Why Berlin’s ad tech startup Applift grew to 200 employees in 3.5 years

You may have heard of the Berlin Airlift. But how about the Berlin Applift?

It’s not easy to get a return on your investment when you’re trying to promote a game or an app across a ton of ad networks in mobile. But Applift exists to help those advertisers (who are often game developers) by building technology tools for them to optimize their user acquisition campaigns and get the maximum return out of their ad spending.

The company’s self-serve platform aims to put the right ads in front of the right players at the right time. And it helps companies get hundreds of thousands of app installs across iOS and Android in a day, when it works right.

The Berlin-based company, spun out of the Hitfox Group, has adapted over time, moving beyond games to promoting all kinds of apps via its programmatic ad technology. With rivals such as Facebook and Google, Applift creates an alternative, a neutral party for mobile user acquisition with transparency. The company works with dozens of ad exchanges in 150 countries.

I interviewed Tim Koschella, CEO of Applift, at the Quo Vadis game conference in Berlin. Here’s an edited transcript of our interview.

Disclosure: The organizers of Quo Vadis paid my way to Berlin. Our coverage remains objective.

Tim Koschella: We started in 2012 as a game-focused CPI network to deliver app installs for game advertisers. The mobile gaming landscape was completely different. There were no super-big hits. The companies that are big today weren’t big back then. That was our starting point. Overall we’re still relatively young, three and a half years old.

We’ve evolved to go beyond games. We’re now also covering all types of non-game apps as advertisers. We expanded internationally. Early on we opened offices in San Francisco and Seoul, a couple of months after founding. Recently, last May, we bought a company in India that has offices in India and Singapore.

We believe the advertising market needs focused specialists – less ad networks, more players that either play on the demand or the supply side. We’re focused on the demand side, on the advertiser’s needs. We’re building tools for them to optimize campaigns and get the maximum ROI out of their advertising spend out of all the fragmented ad formats and media channels out there.

GamesBeat: Do you also do mediation?

Koschella: We invested in a company that had a mediation product for native ads on the supply side. They mediate SDKs from Facebook, Yahoo, and others. They have their own native ads exchange as well. That’s company called PubNative. But that’s more just an investment. AppLift only sits on the advertiser’s side, the demand side. I wouldn’t call it mediation, because mediation is usually used on the supply side. But aggregation of the different advertising channels and RTB optimization layout that allows advertisers to yield their goals across each of the inventory sources they’re using.

We’ll have a major release in June. We’re also hosting a conference in Berlin, the FirstScreen conference. More PR around the conference is going out later this week or the beginning of next week. We’ll have about 800 or so participants. The conference will be around mobile advertising, mobile programmatic, catering to anyone in the app industry who wants to learn more.

As part of the conference we’ll also announce a release on the product side that we think is pretty revolutionary. It’s solving a problem in the app industry that we currently think is not properly addressed.

Advertisers have to work with a very fragmented ecosystem. They usually have one attribution or tracking tool. This is only going post-click. It only allows the advertiser to optimize after they’ve already received the traffic to evaluate. Business intelligence-wise, you can only go in after you’ve done it and decide whether you want to do it in the future. What we’re delivering is a layer on top that allows the advertiser to optimize across all these channels.

GamesBeat: Who are your competitors now?

Koschella: There are two ways to think about that. One way is to think budgets. Who does work with advertisers we work with, but has a different product or approach? There I’d say Google is a competitor. A few of the CPI networks and DSPs in the market that are focused on performance. We only consider companies potential competition if they’re mobile and performance-focused.

GamesBeat: To what degree are games still a part of your business?

Koschella: It’s more than half the business. You can look at the numbers from DigitDay, where they publish these stats. Our revenue split is in line with where the market stands in between games and other apps.

GamesBeat: What’s your own background?

Koschella: I founded AppLift in 2012. I had been in the game industry before, doing advertising for browser games and PC games in the free-to-play area. All the games that were around before the mobile free-to-play industry took off. Germany had been a strong country in the free-to-play browser scene. I saw, in 2012, that mobile would be the major platform for everything in casual gaming, as well as for mid-core games, especially free-to-play games. That was the starting point for thinking about the business model. Eventually I was convinced to take the next step.

GamesBeat: What was the Hitfox releationship? Did you spin out of that?

Koschella: AppLift started within the ecosystem, I would say, of Hitfox Group. I’m also a founder of Hitfox Group. There are three main founders. I was the advertising guy at Hitfox. That’s why I chose to start AppLift and eventually stay with AppLift and grow the business. It’s been a phenomenal success, which is rare in the startup ecosystem, to have such a fast-growing industry and a fast-growing business in such a short time frame.

GamesBeat: How many people are at AppLift now?

Koschella: More than 200. About half of them are in Berlin and the other half are spread across our international offices.

GamesBeat: That’s fast growth in three and a half years.

Koschella: It’s been a good ride, a lot of fun to build.

GamesBeat: What you’re announcing soon, has that been in the works a long time?

Koschella: We acquired a company called Bitstock Technologies back in May of last year. When we were acquiring them, we had a clear vision in mind that we’d been working on for a while, but still had a lot of work to be done and things to be built in order to put it together. Buying Bitstock was one of the puzzle pieces we needed. With them we’re now building the platform. That’s what we’ll release in the middle of the year.

GamesBeat: What sort of insights have you collected at your level, looking out at the industry?

Koschella: I’m convinced that, in the advertising industry, the players in the ecosystem need to align either with the publisher or with the advertiser. The classic network model is broken. If you’re a network, you try to maximize fill rates and ECPMs for publishers. At the same time you try to maximize ROI or installs for the advertiser. This creates a conflict. You’re an advocate for both sides.

A more healthy industry is one where there are specialized demand-focused platforms that allow advertisers to buy inventory across all the different ad formats and channels, and then supply-focused players who allow publishers to monetize with all the possible formats and channels. Meaning selling inventory through RTB — this is what most of the mediation layers do, selling through RTB – and selling directly.

That’s happening. It’s a divide that’s going to, in two or three years, be very clear. The industry’s not yet there, for a lot of reasons. There’s always new innovation. Whenever something new pops up, the standards aren’t established. Think about RTB. There’s no real RTB standard for, say, rewarded video ads, which is a big part of the industry. It’s not technically standardized enough to make it tradable in an open ecosystem.

GamesBeat: Does that mean that more companies will either rise or fall, given the trend?

Koschella: At some point companies will have to make a choice, whether they want to align with advertisers or publishers. That’s more the question. Companies that don’t make the choice might face too much pressure in the long run. Some of them may divide or sell part of their business to focus on one side.

GamesBeat: I’ve noticed some activity like that. Companies have acquired companies, sold off what they’ve acquired, and then acquired something else instead.

Koschella: That’s what you end up seeing in industries that have sprung up very quickly. The industry gets into a certain order. Eventually companies find their place. Some companies realize they need to join a bigger player because they can’t survive on their own. Others realize that part of what they’re doing is aligned with their vision, but other parts aren’t. They need to divide and sell off parts of their business. We’ve seen that a lot in advertising and we’ll continue to see it over the next two or three years.

GamesBeat: You have some very big companies with a presence in this space — Facebook, Google. I don’t know if that affects you or your strategies.

Koschella: We’re 100 percent outside of Facebook. We don’t interact with the Facebook ecosystem, at least at this point.

GamesBeat: How big is that area?

Koschella: Outside of Facebook? It’s pretty big. For everything that happens on the Facebook inventory, on the Facebook side, sure, they own that. But everything that happens outside—they don’t have as dominant a place as they might appear to. They’re making a lot of effort to become more dominant, more monopolistic.

I haven’t seen a strong adoption of Facebook’s attribution solution. They pushed it out half a year, a year ago, entirely for free, whereas other attribution vendors are charging. You’d expect a lot of people to adapt it and that hasn’t happened. Specialized point solutions can be better than the big ecosystem players at delivering value for one specific use case or one specific part of the value chain.

GamesBeat: Maybe there’s a need for some kind of neutral party in the system.

Koschella: Not only for attribution, but for many parts of the value chain. Neutrality is key. For me it comes back to incentive alignment. Are you aligned with your customers? Every business model where you’re not aligned with your customers, you’ll have some sort of problem over the long run. If your customer is everyone, as it tends to be for big ecosystem companies like Google or Facebook, what happens is you can’t be aligned with everyone at once. If you try to be aligned with two conflicting parties as they’re both clients, it’s very hard.

You maybe end up with a loose holding company that has different entities that compete against each other while doing their own thing. But the reality is that Facebook or Google aren’t loose holding companies. They’re groups, strategically aligned. They all have an agenda managed by a top-level strategy.

With Facebook specifically, the whole mobile performance advertising industry has been a great stepping stone for them to grow their mobile business. They don’t need to get too much involved in the politics of agencies or budgets. Everything is measurable. As long as they deliver a good return, people will continue to spend on Facebook inventory.

If you look at the mobile performance advertising industry, it’s a huge industry, but it’s not as huge as the ambitions of Facebook. Even if Facebook owned the industry 100 percent, which they don’t—let’s say 100 percent outside of China, because in China they don’t really play a role, and outside of Russia and a few other specific countries. Even then, it wouldn’t satisfy the ambitions they have. If you look at Facebook’s stock price, the valuation, and the growth they’ll need to show to satisfy analyst expectations—that brings me to the conclusion that in the long run, Facebook will continue to do more to attract brand advertising budgets and change the way they monetize their inventory to satisfy those needs.

They do a lot of things around partnering up to allow advertisers to measure reach on Facebook, like NTV and gross rating points. Eventually, as they focus more on that, because it’s the bigger opportunity, maybe their relevance in the performance mobile industry will be smaller in the future. That’s a possibility I wouldn’t rule out.

GamesBeat: Did anything Gabe Leydon had to say at ReCode resonate with you? He seemed to shake up a lot of people in the established advertising industry.

Koschella: I wonder why. Machine Zone isn’t doing very much with the established advertising industry, right?

GamesBeat: I think it’s because he said that they’re useless. He’d rather work with 300 different performance-based networks.

Koschella: If you have a performance-based product that’s easy to say. If you’re selling cars or insurance or sneakers and you can’t measure every sale and attribute it back to an impression, it’s harder to judge. He has some good points from what I’ve read, but I think it’s not as black and white.

GamesBeat: Berlin seems like a good place to be for your industry. There’s quite a bit going on here.

Koschella: It’s good-sized for Europe. On a global scale it isn’t close to San Francisco or Israel. But for a couple of reasons it’s a good place to start a business like ours. Especially if you’re starting an international business. It’s relatively easy to get people to relocate. The visa process in Germany for professional purposes is much easier than, say, the United States. From that perspective it’s a good place to be.

GamesBeat: I’m seeing some companies buy and sell different pieces trying to become a kind of one-stop shop for marketing technology. I’m not sure how that’s going to play out. But it drives a lot of deal activity.

Koschella: I agree. I see the one-stop shop view in a lot of places. The way I think about it, though — a one-stop shop makes a lot of sense in the very long term, in a very mature industry, where there’s no point in using a lot of solutions when you can have one integrated solution. But as long as we’re in this high growth, high change phase, that won’t become reality very soon.

There will be more one-stop shops for specific use cases. Not one that does everything. When Upsight came out of the merging of Kontagent and PlayHaven, the vision was very much around the one-stop shop in that announcement, around an SDK that lets other providers build services on top of it. In an industry that’s evolved so rapidly in the last two or three years, just keeping the tech infrastructure up to date is a huge challenge. Once the industry matures more, this will become reality, but I don’t think we’re there yet. There’s still too much change.

Just thinking about apps, TV OS and all the different set-top systems — that’s all going to be apps. If TV is going to be apps as well, maybe TV is closer to mobile than desktop is to mobile. It won’t be consumed through a browser, but rather through an app ecosystem. It’ll be the app developers who are the players in that industry, not companies from the desktop space. It’s a new dimension.

TV apps come in various forms. You have iOS, TV OS, various versions of Android like Fire TV, Samsung — this is a huge ecosystem. If you want to be a one-stop shop with your platform — even companies like Google or Facebook struggle to keep up with the pace of innovation.

GamesBeat: Does that mean some of these developers are stuck with SDK fatigue? They’ll just have to deal with lots of different integrations for the foreseeable future?

Koschella: There will probably be fewer SDKs for the same purposes. Let’s look at advertising. Mediation layers, SSPs, however you call them, are the tool of choice for the majority of app developers who want to monetize their inventory. If you look back four years ago, an app developer would use five, 10, 20 different ad SDKs and integrate them all. Now an app developer is using a mediation layer and only using SDK adapters to integrate. It’s much less effort. The next step is he’ll probably only use the mediation layer SDK and connect all the networks through a server to server connection.

We’ll see less SDKs integrated for the same purposes. But I still think a developer needs SDKs for different purposes. If you need a CRM system in your app, you’re probably going to use another SDK for CRM. You probably won’t have five different CRM systems, but you still need a CRM SDK. The point where we’ll see the super SDK that does CRM and attribution and ad monetization and so on, every other purpose, that’s still a long way away.

GamesBeat: What about ad fraud? Does that topic come up a lot in the space?

Koschella: If I compare how much it’s been written about and talked about these days, it’s much more than a year ago. I sometimes wonder why. I don’t think that, fundamentally, ad fraud has become a bigger problem. I think people have become more aware of ad fraud.

Ad fraud is a nice example where — again, our philosophy is you need alignment with your customers. There may be very few companies in the industry who produce intentional fraud. They’re probably coming back under different names once in a while, but it’s the same teams. Then there are a lot of companies that don’t actively fight ad fraud, because they don’t have the focus for it. They have too many other things to do, so it’s not the first thing on their agenda. And they may indirectly benefit from it.

If you look at an exchange or an SSP on the market, as long as people keep bidding on my inventory, I know part of it is fraudulent. But I make a cut, perhaps 20 percent on each transaction. If someone else sells fraudulent inventory using my product, he still gives me money. Why should I make fighting fraud my first priority? Maybe I don’t feel so good about this, and I have a plan to root it out at some point, but internal priorities are always about managing limited resources.

Every company has a roadmap and a vision that’s bigger than the resources they have to execute it. You have to focus and you have to decide. Is this a priority now or not? If it’s generating revenue, it’s less likely to be a priority. We’ve seen that in the desktop space with AppNexus, where there was a lot of press around their video inventory and banner inventory last year. It’s the same reason. They knew about it for a long time, but they had so many other things on the agenda, it wasn’t their first priority to kill it.

In that sense, alignment is good. If you’re advertiser-focused your goal is to fight ad fraud. Ad fraud is bad for your clients and you’ll eventually be associated with the negative impact if you don’t succeed in fighting it. If you’re on the supply side and the advertiser isn’t directly buying from you – if another player in between takes the hit for it – you probably don’t make that your first priority.

GamesBeat: Ad fraud and ad blockers are both starting a lot of conversation.

Koschella: On desktop, yes. On mobile, there’s not that high of adoption as far as in-app ad blocking. Ad blockers on the browser work like plug-ins. It’s relatively simple to build. And mobile ad-blockers for Safari or the various Android browsers work as extensions of the browser plug-ins. But most of the ad inventory in mobile is in-app inventory. Ad blockers don’t catch those ads.

If you look at the in-app space, to build an ad blocker technology that works effectively, all the traffic that goes to your phone needs to be routed through a VPN. The VPN, unless you have infinite resources for servers, will run very slowly. That kills the user experience. If you’re a user, you have to choose between a bad experience with blocked ads or accepting the ads to have a good experience.

So I don’t think it will touch us in the mobile space any time soon, unless ad blocking happens on the network level, at the carriers. If the carriers wouldn’t allow ads to go through their network pipes, that might mean ad blocking could become a serious problem for many players in the industry. First and foremost, the big juggernauts. But without net neutrality legislation, in Europe and especially in America, it’s very unlikely something like that could be legally enforced or accepted.