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Full transcript: Simulmedia CEO Dave Morgan on Recode Media

“Television needs to be made a lot more efficient to work for all the advertisers.”

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Simulmedia CEO Dave Morgan
Simulmedia CEO Dave Morgan
Andreas Rentz/Getty Images for Hubert Burda Media

On a recent episode of Recode Media with Peter Kafka, Simulmedia CEO Dave Morgan talks about the future of television and online advertising. Morgan is betting that big advertisers will want their TV ads to start working more like digital ads, personalized to each viewer and able to be connected with buying behavior.

You can read some of the highlights from the interview here, or listen to it in the audio player above. Below, we’ve provided a lightly edited complete transcript of their conversation.

If you like this, be sure to subscribe to Recode Media on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.

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This is Recode Media with Peter Kafka. That’s me. I’m sitting across from Dave Morgan. I’m going to introduce him in one second formally, but first I just want to say that last week I went to the Code Commerce event.

I met a bunch of you guys. A bunch of you come to me and said, hey, I listen to your podcast. I like your podcast. I love your podcast. It’s great to hear that. I’m really appreciative of it. I’m glad that you guys like what I am making, so thank you. All I ask is that you tell someone else who’s not me about the podcast so they can like it too.

Okay, here’s my formal introduction. Dave Morgan, CEO of Simulmedia. I’m pronouncing it correctly?

Simul, correct.

Simulmedia. I think of Dave as the guy I go to when I want someone to explain how advertising really works, both in TV and digital. Dave, you can actually explain what your business does in a second, but this is your third startup.

That’s right.

You’ve been doing some kind of media-related advertising startup for decades?

Decades, since ’95, but I started working on them in ’92.

Okay. We’ll go through the entire history later, but the company that you’re building now, what you’ve been at for ...

Eight-and-a-half years.

Simulmedia. Eventually what you want to do is allow TV advertising to be bought and sold the way that digital advertising is. Right?

That’s right.

You want to be able to find the person who looks like Peter Kafka or maybe is Peter Kafka and say, “Hey, Peter Kafka, here’s an ad tailored for you and your buying needs and buying habits.” That is the holy grail of what you’re trying to do with a lot of other folks who’ve been trying to do it for decades.

Yeah. That’s the essence. The essence is fixing TV advertising and making it operate like digital.

You’ve been doing this for eight-and-a-half years, and like I mentioned, people have been trying to do this for a long time. This basically became the same question — I come to you all the time, this is basically, this is a version of me doing a reporting call with you, we’re just recording. How far away are we from getting to this, really? How many more years before I get an ad delivered to me when I’m watching “Monday Night Football” that is delivered specifically to me as opposed to someone in the next house?

Well, first it depends where you live and depends what device you’re watching it on. I think you’re going to see it’s slowly gotten better for the last five or eight years and I would say in five years from now, eight years from now, 70 or 80 percent of the ads that you’ll get on what we’ll call TV, which may be a little bit different ...

Could be a phone, could be a tab, could be a traditional TV set.

Could be a traditional TV set — may not come from a traditional cable or satellite. Will be mostly tailored to you.

This, again, is the holy grail or has been a holy grail for traditional TV for a long time because why?

Is the why, “Why hasn’t it happened?” or, “Why has it been the holy grail?”

Just pretend I’m even dumber than I am. I’m pretty dumb. Why is this a good thing for advertisers? to start with.

I think that the fact that everybody in America gets the same ads at the same time for the same products has never made that much sense. I grew up in a small coal town in Western Pennsylvania. My mother is still there. There’s not a Starbucks within ... there’s one Starbucks 55 miles away, there’s probably not another one for 80 miles.

I live in the upper west side of Manhattan. There’s more people on my block than in my hometown, and she gets the same ads, same time, same products. Can’t even buy the same things. It’s never been very efficient for people. It made sense when you only had a few channels and you only had a few products. There’s three kinds of peanut butter — Jif, Skippy, Peter Pan — which one are you going to buy?

Today, when there’s thousands of products for a lot of different people, sold a lot of different ways, television needs to be made a lot more efficient to work for all the advertisers.

They show you in your fancy-pants apartment in the upper west side a Land Rover ad and you show someone in Coaltown something else.

A Ford F150.

A Ford F150. There is an argument that says, “Hey, you know what? We’ve gone really far with targeting on the website, and it turns out we’ve got it too fine, too specific.” Sometimes there’s just nothing like carpet bombing most of America with an ad from McDonald’s and certain kinds of brands like that. Maybe a bit rate tailored a little bit, but we’d rather just make sure everyone sees the same ad because at least we know we’re getting our bang for the buck as opposed to its floating off in the ether and micro-targeting.

Yeah. The concept of targeted reach getting more efficient but still reaching a lot of people used to be an oxymoron, but it’s not today. You can’t actually just do an efficient carpet bomb anymore. If you’re a movie studio today and you’re going to put $80 million to work in two-and-a-half weeks — which they do on TV — in the old days you could.

You’ve got a new “Avengers” movie. You’ve got $80 millions for you to spend promoting.

On TV in two-and-a-half weeks. You used to put it in just a few networks and you could make sure that no one person in two-and-a-half weeks got that same ad more than five, eight times, 10 times. That’s okay. Today, 10 or 20 percent of the heaviest TV viewers will see that movie ad 150 times; 40 percent of the people watching TV when that ad was being shown won’t see it at all, and they’re still frequent moviegoers.

How will they see it 150 times? On TV or they’re seeing it on billboards? No, just on TV.

On TV. Just on TV, because the television buyers still buy the same big shows the same way, and they buy them on sex-age demographics. They don’t have any deeper metric. They don’t have a frequency cap. They don’t have a notion of saying, “Don’t show this ad too many times.” That inevitably leads to a situation that everybody complains about the same things: Too many ads that I see too many times that are not relevant on TV and that’s causing people to turn away from TV. That’s one of the reasons streaming video is doing well because you don’t have these ...

The ad-free streaming video.

Yeah. Even the Hulu services with limited ads, because ads have become a problem on TV.

What hasn’t happened, you’re describing this world where TV advertising is incredibly inefficient and clumsy and bombarding the people who don’t really know better, who don’t know how to watch some other way are choosing to watch TV instead of doing something else on the internet. What hasn’t happened, though, is we haven’t seen all that TV ad money move to the internet with people who’ve been watching for many years. And you seem skeptical that’s not going to happen as well.

It’s not going to happen. When I started in online advertising ...

This is the entire premise of Facebook and many other companies who are waiting for this to happen one day.

Here’s why it won’t happen. So I did online advertising 25 years ago, so I don’t think I’m a Luddite. But No. 1, TV advertising is not so broken it’s had to be fixed. That’s why it’s taken so long.

Even though you described an incredible broken process, it still works better than the alternative?

It works better than any alternative because ... I’ll use an example. You probably just an hour ago were watching “Judge Judy.” You just finished up today’s show.

Yeah, that’s why I’m in a rush. I was a little late.

Exactly. “Judge Judy” today in 30 minutes will deliver more people watching advertising time, so audience ad minutes, in 30 minutes than all of the videos all day on YouTube.

Now the YouTube guys are going to want to say, that’s absolutely not true.

It’s totally empirically, they can’t argue with that. It is absolutely empirically. YouTube, if you add up all of the ad time. Now don’t forget, they have six-second pre-rolls, there’s a lot of skippable ads, the amount of actual ad time.

Actual ad streams.

Ad stream time, which is what people pay for in the TV ad world, in the video ad world.

The counter to that is, okay, but that’s the “Judge Judy” audience? There’s people who are watching Peter Kafka and everyone else is watching it at 2 o’clock in the afternoon. We need to find many many now generations of people who are not doing that.

Let’s step back from that a moment. Let’s just decide who we are first. I’m Budweiser, am I cool with that audience? “Judge Judy” audience.


Yeah. They want it.

You want some of it, but that’s not where you want. That is not your target.

Well, it may not be your perfect target but it’s a good chunk of them.

You definitely want a bunch of 18- to 40-year-olds.

Ford, State Farm, Walmart, McDonald’s, these large reaching brands. In other words, there’s a reason “Judge Judy” gets $43 million a year.

Yes, she is very popular.

Her show is growing, still growing.

Still growing. Okay.

Yeah. My point is if you could chase, if you want to just chase the luxury young millennial audience, you’re going to chase a group of people that aren’t yet spending that much or if they are spending, are spending on the limited number of products, can be maybe more efficient gathering and targeting. If you’re really looking for large mass reach brands, nothing beats TV. Plus, look, you have a premium show here. Boxes premium.


When you sell premium video advertising, pre-roll, a six-second, eight-second spot, it’s going to go out at about a $50 CPM, yeah?

A lot.

Yeah. A lot. TV, national cable goes at eight, 30-second ad, interruptive, all attention on it. TV is really cheap. It’s cheap because they’ve kept the pricing somewhat artificially low to keep volume up.

You’ve explained how far away we are. You said five days a year on this to really work. You explained why you would want to move it to make ads more efficient. You explained why the TV money is not going to in the meantime all flood over onto Facebook or YouTube. What is holding it back? Because again, you’ve been working at this for eight-and-a-half years.

I’ve gotten to the point where I only covered this every couple years because every couple years someone says addressable TV is happening tomorrow, and here I’m going to tell you, and sometimes they spend billions of dollars on this. There was Canoe [Ventures], the cable guys got together, just incinerated billions of dollars trying to make it happen. What is preventing it from happening today at scale?

In the end, you have oligopoly. A highly competitive oligopoly of about eight companies that own content, six companies that drive distribution.

The Time Warners of the world, the Comcasts of the world.

Yeah. Five companies that do most of the buying. One company that does the measurement.

That’s the consortium.

Right. You can actually put them all in this room and still have plenty of room and even some snacks left over.

Spacious room.

Yes. They didn’t have a reason to change. That’s now changed. They now see an end that happens before they can retire. Wall Street have said you must go into harvest mode, we see a terminal value of zero coming. We don’t know exactly what’s going to happen but it’s not going to be pretty so now you’re seeing consolidation.

We’ve got AT&T buying Time Warner. You’ve got Discovery buying Scripps. You have Time Warner Cable ... or Charter bought Time Warner Cable. You got Altice bought Cablevision. They’re going to buy probably more.

Verizon is buying everything.

Verizon is buying everything. Disney is taking a position. They’re buying a control position of BAM. Everybody is now getting to musical chairs time, and you also have a whole aging out of a generation that believed in TV, loved TV, only knew TV, so the new Chief Marketing Officers are now, they’re not digital natives, but they’re digital immigrants. They weren’t getting every email printed out 10 years ago.

Now we got the rationale over why it’s going to happen. But what is it, then, holding it back? Is there a technical problem that we need to solve?

Yeah. There’s some people have to want to do it, but there’s a couple things that will keep it from going the way people think. How many American households don’t have broadband at home?

That’s me shrugging my shoulders.

Well, it’s 100 million people. When you think about that, when can McDonald’s afford to really go online? They can’t afford to miss 100 million Americans.

Basically half the country has broadband.

Yeah, 30 percent of people don’t even have the internet at home, at all. Broadband is half. Not having the internet is a third.

Not to all, east coast, the latest. We’re setting the old Goldman Sachs building.


Count on a shrug. At some point you stop chasing those folks.

How can you? Not if you’re State Farm, McDonald’s, Walmart, Ford.

Right, some of those advertisers, but a lot of them don’t.

No, I’m talking about 65 of the $75 billion on TV.


They do buy a lot. I come from one of those places, so I have a little, I guess, talk to my mother every other day or so. There’s a bunch of things that we digital people didn’t always understand and I would say Wall Street gets it, so that’s where the capital is going. The telcos are consolidating, the media companies are consolidating. They now know we need to make it happen and the competition for growth has to come from something more effective than yesterday’s TV advertising.

Dave, I have more questions for you about this, but I want to take a quick break. Have some water, too. Sorry about my cold, everybody. We’ll be right back with Dave Morgan from Simulmedia.


I’m Peter Kafka. I’m newly hydrated. I’m back here with Dave Morgan with Simulmedia. You know this because you’re listening to the same podcast, but we keep following this convention of doing the radio-style ad way. Anyway, hello, Dave. Welcome back. I want to keep asking you about TV and digital and this great merger of targeted advertising.

When you hear AT&T and Time Warner, and when you hear Verizon/AOL, we had Tim Armstrong here a couple weeks ago, say to justify why they’re merging. They will often talk about addressable advertising as one of the things they’re very interested in. Do you take them at face value? Do you think that’s something they’re really going to pursue and they really think that is their reason to do the merger? Or is that an additional thing to say, something you say because you don’t want to explain why you’re really doing that deal.

I think there’s certain economies to scale, to bring in companies together, but I think that without question, I take them at face value that a key driver may be the primary driver of long-term values addressable advertising. I think that for 20, 30 years, as we’ve been thinking about when will TV advertising change, there’s actually been a strong movement for when will direct marketing results come out of advertising.

When can a marketer put a dollar out and know the result they’ll get back? If they buy coupons, if they bought freestanding inserts on newspapers, they could get that one. Google, Google they get that. Facebook they get that. Digital has made it front and center table stakes. That’s one of the biggest reasons why we’re going to see addressable performance-focused TV advertising going forward because digital has now made it table stakes.

You say performance-style advertising. What you don’t often see on Facebook is a Ford F150 ad. You see an ad for something that you can click on and buy within one or two clicks. Facebook’s aspiration is to get that Ford F150 ad. You already explained why they’re not going to get it. When we get to addressable TV advertising and it’s a real thing, is there going to be a Ford F150 ad or is it going to be here’s an ad, respond now and you’ll get your Doritos delivered to your door, or sign up for the shaving kit?

Well, I think actually to the consumer, it’s done well, they won’t know. If you look at some of these, the digital brands that have really grown recently in the last few years as consumer brands, in the last 10 years, Expedia, Priceline. They’re heavy users of search. They grew their businesses in TV. TV pitches start social online interface catches. Zillow. There’s a lot of companies that have been more consumer focused that are doing it that way.

You say you put out a branding ad on TV, which is not interactive and you connect it with something interactive on TV. Zillow, I remember what to use them for, I’m going to click on this thing.

It actually assumes that that’s how people buy, which of course they don’t. We’re not actually processing and understanding. I heard of this site, this is what I’m going to do. This is why I’m going to grab this can of, this jar of peanut butter and not that jar. What you do know is when you start linking what people view and what they buy, there’s an extraordinary impact, and that’s really where the change is happening.

This is what’s behind, certainly as I understand it in listening to the transcript of Randall Stephenson from AT&T, which is they have more data than anybody on people, what they’re going to purchase and linkages to what they buy. You’re now going to connect ... the Ford F150 may be tough because it may take months or years to change someone’s decision, but not for Walmart, not for going to a movie, not for Hellmann’s mayonnaise.

Right, and Amazon is talking about this, as they edge into TV. They’re going to start showing NFL games. They’re going to say you saw an ad for something watching our stream and then eventually you ended up on Amazon. We can link those things.

Right. If you look at the market cap of Google, the market cap of Facebook. Those two particularly. They’ve built no continued growth at the same rate for a decade, probably. Now there’s only so much they can churn through what was print advertising. They can churn through what was radio advertising. They’re going to have to churn through what was or is TV advertising.

They either capture the TV audiences onto their own platforms. We’ve seen Amazon’s attempt here. It’s pretty successful. Give it away for free, bring in TV audiences, develop relationships around shipping and then sell them e-commerce. Facebook’s already announced they’re going to start buying. YouTube already is buying. They want to take the audiences away from TV, put them on their platforms and monetize them in a digital platform. You’ve heard my reasons why I don’t think that’ll happen soon.

The other alternative is the AT&T-Verizon alternative, which is I’m going to bring a digital monetization approach to TV. I’m going to go there, because it’s really simple. There’s no way that Google and Facebook grow into their market caps. If they don’t take away the TV dollars ... Everybody talks about those 75 billion in the US, 250 billion worldwide. They have to get it. They’re either going to embrace technology and put it on linear TV, which may last longer than people think, or they’re going to have to wrench those audiences away from TV.

My gut is that I don’t think AT&T is very serious about addressable. I think they’re a slow-growth company who bought another slow growth company, because that seem like a good way to spend their money. We’ll see. That’s the fun about writing it. I’m happy to be wrong.

I want to talk to you about building your business. Like I said, this is fair business. We’ll talk about some of your other businesses. But I’ve been talking to you about this one for seven-eight years. It seems to me that you’ve either pivoted or bobbed and weaved through a couple different iterations. When you started out, it seemed pretty clear your goal was to do addressable TV advertising, but you weren’t doing that initially. You were doing this thing, it was a little complicated but basically you’re finding a smarter way of buying existing TV advertising.

How much of the evolution of your company has been intentional, versus, “We thought we’d go here but turns out that didn’t work, we’ve got to go a different direction”?

Well, if I pulled out the original business plan and showed it to you, you would be shocked at how consistent it is with where we are today.

Today it’s where you said you were going to be.


But then you went through multiple startups.

The hardest thing is a market entry strategy. The biggest problems in starting companies and doing startups. You either grow too fast or you grow too slow. Finding a perfect equilibrium is very ... When you grow too fast, you build a big cost structure before you have a revenue basis, and then the moment there’s not plentiful capital.

Venture-backed startups only have three outcomes. You go public, trade sale, or you go out of business. Timing is probably the most important thing. My first startup we filed to go public, filed our S-1 to go public in the end of ’99.

This is Real Media.

Real Media. We were ready to go on the road in late February. We’re already planning the road shows with the bankers. Frank Cutrone is our banker, Credit Suisse. You’re already picking what cities you’re going to go. Are you going to go private, fly commercial, that’s the kind of stuff they’re asking you because you’re a heady entrepreneur and you’re all excited about that.

Then you wake up one day and the stock market collapses, then your bankers are saying, “We’re going to hold off for a while.” And then a month or two goes by, then they’re like, “We’re really going to hold off,” and then you’re like, “I’m spending $6 million a month running the company against four million, five million in net revenue, this isn’t sustainable. You realize you’re burning a million, two million a month at this point because you’re getting ready to be a big public company with $150 million of extra cash.

This was a web-based advertising company.

Web-based advertising company. Over the period of five months, you have to lay off 375 people to get it down to a profitable ad-serving business in the nuclear winter of the post dot-com world and then merge it finding the way to the other side. I think if I look at Simulmedia, having been through the ups and downs and roller-coasters of startups, the hard thing is I think actually seeing the big long promise isn’t that hard. When people say how can you make bets early, it’s like, well, everybody knew that TV advertising would become addressable at some point. People wrote about that in the 1980s.

Right. But if you built an addressable TV company in the 1980s, you’re out of business.

In the ’90s, you’re out of business. I did in the ’90s too, I did it in Europe, I had 60 people doing addressable ads. In France, the U.K. and Switzerland, it helped to get to know it. You got to find that moment, so when I launched the business, Google TV ads, Google had a business. Microsoft bought a business called Admira doing targeted TV ads.

Looked like it was going to happen then. Phase one of our discussion, it’s happening now. Then it blows up, then Canoe is launched. Well, this is the next way. That blows up. Now we’ve got this next phase which is this consolidated in the space. The digital players are heavy into video. They’re getting real audiences. They’re going to beat “Judge Judy.”

Right. You’ve moved around a few times in this business. I remember I’ve talked with you about this before, for the benefit of you guys. Remember going to dinner with some ads guys, and you had started your business, and they said the TV guys are going to crush Dave Morgan. He’s really smart. There’s no way they’re going to let him into their business.

He wants to get into the business of selling TV ads and they’re never going to give that up. He’s going to get smacked down. It seemed like a couple different times, you said yeah, it was harder to get into this market than I realized. I’m just trying to get a sense of how many times you consciously said we’re going to have to turn left or turn right.

The first thing we did because the resistance was out of the TV industry, they did not want us in.

Because you said I’m going to make your business more efficient, and make you more money, and they said we’re fine.

Yeah. That’s so broke, it has to be fixed. Our phase one was going to TV networks as advertisers. You guys really want your advertising more measurable and more performant. CBS as an advertiser. Because they have to launch shows and if they don’t make ratings, they lose their jobs. They believe in TV.

The No. 1, really, job of a broadcast TV network is to advertise its own shows.

Right. It’s a big part of a lot of the programming. They buy a lot what they do. Our market entry was to go to them as advertisers and win them over. Today we work with nine of the top 10 TV companies in America and launching TV shows when they advertise them on other networks.

You weren’t really doing addressable TV. You’re just saying we found inefficiencies in the way TV is bought and sold. We’re going to find you cheap inventory on Friday morning, that’s going to advertise your Monday prime-time show, you’re going to make money.

We’ll do better. Our software is actually going to determine, did the person see the ad and did they watch the show, and we’re going to give you a conversion measurement just like you get on search. You’ll love it. Closed-loop advertising on TV.

You went with that even though your goal was eventually addressable TV. You’re going to start here because why?

Well, because A) it was a way that the TV companies would play. We gained admission into the velvet rope club. They’d let me in the rooms. B) It was possible then, C) we could build technology and data that could make us smarter and we would have a prototype model for what you would do in the future to advertise for Walmart.

Even realizing that really doing addressable was still many years off, but we believed that it would be audience-based, data-driven and measured on a performance basis. Those were the fundamental characteristics. Started in the television program promotion then started expanding into general market helping retail companies.

I thought, “Hey, if you come in and you guarantee them results, they’ll all come running.” They did. Some of them were saying, “Well, we’re going to started selling ratings to TV networks,” they like that. Take away the risk. We started doing the same for retail and insurance. Then we started getting a lot of resistance from agencies and others because we became pretty threatening in the market.

When an ad agency resists you and they say we’re going to take the call, the logical thought would be, well, we’re just going to go to the P&Gs of the world. We’re going to write to McDonald’s, but no one really does that.

No, in the digital world, direct client selling with the agency supporting it is the No. 1 way of doing business. The reason why, it’s in the digital days. The digital agency was new too. We were both fighting for the same thing. Change it, shift your budget, take money away from TV, put it into digital. Now I’m on the other side of the house. There, it’s more of a resistance to change.

There’s a setup world where big advertiser X goes to ad agency Y, and that is the relationship. Sure, you’d like to insert yourself in the middle of that but they’re not going to let you in. Neither one of them wants to let you in.

No, and it had not been done. One of the ways it works in digital is that the website was owed to the client, not by the agency, and so there was always digital people at the client, at the marketer. That was probably the longest pull. The hardest thing we’ve had to do was over the last half a dozen years, five years plus, that we’ve been working with general advertisers, general market advertisers, is going to the client directly, showing them how their TV is working, how they could do better. Ultimately, in an ideal world, aligning with the agency so now the agency realized, like them or not, I’m going to work with them because I want the agency in place. They actually do a lot of good stuff.

You’re at this eight-and-a-half years, like you said, you’re venture-backed, so at some point those folks want their money back. Is this longer than you anticipated or are you on the timetable you thought you’d be at?



Yeah. If I go back and look at all of our projections, I would have thought this market maturity level was going to occur four years ago, so you’re four years behind.

Four years.

Yeah, the market is four years behind, so this is the big issue as a startup. If I build my business such that all of the money, all of the infrastructure, all of the technology, all the people who are in place four years ago, when I thought it would be there, do a moonshot, you don’t achieve escape velocity, you crash to earth. That’s how the Canoes of the world and things like that didn’t make it.

You go, it’s right around the corner, let’s go bake it.


It turns out to not be around the corner, it’s a wall around the corner, you’re dead.

Yeah. A couple good things going for me. One, I own a significant part of the company. I was fortunate my last startup exited pretty well, and so I had more of a voice and a seat at the table among the investment group than I might have otherwise, than most entrepreneurs would have.

Let’s just be super clear about this because I was going to get to this and this is always one of my favorite questions to talk to entrepreneurs about, and they usually don’t want to do it on the record, so I’m glad we’re doing it here. You made a bunch of money selling your second startup. You are a wealthy person. It means when you do startup three, you need to raise less money, you can go to your investors and say, “I’m going to keep more of my company.” And both because you’re not well off and two, because you have a track record you can do that. You are different than a lot of other startups.

Right. The track record’s everything. Now the challenge is that the third time recidivist entrepreneur, their track records aren’t so good. You have a lot of people that once they get, they have more money, they get sloppy, they don’t like flying coach. They want to go home.

I’ve done the grimy part of building a business. I want to build another one, but I don’t want to be quite so rough. I want to be ramen profitable.

Actually, I was fortunate. Brad Burnham, who I’ve known since ’95, I was there, I was the first investment from Union Square Ventures. He’s on my board with me today. When I said I was going to do it, he said the track record for third times aren’t good. They’re not hungry. You gotta be hungry.

You’re in your 40s at the time when you start this?


So you’re too old to be starting a startup.

Yeah, I’m 54 now. He’s like, you got to really be starting, you’re going to do it, and you get boards. I was on a public board at that time. I was like wow, yeah. He’s right. I got to get focused. I got to do it. I got to talk to my wife, and my kids. I’m going into the trenches, and I don’t know when I’m going to come out. You have to do it, but then you have the advantage. Yeah, I got to have other investors bidding for a position in the company.

You’ve got more leverage when you’re forming the company in terms of the people who are going to fund you, the terms you’re going to set, and obviously the word of ... We’ve been through a period the last few years, we’re entrepreneurs of all stripes. Fresh out of school, or not even out of school, are able to make some of these deals as well.

At the time, it was rare to get this. People say, these are the terms. I’m going to own this much of the company, and you guys are going to be along for the ride to some degree.


You can do that again because of your status — wealth and status. How does that change decisions you would make otherwise? If this was startup one or startup two, would you have sold it already? Would have founded the next one?

Yeah. Very directly, we had offers for this company and interest in this company that would have paid off and made it a good return years ago.

A lot of people made you money personally, would have made your investors money. Wouldn’t have been a 10x, wouldn’t have been a home run, but if you’re a normal person, it would have been real money. Life-changing money, perhaps.

Yeah. We could afford to be mission-driven. So we could say we want to solve this problem, which helps me on the recruiting side because I can bring in people that have choices from a lot of other startups and they want to be in a place like that.

Are some of them doing the math and saying, “Wait a minute, Dave is not going to sell. Meanwhile, I haven’t had my hit yet. I would like Dave to sell.”

Probably they don’t tell me that so much, if they do think that. I think if we were in the Valley, yes. There’s a very different mindset between the Valley and the Alley, Silicon Alley. I think people in New York tend to be a little more business committed. People in the Valley are more, let’s exploit this tech and get onto the next one quickly. It’s more of, interestingly, more of a pure numbers game. We don’t have nearly the robustness and the fluidity of the 10 startups you can move in and out of easily.

Right. There’s a lot of folks in the Valley, I think right now, who just assumed that if they leave their job at Google, Facebook, wherever, it’s just a matter of where they want to go.

It is. Now, I think it’s interesting though if you look at that market now, there’s a massive concentration now between Google and Facebook with all of the talent. What was half a dozen big companies and thousands of others is becoming a more consolidated ecosystem.

But it’s much sparser in New York. There’s a handful ...

You have a lot of traditional places they can work, so you always have to compete with that.

Is there a gap, though, between you and your employees and you’re well off, you really want to see this through, this is important for you to do right, versus I’m going to say, I know but I need to have some kind of exit myself, or some kind of payout, are you figuring out some way to compensate those folks to get them there? You can obviously pay them.

We pay. People work for you for three reasons, or work with your company for three reasons. One, always the first one is the problems they get to solve. That’s, is the work interesting? Is the work interesting? Are they going to solve a big problem? For a few startups, it’s not just the way interesting work, am I solving a big problem? Then it’s who are they going to work with. Then third, it’s am I fairly compensated for it?

Because I think most people in New York don’t expect a massive life-changing exit. Now I want to deliver that. I got lucky. In TACODA, I won’t remember exactly, but certainly 10, 15 people out of a 100-person company had seven-figure exits.

People in tech don’t expect that. That’s the reason you go to Wall Street is to make that kind of money. If you’re doing tech instead of Wall Street, you’re smart enough to figure out what those exits are.

Yeah. I always tell people coming in, I tell them. It’ll give them a lot of transparency about the value of the stock. What they think it’ll be worth and what we’re going to try to do, and I tell them, having delivered good exits in the past. I’m like, look, you’re going to be just as proud of having built some technology that’s still running.

My people built the AdServer, it’s still the second-most deployed ad server in the world after DoubleClick. With that code, that means a lot to engineers to build a code base that’s still running 20-some years later. We talked about it, we have standup meetings every Monday afternoon and I talk to them about.

Standup meeting is when you’re little as 10, yeah?

Yeah. I talk to them about here’s what I tell the board, every time we have a board meeting. I tell them here’s what I tell the board, here’s what the board said. I talk to them about when here’s the kind of decisions we’re going to have to make, so I don’t think there’s a big divide, because they’re pretty good about telling me, actually.

If they’re listening to this, they’re not rolling their eyes and saying, “Dave, come on.”

We have a culture such that they’re pretty good about letting me know, even if they won’t do it there. The thing I love about tech cultures. The engineers are the first to tell you. Come on, stop it. Tell the truth.

Occasionally that directness from engineer gets them in trouble.

Yeah. You have to have a culture that it does. I think I would say, if I step back, I think the interests are very aligned. The people that don’t want the same path, I’m also very good about there’s some people that ... not everyone is going to stay at your company the whole time. I have some people that had been here from the beginning.

We have people that have done five years and left. Three years, I had people that worked for me, and my first company, not my second, and now working in Simulmedia is the third. I have people that have left the company and come back, because the other thing is startups have phases. There’s the off-road phase, the dirt road phase, the paved road phase, the highway phase, the limited access highway phase, and the autobahn phase.

Some people will come and join one phase, they’ll make it to the next phase, maybe two phases, but they may not scale to the next. They don’t like it. They want to go back to a dirt road business. Some will do two phases. Go off and work someplace else, learn the next skill and do that. I think if you look at it a bit more fluid ...

I love the fact that we celebrate people’s anniversaries. Yesterday, I think we had someone in a four-year anniversary. Someone else the day before had a five-year anniversary. You get a few of those every week.

I like your highway metaphor. We’re going to take a quick off ramp right now.


Going to hear from one more advertiser. We’ll be right back with Dave Morgan.


Hey, Dave. We’re back here with Dave Morgan from Simulmedia. I have a different voice again because I’m still sick.

I like this culture stuff. I think it’s fun to talk about culture. People don’t really talk about it — again, I think honestly when talking about startups. You mentioned a couple times speaking on culture that you’re from coal town, Pennsylvania. Western Pennsylvania, right?

Western Pennsylvania.

How do you get from there to New York to Silicon Alley startups? Was the plan, “I want to go build digital internet companies”? Digital advertising companies.

No. I didn’t have a mercantile bone in my body. My dad was a lawyer, my mother was a nurse. I loved science. I went to college at Penn State, which wasn’t that far away. Started as an engineer, found out that engineering was about math, not science. I was really good in math but I wasn’t going to spend all my time doing it. I went to law school because I thought that would be ...

That’s what you do.

I could do it. It was a good path. They were paying a lot of money. I went to a big law firm in Philadelphia. Got paid more money than my dad was getting paid which is ... that was ridiculous. He’s taking cases to the U.S. Supreme Court in a little town and they’re paying me more to handle GE litigation, making copies, velobinding. I’m expert at velobinding. I’m extraordinary at velobinding.

I don’t even know what velobinding is.

Yeah, it’s an old skill. There’s still a few of us out there.

I got lucky. I started actually having opinions about my client’s business. One case I got to work a little bit with Paul Allen, buying out some assets of a spinout of RCA when it was bought by GE.

You’re the second guy to reference Paul Allen in the last few weeks here.

There we go.

We had Tim Armstrong in earlier, I’m sorry.

Vulcan Ventures was a client, and I was a junior person on it and they were going to back a PC clone licensing IBM technology. And I’m thinking how can you build a computer business if you’re licensing IBM? It’s impossible. That became the cardinal technologies business, which eventually was just a modem, and then I quit that, ran a political campaign.

Ran into James Carville on that campaign. I was on the losing sides of that campaign. Lifeguard at the beach wanted to write a great American novel. It’s more than you’re expecting here, and then went to work for the newspaper industry as a lawyer doing pre-publication libel review and ad acceptability standards, and this internet thing started going. I was brought in to help lobby against the telecommunications industry.

What was their beef, the telecom guys?

It’s so funny. They thought they would buy content and have cross subsidization from rate-based telco to bring in subsidized content. You think, like, give away free HBO to get a mobile plan, or is it really going to go the other way actually, and that that would be unfair competition to the newspapers, and that they would lose the yellow pages business out of it. They bring the yellow pages and beat up the newspapers. That’s ’91, ’92, ’93.

Now all of those businesses are gone.

Yeah. They’re all fighting yesterday’s fights, and so the web hit and newspaper companies were really heavy investors on an R&D basis in the early online services.

Right. We now say, “The newspaper guys never saw the internet coming.” They saw it coming.

They saw it, totally.

They couldn’t figure out what to do with it, but they were aware of it, and they thought this would be an interesting thing for them to be doing.

I’m going to say something that’s blasphemous in this building, if you don’t mind — so don’t tell Jim [Bankoff], but maybe he’ll hear it, because he listens too. They thought content was king. They were wrong. Their content was not king.

Their distribution was king.

Their distribution was king. Every newspaper in America. Every time there’s a highly competed-for market. Two-newspaper city: The one with the best content lost to the one with the best distribution. People like Revere Annenberg. Built the Philadelphia Inquirer. They won 18 Pulitzers in 10 years, something like that.

They forget that 15, 18 years before that, he did a deal with Little Nicky Scarfo in Philadelphia. They knee-capped the Bulletin distributors. The Bulletin was a better paper, and then Philadelphia Inquirer won distribution, probably felt a little guilty. Hired Gene Roberts and they won Pulitzers. That was the way it was everywhere.

Right. The value was literally the distribution of the stuff, and also the bundle of the stuff.

Right. When they shifted to online models, they still had this idea if they dangled content, everyone would come running. And they forgot the bundling, the distribution. They didn’t let the commercial folks drive those business decisions and those commercial folks ultimately left, and built the businesses at Yahoo and AltaVista.

You’re one of those guys who left.

Yeah. I left.

Why did you build it in New York, instead of going out west with everyone else?

Because I ran into this guy named Brad Burnham in an elevator in Dallas in January of 1995, and I told him my idea for a business, and he said well the advertising business is in New York city, you can’t do it from Pennsylvania, so if you’re really serious, you’re going to quit your job and come to New York.

’95, you’re building a digital advertising business in New York city. There’s almost no one doing anything digital in New York city in 1995. There’s barely anyone doing it in Silicon Valley.


If you’re doing it in New York, you’re one of a handful who’s doing anything like that.

The thing is, people don’t realize the hardest parts of doing it in New York. It wasn’t resistance, because the ad community was here and they would take meetings and there are a lot of media companies here and they would take meetings. There weren’t lawyers who knew how to work the startups in New York. There weren’t real estate people who knew how to work with startups. Used to doing 10-year leases, they’re used to doing ... The stuff that the Valley just kicked our butts on and even Boston kicked our butts on because they had had a much better venture community.

It used to be that east coast technology was in Boston. There’s a lot of academic based, a lot of actual technology was coming out of Boston.

Yeah. We had only a couple venture capitalist. Allan Patrick Hoff, Brad Burnham was AT&T Ventures at the time. Fred Wilson and Jerry Colonna had probably not yet or just about started Flatiron. A very small group. DoubleClick didn’t exist yet. It was actually mostly an Atlanta-based business tied to something called They took over here in New York. Jason Calacanis started his newsletter.

Jason listens. Hello, Jason.

Hey, Jason. He’ll have to correct me. He will correct me, I’m sure. But I’m thinking that was probably late ’95, the first Silicon Alley Reporter newsletter came out and the big thing was getting on his map.

It’s a small map.

It was a small map. There were a dozen of us.

You mentioned a few times where you came from. You’ve called me out a couple times for being east coast elitist about what I think about. Yeah. I’m from Minnesota so I can do it with a nudge and a wink. Given that you have that background and now we spent the last year-plus talking about the divide between the coasts and the middle of the country, and now we’re talking about the gap between the technologists and the rest of the country, do you feel like you’ve got a particularly useful perspective you can share with people about what that gap actually is or is not?

Yes. I think so. I think — and this also ties into more control of the company. When you’re a small minority holder of a company and you’re beholden to your investors who may be from very specific economic strata, and they tell you they have a viewpoint, you can’t really disagree too much. If you believe you have a point of view that’s different or that you can see something that people don’t see — for example, not many tech venture capitalist actually would believe in backing the future of television.

Today, they would.

Not television. Linear TV. They wouldn’t have said that eight years ago. It’ll still be around. They’ll just say no, it’s all going to go to YouTube.

Yes. They’ve been predicting the death of TV for 20 years.

Until you explained, when I talk to my mother and her broadband still is like, she’s one of the 10 percent, 15 percent of the people in town that have it. They can’t all get Netflix. When I talk to people in the business, they’re even shocked. If you’re in TV, a lot of people in TV are probably the most pessimistic about the future of TV.

Because they don’t even realize. They’re so used to hearing these other digital disruptions, and so I think that there’s, I think having a sense of balance ... For example, this will sound crazy, but I was telling people at the time I was very unhappy with the outcome of the election but I wasn’t surprised because it was obvious on my Facebook. Half the people who I grew up with, who were smart people, who were military officers, were putting stuff on their Facebook I’m just shocked at. I would have been shocked at in New York.

Is there a way to apply that to the business itself or it just gives you a more expansive worldview? That TV is big and out there, you should be paying attention to it.

Yeah. If I tell you 100 million Americans don’t have the internet at home. I do this, a lot of times I can conference and say, yeah. You’ll be shocked. My time in New York teaches me to make a bet that way. This is, let the undoing project go to where you know people are not going to play moneyball.

If it’s so obvious to you that having a slightly different background than a lot of folks who are running startups and creating startups, backing startups in the Valley is a good thing, why do you think more venture capitalists who are ultimately motivated by returns aren’t out there actively mining smaller towns in the middle of the country, saying, “Let’s find this guy in Bismarck, I bet he’s got a good idea.”

I think it’s a much tougher, it’s a much higher-risk bet. My chances for failure were so much higher, and so it was much more likely I was going to fail. The most predictable way to make a bet if you’re an investor is you’re going to get someone with an engineering degree out of Stanford who has a perspective on a core technology that you can make a heavy investment in, and it’s either going to work in 18 to 24 months or not.

It’s pattern matching.

Yeah. It’s total pattern matching.

This guy looks like the last guy that was successful.

Yeah. I’m not going to look like that, and so I happen to get to the city, but most people I grew up with, the vast majority have never been in New York City, so you got to find people that are going to do it, and are going to be successful to make it through those things.

It’s easier to wait for them to come to Stanford than it is for you to go out to Bismarck.

Actually, let’s talk about Minnesota. I have a good friend of mine, Mike Benson. Used to run marketing at ABC, he’s already at Amazon now. He grew up, you’ll know the town, I won’t, but it’s where the Mall of America is today.

Bloomington, Minnesota.

Yeah. He grew up just south side of there. His grandfather and great-grandfather owned a diner, a restaurant there. Big part of the community. His brothers, the Benson brothers, are a really successful local manufacturing business there today. You know what they manufacture? I won’t know the whole story. They grew up with Tony Hawk, and they built his jumps, because they were at high school together.

They built his skate jumps and parks, and they started then a business with him building skate parks. Problem is, you can’t build them out of plywood because they splinter and they break and people get hurt. You can’t build them out of steel because it breaks bones. Can’t build them out of concrete, same reason.

They came up with a composite plastic that was light wood that you could cut and assemble. Became very successful, which is why you see skate parks and you see playgrounds made with that all over America. They did not follow that business of making the skate things. They took all the scraps and started making cutting boards for kitchens. Those composite plastics.

They’re in the cutting board business.

They’re in the cutting board business, they just, I saw Mike just showed a link on Facebook. They just opened a new factory in their town. Even bigger, you would think those would come in from China, they don’t.

I do think, I firmly believe that we don’t have, New York is not going to go to Bloomington, Minnesota, or Clearfield, Pennsylvania, to get all the entrepreneurs. Some of us will come here, but technology is going to take it to the entrepreneurs there. It will see a lot of those new businesses happen there.

That’s a nice optimistic note to leave them.

I believe in it.

Dave Morgan. I’m glad you came to New York. I’m glad you came to Vox Media for this recording. Thank you for joining us.

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