lot of the sports viewership on streaming is actually on rebroadcast transmissions available via streaming apps. So I think just fundamentally understanding how is the content getting onto the streaming app, that's important for both an advertiser's perspective as a consumer, understanding that. But then from a from an advertising needs standpoint, what do I need to be able to actually deploy advertising in the fourth quarter of a game or maybe in extra time in overtime when those that's inventory that's outside of the core programming of that sporting event? So sports are definitely the driver, I think, of a lot of the ad tech innovation in the space. And especially live sport, that's a that's a it's a gap that streaming advertising has yet to really solve. So I think that Bedrock and this announcement are perfectly positioned to close some of the that gap.

Rich Ashton 9:35

Yes, definitely. Um the live sport is one of those few sort of real premium uh large-scale environments where I think the viewers are very happy to be and keen to be and then want to be there live uh rather than catching up afterwards. Here,

Margin Compression Changes The Game

Rich Ashton 9:49

on one of the other interesting angles that's come out on this sort of topic was from our friend Brian Weezer, Madison and Wall. Uh, you shared his article with us internally. Why don't you tell the audience a bit about that? Because I think Brian's point wasn't that it's it's not just sort of competition between ad tech companies, but actually that the the the sort of margin potential is compressing uh with the likes of index and bedrock operating in a much more single-digit sort of take rate environment. Uh, from your conversations with the industry, how are you seeing that shift happening?

Ciarán O’Kane 10:16

Uh uh like margin is the one thing that that drives this industry. Money is everything in this industry. So I love the way people in New York who pretend that they're you know they they're in Silicon Valley don't understand that. The reality is programmatic exists because agencies were getting hammered on margin retention by ad networks or brands were so working media was like minuscule versus what what uh specific media who are now violent, DSP, were taking. I think like 98% was the record margin take. Maybe I'm wrong with that, but um well, they had lots of parties, so I assume they had a lot of money. Um so if you think about what's happening right now, right? Like the spat between uh publicism and um and the trade desk recently about like you know margin retention within the within the DSP, it really wasn't about like you know, the good of the advertisers about two economic models coming up against each other, right? One is uh a DSP which is trying to make as much money as possible, and the other is the uh principal media buying, which is uh obviously a new revenue stream for a very, very lucrative revenue stream for agencies, whole costs. So like it would stand to like the reality is a lot a lot of ad tech uh there's a lot of ad tech bloat in the middle taking money, right? Uh if you're losing like 40 or 50p in a pound, someone is getting done, uh generally probably the advertiser and the publisher, but someone's getting done on that, like so I think Brian's point was the DSPs and SSPs becoming blown into what if you if you listen to Rajiv from Pub um Pomadic, his recent interview on market texture, he barely talks about DSPs. As if they don't exist, it's a weird like thing, like you know, he doesn't even talk about them. They're like it's just you know Magnite as well, they have their own DSP or their own their own demand activation. Index of in fairness, trying to stay close to the publisher, and Bedrock is that sort of happy in-between. And I think that bedrock is this is more about what bedrock can do in terms of margin retention for ad networks and uh and principal media buying solutions and agencies. We like that is gonna be a huge, huge thing. Don't get me wrong, it's the modularity uh and it's not the agentic stuff that that they're building for sure, but the reality is a lot of the adoption is gonna be around okay, how do I increase my take rate to 10-15% uh for every dollar, every pound, every euro, um uh every one, if you will, but they're not walking in Japan or in in China, obviously, because China is a close-off market. That's another day, that's another podcast. Uh so yeah, I look margin is hugely uh is gonna be huge important in this in the in the program. I as those lines blow. But the beautiful thing about this is that index can still remain true to their publisher roots, and bedrock can work within the index uh um container and sort of bring down the take rate. So, like we've like this is gonna be a big issue, hi. I continue like if you think about if you think about the way the market's going, margin's gonna be a huge issue, right? And it's inevitable that margin compression will happen, and whoever can do that will win business. I don't know if you agree with that, but like uh that's my take.

Why FPC Invested In Bedrock

Tim Rowe, Host, State of Streaming Podcast 13:52

It's easy for state of streaming to look at the news and say, hey, this is what we see is going on, but y'all had to be right about it. What led you to having the conviction about making the investments, especially in bedrock, so early that it's materialized today?

Rich Ashton 14:08

Yeah, it's a great question. Thanks. I appreciate it. Uh, as you say, it's uh it's one thing kind of looking at the news and going, oh, these are some interesting trends, which which I think we're pretty good at, but it's also another thing to actually be kind of forming and creating those trends and building these companies from scratch in in many occasions, as we did with with incubating bedrock. Ciarán, I feel like you've got an interesting uh view on this one.

Ciarán O’Kane 14:27

Yeah, and look, it's it's more a case of being able to cater for the ad tech middle, right? So if you think about you know uh large agencies or FMCGs, um you know, they want scale, they want global scale. Uh so like a trade desk or an Amazon DSP or DV360 does a great job on that. But then there are a lot of businesses that are ad-network focused or built on curation, or even like the rising tide of like uh principal media buying, that sort of are at the bleeding edge and they require something more custom or they're looking for something a little bit more uh like a framework to build on top of. And uh Bedrock for all for us always represented that opportunity. And if you think about the three sort of companies that kind of led the way in terms of building a technology layer for for great companies like the likes of MIQ and others to build on top of Ipen Web, uh Beastwax and App Nexus, you know, there there really was a void there, there really was a vacuum, and we still there's still no, there still is that 20% bleeding out in the industry that requires something different. Um I think that the thing about Bedrock is that the fact that they've built something that is what we call composable, is that they can it can run anywhere, right? So you know the the index relationship is a good instance of that. The ability to run their software within the container of of a of a uh index's cloud infrastructure just shows you what is possible now, right? And that actually is hugely important because you know an instance like that drives down the margin to take rate, it also decreases the latency within the the the the time from bid to actual um winning the bid or or or or or actually being involved in the auction. I think like it's like two milliseconds is actually like completely obliterated the the the time uh in the of the auction. That's hugely important in terms of like winning the bid and serving the ad. And I don't know if you guys have seen like something like Business Insider, which is a great website in many ways. If you scroll down, it's ads are hanging all the time. That's latency issues, right? That's the hop from DSP to SSP to publisher. Now, what what Bedrock does by living inside index is able to win those auctions and serve those ads. So performance starts to increase, costs come down, and I think that's what's going to happen in programmatic. You're seeing it already, right? DSPs are kind of like shrinking the the the supply chain, you know, um uh uh trade desk with open path, the SSP side you've got uh you know uh Pomatic and Equitive and uh um Magnite running sort of their own full platform piece. Um, but the bedrock innovation is huge, and we just think it's a it's a it's a leap forward and it helps the ad tech middle. So that's sort of the that was the thinking behind the investment.

Cloud-Native Ad Tech And Cloud Taxes

Rich Ashton 17:26

I think there's an interesting strand here around the cloud computing angle and how ad tech is increasingly kind of getting distribution through those cloud partners. Our first investment out of our new fund is into a comedy called Audiences, which is uh you know a first-party data kind of activation and modeling business. And the the great insight that they had was why are the incumbents, like LiveRamp and others, asking big brands to trust them with you know millions and millions and rows of very sensitive, very valuable data. There's obviously a privacy risk, there's a cybersecurity risk, and then ultimately there's a business model kind of challenge where those brands you know give up all that data and then effectively have to pay uh to get it out and actually activate it, almost a tax on using their own data. Whereas the guys at audience has said, you know what, we we can build an application that lives inside Azure or Snowflake or Databricks, whatever it might be, and literally do all of the same thing uh inside your existing cloud infrastructure. So there's no kind of almost a usage-based fee for the brand, um, but equally for audiences themselves, they literally have no server costs. So it's a it's a brilliant business model and a really interesting insight. So I think, yeah, for us also that kind of more integration into the major cloud computing companies is is is a natural one and a smart one. And on that note, I was having a very interesting chat with one of our investors this week, who's a chief product officer at a very large media business. And he said something which really uh was was fascinating. And he said that I get pitched by startups all the time. Clearly, as a very, very large media business, our AWS costs are infinitely more attractive than the AWS costs for those startups. And they might pitch me up, you know, 40 grand a month kind of you know engagement or license fee or whatever it might be. And he said the thing is I know that 10k, 20k, maybe even 30k of that 40 is basically paying you know Google or Amazon credits, and that that's a poor use of my budget. I'd rather pay them 20, tell them to containerize their kind of software in my cloud, and then we're kind of both winning. That's really interesting.

Ciarán O’Kane 19:23

Um that's that's a that's a huge, that's a huge issue that never gets discussed in in ad tech. The the the hidden ad uh cloud taxes basically that Google, Microsoft, and Amazon heap on the on the industry, and then they le like Amazon, particularly Amazon and Google, leverage that then to kind of fuel their their own sort of ad business. Um you know the thing that's interesting about the index news is that they're moving into a situation where they can leverage their own cloud infrastructure to to help uh other businesses winning. I think I think Rich is right, it's really interesting. I mean, the other thing that the other thing that's interesting about our portfolio is we are picks and shovels guys, right? Like that's what we are, like we dig ditches. Um we don't dig the ditches, sorry, we create the shovels in the for the other people to dig the ditches. So you know, like the companies that are doing well in our portfolio are the ones that are interesting from a first-party data perspective, from an infrastructure perspective, from a data perspective, from a compliance perspective, you know, really like that's where I think the cool stuff in ad tech is becoming is bloody boring. It's not the sexy AI stuff or you know, the latest sort of format, or you know, we're we're just the guys behind the guys behind the guys, basically. That's what we want to be.

Rich Ashton 20:43

Fair enough. Yeah, fixing shovels is a good way to do it. I was looking for a better analogy at some point, and I came up with a nice one, which is in the kind of motorsports world, you've got obviously like the driver and the teams, uh, but then actually underneath that, you've got this very boring company no one's ever heard of that build the chassis and the tires, and they just want to get into as many hands as possible. They don't necessarily care about being Ferrari or Lewis Hamilton, but you've never heard of the insert company name who I've already forgotten. But it's uh it's a similar sort of analogy in terms of generally speaking, we're trying to back those companies that are that sort of, yeah, as you say, data infrastructure.

Ciarán O’Kane 21:15

Are you sure we're not the the window washers, no? Um or the really good-looking lads that carry the scorecards around before the cars go out. We all have a job to do. Could be.

Rich Ashton 21:28

Could be. Um, I think I was mid-flow, Ciarán. You cut me off, but I mean, look, this is uh a very very small part of obviously this big cloud computing company's business. But it struck me as odd. I was like, they must realize that effectively there's a way of startups circumnavigating the kind of cloud fee in this instance by sort of saying, well, we'll just run our app or whatever in in your cloud. Um so yeah, I mean that's obviously a very small, uh, very small part of their overall business. But I wonder if there's a way, if there's any way that they can somehow block that in the future, saying, Hold on, actually, really, you should have a separate account pay for these. Credit separately.

Tim Rowe, Host, State of Streaming Podcast 22:01

It's an interesting trend. It's something that we just wrote about recently, which was taking a look at how much of the streaming universe actually runs on AWS and some estimates, but but but some fodder for the conversation. It looks like this year, 2026, uh AWS will make three times the margin on AI services versus traditional compute. 40% of the year-over-year growth coming from AI and machine learning versus the traditional media vertical. So it is an unspoken theme that we're certainly interested in covering, which is what's the influence of the relationship between the cloud that is the underpinning to so much of the ad tech that we're talking about.

Rich Ashton 22:45

Yeah, and we're obviously seeing uh similar things, I think, in the kind of the large language model versions, uh, the kind of free or $20 a month version being obviously very, very different in sort of performance and quality to the more enterprise grade models, which uh obviously do chew through a hell of a lot of compute. I was about to start talking about another startup we were looking at, but that's probably a bit uh irrelevant to this particular topic. But yeah, certainly an interesting kind of angle there around the convergence of AI and cloud compute, and uh those big players obviously being in a in a pretty good spot.

Tim Rowe, Host, State of Streaming Podcast 23:20

There's

Attention Metrics With Lumen And Netflix

Tim Rowe, Host, State of Streaming Podcast 23:21

another startup in your portfolio that I'm curious about. I think it kind of connects some of the dots here. Lumen. Lumen, a recent announcement with Netflix in the UK tying together the measurement piece of this. Can you talk about that?

Ciarán O’Kane 23:35

Yeah, yeah.

Rich Ashton 23:35

Um, do you want to say this one, Karen?

Ciarán O’Kane 23:37

Yeah, Lumen's is sort of uh another interesting business in the portfolio. It's it's a first party uh um data company that uh has built a attention business or attention signal uh on its own hardware. So it works with um a large like a huge scale panel to build uh attention models for for customers. So it works with DVIS, Amazon, Netflix. So Netflix are using it as a means to kind of measure the attention that it generates uh uh for from advertising, uh, which is becoming a very, very important metric uh in the space. So, you know, um again, it goes back to our narrative around you know what will what will have some value, what will have some utility in the space. It's companies like this. And uh like Lumen is almost like an ingredients company, it builds these attention solutions for big scale customers. Uh I you know, T Vision got bought there recently by um by Violet. Um but you know, that was I I believe they had uh cameras and and with tracking sort of like uh uh TV viewing on terrestrial. Um Lumen's technology can work across the CTV landscape. So it works with Prime, it works with Netflix. So that's sort of the type of company. And it's it's it's sort of the leader in that space. I mean, it does have competitive uh competitors like Adley and a few others, but uh Lumen has its own sort of unique first party data. It that's where it generates all the value, nobody can do what it can do. Um, and where that's going is you know, you're getting a lot more omni-channel-based stuff, which attention is like going to be applied to that. So, like it's doing stuff with Meta and Google. So, yeah, it's it's it's a pretty exciting uh um space. Um, yeah, we're like it's one of our biggest position portfolio and it's it's growing really, really fast.

Rich Ashton 25:34

Yeah, and I think some of the product kind of uh iterations and partnerships they're putting in place are very exciting as well. And moving just from um you know attention as a sort of media buying currency to actually linking that to outcomes, be it brand lift or be it sales. So there's some, I'm sure will be some interesting announcements in the coming months around that. But the it makes a lot of sense. It's like, you know, not all attention is is created equal. Uh just because something got five seconds of attention doesn't necessarily mean that it was equal to this other thing that got five seconds of attention. And so what they're really trying to build out is this like working backwards from whatever the KPI is, a sale or a certain incremental lift in in brand awareness, you know, how much attention do you actually need and on which channels? And we can therefore do that sort of predictive modeling in advance of you running the campaign to say, right, here's where you should be placing your media budgets uh to get to those kind of outcomes. So yeah, very interesting business. Uh we are yeah, remain very excited about that one. It's been uh yeah, one of the bigger uh bets in over the last three or four years. And uh yeah, obviously they've been one of the real sort of long-term pioneers of the importance of attention in advertising. Uh Kev, sorry, I think it looked like you were about to jump in as well, though. Is there anything you wanted to add on Lumen or anything else before we wrap?

Kevin Flood 26:44

No, no, don't no monologue from me, mate. I'll uh I'll keep us on time today.

Rich Ashton 26:48

Yeah, I think you got it in early actually on this one. That was good. Good opening.

Kevin Flood 26:51

I did smashed it, yeah.

Ciarán O’Kane 26:52

Yeah, Kevin likes to do like a little soliloquy uh experience, probably. We gotta get the yeah, the monologue open. Yeah, he is he's a monologue king.

Kevin Flood 27:02

Yeah.

Ciarán O’Kane 27:03

Thanks, Tim.

Kevin Flood 27:04

Well my thoughts.

Rich Ashton 27:06

Really appreciate uh joining us today, Tim. And yeah, thank you for the re the recent coverage uh and your publication.

Ciarán O’Kane 27:11

It was very kind of you, Tim. I have to say, uh, it kind of uh took us a wee bit uh off guard because uh think that we were competing with the trade desk from the start. But like it was I I see your point. It was we are we are offering something that is unique to a very different from a very, very um I would say innovative segment of of the ecosystem, right? So Bedrock definitely occupies that sort of gap. Um yeah, we're we're very excited by it, to be honest. They're they're doing great thing, and obviously they're they're in Miami this week getting you know schmoozed by all the various big uh uh uh retail media networks and media businesses and ad tech businesses. So that's quite exciting. Quite exciting indeed.

Wrap Up And Upcoming Events

Rich Ashton 27:57

Absolutely. Uh for those of you listening in, thank you very much for tuning in again. Um, obviously, only two months or so went after Cannes, so we look forward to seeing you a lot of down a lot of you down there. And hopefully before that, um at some upcoming industry events. Uh, watch the space for a FPC spotlight event, which will hopefully be uh rolling out towards the end of May as well. Uh potentially bringing together a few of our interesting digital out of home assets for a discussion around that part of the market. Thanks all, everybody, and we'll see you next time.

Intro 28:29

The FPC podcast, where the worlds of finance and ad tech collide. The content in this podcast is for informational purposes only and should not be considered as investment advice. The speakers may hold positions in the companies mentioned.