Paul Kemp: Welcome to another episode of The App Guy Podcast. I am your host, this is Paul Kemp. Today I’ve got a fascinating chat with a founder who is reinventing the way that we can monetize our apps. It’s unbelievable what we can do with regards to data. We’re going to be investigating alternatives to putting those frustrating ads on our apps and getting little monetization; we’ve got an alternative to go through. It’s going to be a wonderful talk, please do stay tuned.
Let me introduce today’s guest — today I’m speaking with Christian Rouffaert. He is the founder and CEO of Teragence. They are providing alternatives to us putting ads on our apps, and we’re going to find out more. Christian, welcome to The App Guy Podcast.
Christian Rouffaert: Thank you, Paul. Glad to be here.
Paul Kemp: Let’s just go straight in. The big challenge that many of my audience appster tribe find is that they just can’t monetize their ads that they’re putting on their apps. You’ve got an alternative — right? Give us the elevator pitch on what it is you’re offering.
Christian Rouffaert: Yes, so what we do is we have created an SDK — in that sense, we’re not very different from traditional ad models… An SDK that we embed in existing apps and the SDK basically sits in the background and takes network measurements of the mobile network (3G or 4G network, whatever it is) at regular time intervals and collects that data and sends it back to us. We monetize that information with the mobile operators.
The key value proposition for our app partners is to embed a very simple to deploy SDK that, contrary to traditional mobile advertising, does not interfere with the user experience, does not drain your battery and your bandwidth, but does generate revenue for you.
Paul Kemp: So let’s flesh this out in more detail then, because it’s a fascinating idea. First of all, why do you think that the traditional ad networks are not working for apps?
Christian Rouffaert: Well, I think there’s a number of significant hurdles that you have to overcome when you work with an ad network. First of all, it’s the SDK and its integration — integrating an ad SDK into your app is quite a long-winded and complicated process. That’s the first resource drain that it imposes.
Then secondly, what we see is that to understand the economics of that SDK deployment, there’s actually a vast amount of spreadsheets and modeling that you have to do in terms of number of exposures, numbers of click-throughs and all that. So the economics of it under normal circumstances is actually quite projective and uncertain. Add to that that the ability for the ad network then to get the adverts that work for you is sometimes limited. We’ve all seen people coming with big promises and low deliveries, so that’s the next disappointment.
And finally, adblockers — today more than 30% of traffic gets blocked and actually doesn’t generate any revenue. Then the final point is when the ad gets through, it often creates the distraction and the customer disengagement that you do not want.
There are all kinds of issues around mobile advertising that basically make it a very uncertain and not so nice value proposition, and that’s why we looked at some alternatives.
Paul Kemp: Yes! It’s the ad networks that control whether you get paid or not. We’ve seen as big as YouTube, for example, with its creators just changing the rules continuously, and changing how much they pay out, and actually just then deciding not to pay because you’ve broken some new rule that’s been put in place.
Christian Rouffaert: Yes. Well, I wasn’t actually aware of that, but I can absolutely imagine it. With the traditional ad networks, if you are a medium to small-sized app or content provider, you basically have to take what you are given by the big boys, and if they choose not to give anything, then that’s your loss.
Because we don’t pretend to be big and huge, but we are honest brokers, we can guarantee those payments much easier than the big boys are, and it’s not in our interest to change the rules halfway or down the line.
Paul Kemp: Yes, and on the flipside of that, we know that there’s these click farms that exist in Indonesia, the Philippines and elsewhere, where the advertisers are getting ripped off as well because they’re not getting genuine clicks. So both sides of the ad network there are challenges to the whole existing model.
Christian Rouffaert: Yes, exactly.
Paul Kemp: Let’s try and understand a bit more then because it’s the first time I’ve heard of such an interesting way to monetize your app. You had a really good point in why we should think about our devices different from perhaps a traditional TV — it’s still a screen, we still consume content through the screen, but why do we need to consume typical ads? You had a really good explanation of what we’re actually carrying around with us and why we can find these alternative ways of monetizing.
Christian Rouffaert: Yes, so the first thing to think about is that actually, I don’t come from the world of content, my background is in telecoms… But when we started to think about this, about our business model, it dawned on me that the model of mobile advertising today is actually still only a strange evolution of mutation of something that started in the ’50s. Let me explain what I mean by that.
In the ’40s and ’50s, televisions became a semi-ubiquitous consumer device. Every room had a television, and that television was essentially a screen that was able to produce audio-visual content that people wanted to consume. At the same time, people didn’t really want to pay for that audio-visual content, so people found other ways to monetize that content, which was to insert other content, which were called adverts.
So you had the typical American televisions phenomenon of the soap operas, and every 15–20 minutes two or three ads were inserted, and that paid for your consumption of your content free of charge. And it struck me that what we’re seeing now is that people are seeing smartphones and are saying, “Hey, a smartphone is a device with a screen, ergo the traditional screen monetization of advertising should work on the phone. So if people want to consume content on a phone which has a screen and therefore is like a television, we will do ads like we do on the television. We will position them differently — not on the entire screen; we’ll put them on corners or sidebars, but essentially it’s the same idea. This is an audio-visual device, people want to consume audio-visual content, therefore I’m going to insert other audio-visual content to pay for that”, which is actually just the evolution of the 1950s TV advertising model.
But the phone is not a TV. A phone is a super computer that happens to have a screen. It’s a super computer that’s charged with every kind of sensor imaginable. You could launch an Apollo 16 rocket off your smartphone.
The monetization techniques of the ’50s of TV advertising is just that — it’s an old relic. There’s actually all kinds of other things that we can do with that phone that pays for people’s audio-visual consumption, and that’s essentially what we do. What we say is we use the phone as a measurement device for network connectivity, and that enables the app guys to make money, and that enables the consumers to consume the audio-visual content free of charge or at a lower charge.
That’s a true evolution of the business model, leveraging the new capabilities of a phone, not just at an audio-visual screen, but as a super-computer charged with sensors that can be monetized in all kinds of ways that are actually not customer-intrusive.
Paul Kemp: Yes, let me just take this opportunity to summarize the way I understand it, because it is so revolutionary. What you’re suggesting is that because we carry around these super computers in our pocket, they have the ability to collect data — initially you were doing telecoms, and they can maybe judge the strength of the signal and all this other data that’s wonderful for the telecoms… You can aggregate that data up and present it and sell it to the telecoms who want to pay for that data, and then you’re rewarding the app developers by giving them a percentage of the return that you make for displaying…
That’s so wonderful, and I’m almost surprised it hasn’t been done before… It’s certainly the first time I’ve heard of it. Why did you only choose telcos? Is that the only thing you focus on right now?
Christian Rouffaert: No… As with all startup businesses, you start with the area that you more or less know. I have lived my life before becoming an entrepreneur as a corporate warrior in the telco sector, so that’s where I saw the business opportunity. But as we think about this, we believe that there are other domains where we can apply the same logic of background measurement that is at scale, but at the same time also privacy-respecting.
Areas that we are currently exploring are things like weather and weather prediction. For example, your phone has a very sensitive barometer in there, so we could track the movement of a low or a high-pressure system almost on a meter-by-meter basis if we have enough measurement points in our phones.
So weather is one that we’re looking at… We think that in the near future things like pollution and air quality will become possible, and another use case that we’re looking at is quite a niche, but quite interesting — it’s around potholes. A phone has very sensitive movement sensors, and if enough people go by a certain location and their phone makes a sudden jittery movement, you know there’s a pothole in that street, and somebody has an interest in knowing where the potholes are so they can keep the public happy.
So those are some of the other use cases that we’re looking at: road conditions, weather, pollution.
Paul Kemp: The reason I’m loving this is that I recently read a book by the founder of Wired, Kevin Kelly, and it’s called The Inevitable. A fascinating read, but the big theme that he’s talking about the evolution of devices and the fact that they have more sensors being attached to them, and it’s the ability to extract the data from these ever-growing devices and ever-growing sensors, and then presenting that as viable data to those authorities or companies that are desperately wanting that type of data.
Christian Rouffaert: Yes, and I would add to that… The technical capabilities are well known and we can create sensors for pretty much anything. The problem that you still have with sensors is that you need to distribute them, you need to get them to a wide enough blanket of measurement points, and you can do that the traditional way by sticking them into whatever device that you’re selling — fridges or microwaves or cars, but all these things have very, very long replacement cycles.
If you wanna deploy a network of sensors in fridges or microwaves, that’s a ten-year deployment cycle. Handsets have a 12 to 18 months refresh cycles. Within 12–18 months, you can deploy any new generation sensor to a very wide footprint, and then if you deploy our mechanism of collecting that information in a way that is large scale and privacy-respecting, and then extract the valuable information on there, you’re entering into a whole new world of how you understand the world.
Paul Kemp: Yes, and this is why I love my show, The App Guy Podcast, because we can almost foresee the future. What I’ve just gleaned from you in having this chat is that in the old world, in government, local authorities and state government in the U.S., they would have to get data by almost paying typically students who would go out and monitor traffic, look for potholes, look for various things and report back.
That would be a survey that the governments would pay for. But now, they have the potential of just buying the data from yourselves, and the data has been then taken from the population of smartphone users.
Christian Rouffaert: Yes, exactly. I would also stress that it’s not only the governments and the big corporate entities that have an interest in this… For example, one of the use cases that we are investigating at the moment is around we can now detect network outages in mobile operators. So not only can we grade the mobile operators in function of the quality of their coverage and the quality of their connectivity once you are in coverage, we can also say “In this given area there were 15 outages and they lasted 20 minutes in total”, which is an information piece that the big corporates have always tried to hold onto, because it was their big, dirty secret. We bust that open and give that to the consumer to enable them both to have a better choice and a better-informed decision on their purchasing, but also to make the information available and to go to their big service providers and saying “What you’re delivering to us is not fit for our purpose. Here are the data points.”
So it is both creating data to enable big businesses, but also to hold big business and big organizations to account by busting open information that they have very jealously guarded before.
Paul Kemp: Yes, in fact in my past episode we were talking about artificial intelligence, episode 500, with the co-founder of Skype. With the evolution of artificial intelligence is the need for data. What I’m also learning from you is the fact that you’ve just found a way of making data valuable to each individual who then carries around a device, and app that perhaps has your SDK, because at the end of the day they’re getting content for free, and they then are extracting a value for the data that they’re collecting through their device. It’s just remarkable.
Christian Rouffaert: It’s exactly that: you provide a service in the background, without any effort, from your phone, that is monetizable for society and for business, and in exchange you get the services that you need, i.e. your content consumption. It’s exactly that.
I think as we go further on, we will see a number of changes and mutations in that business model, and it is truly very interesting. For example, if we start to apply artificial intelligence, whereas now we can retrospectively see how many outages there were and how long they lasted and which locations they impacted, we will very shortly be able to predict where the outages will occur and how long they are likely to last, because that’s just pattern recognition in the data that we collect.
Paul Kemp: Yes, and I guess one of the big challenges that you have right now is getting onto these apps and getting the collection of data going. Maybe we can talk through that and the sorts of app developers that you’re looking to reach out for, who you’d like to help out with and out this SDK into their apps.
Christian Rouffaert: Yes, so our sweet spots are essentially app developers that have a good Android estate; iOS is part of our roadmap, but is not in our offering today. So first of all, you need to have a good Android estate. The second parameter is that we look for small to mid-range apps. We look for a few ten thousand to a few hundred thousand users or installs in a country like the U.K. We do not look for people who have millions. We look for mid-range apps.
Thirdly, it’s very helpful if the app already has a location-tracking component in there. So outdoor activity apps, geosocial networking, navigation, location-based games are really our sweet spot. And in that area — not the big boys, but the mid-range boys is what we look for.
Paul Kemp: That’s music to my ears, especially because that’s the part of the app store ecosystem that’s getting most squeezed with the domination of the big companies, like Facebook just dominating the top of the app charts, and Google and Apple with its own apps. It’s nice to know that the mid-sized apps do have this alternative mechanism.
Two final things before we say goodbye to you, Christian… It’s kind of switching gears, slightly — this is also a show that is to inspire app entrepreneurs, and you’ve made a successful switch from a high-profile corporate job to life as an entrepreneur. I wondered if you can take us back to that point where you did make that decision and give us some helpful tips on things that you learned that you would perhaps change in the way you did the switch from corporate to entrepreneurial lifestyle.
Christian Rouffaert: I don’t know if I’m in a position to give tips, but I can share my experience. I think a lot of us who live the corporate life will have a level of dissatisfaction that we have with the lives that we live. The politics of the workplace, the bureaucracy, we get squeezed into a corner and that frustrates us. The flipside of that, and this is really important to understand, is you do have a regular income.
What happens when you live in that situation is that you become — as somebody described it to me — a lab rat. It’s a negative image, so let’s call it a lab hamster. Basically, the lab hamster goes to a machine, pushes it, and a pellet is produced. That hamster very quickly understands the relationship between pushing the lever and getting the pellet. He might not like the lever, and he might not like the fact that he has to push the lever, but he gets very quickly conditioned that if he does that, a pellet will be produced.
Meanwhile, the hamster has all these ideas of how the world will be better and what he could do, and he might have done an MBA where he’s learned the tricks of the trade, and he’s spoken to other people, so one day the hamster breaks out from his cage with pellets and the machine, and he comes out in the wide world.
What you will do as a corporate hamster is you will look for a new lever to push, which might be, “Well, I learned that to run a business I need to do A, B and C. I will do A, B and C, therefore a pellet will be produced.” The shock to the system comes that actually nothing is produced, because your idea might not be right, you might not have been pushing the right buttons… Nothing happens. There is no feedback on what you do.
What you realize is that as an entrepreneur there is a significant period where you have to work and try things and do things without actually any feedback — no feedback in terms of salary, no feedback in terms of money, and no feedback in terms of people saying that’s actually interesting or good, because most people in that conception stage will look at you and say, “It sounds kind of interesting” — they will politely say that’s interesting, but actually not do very much.
So you are in this world where you had the certainty… At the end of the month, I will push the lever, a food pellet will be produced; and yes, life was a bit tough, but there will be food on the table at the end of the month… To a world where this is not the reality for a long time. You have to improvise, hustle and work through that without any pellets being produced. If you’re lucky and if you’re good and if you do that long enough, slowly things will change. You can find your product and people will start to engage with you, will start to pay you money, but it’s a process of continuous change and understanding how you should do things, and adjusting. In the hamster analogy, from pushing a lever and getting a pellet, you now have to forage for your food, and you sometimes have to forage in corners and places that you never suspected existed, or you could never imagine that you would go.
That’s quite a big, transformative thing, because up until that time you did a good job, you got a reward in some shape or form. In entrepreneurial life, you might be doing a good job for a long time and nothing might happen. Then slowly you kind of grip into the market, you get traction, you get your funding, you get your first revenue, and then things slowly change. But the process, the mentality and the emotional resilience that is required for that is quite something that’s fundamentally different.
I’ve gained a very much newfound respect for people who have been able to do that, and of course I respect myself because I have gone through this journey… But it is a fundamental change in mentality that is not to be underestimated. Running a business is not running a recipe book and expecting the cake to come out perfect. It’s doing everything right in the recipe book and the cake might come out wrong five times, and only the sixth time, with your last flour and your last eggs will something come out that somebody will pay money for. That’s the experience… Which is good, and also quite disturbing. But if you do it right, you come out on the end and it’s a great kick, and you’ll never look back.
Paul Kemp: Christian, I have to genuinely say that in the over 500 startup founder interviews, that is one of the wisest stories about the transition that I’ve ever heard. And it’s true in my transition… It’s almost given me a lot to think about in terms of the journey that I’ve been through, and the analogy just absolutely is perfect. You’ve just framed for many of us what we go through and helped us understand that we’re not alone.
Christian, finally then, how do people best get in touch with you, reach out and also get connected with the SDK, to start installing it in their apps?
Christian Rouffaert: Okay, so the easiest way for us — I’m slightly old-school, so e-mail is still something I use quite a bit, so info@teragence.com is a way of getting in touch. We are also on LinkedIn and on Twitter, so any reach out via those channels… On Twitter look for Teragence or @InfoTeragence; on LinkedIn look for my name Christian Rouffaert, or look for our company, Teragence. All those channels — you reach out to us, we will respond very quickly.
Paul Kemp: Yes, and just to spell that, that’s Teragence. I’ll have full show notes on episode 510 of The App Guy Podcast, so you could also go to theappguy.co and search for Christian Rouffaert and Teragence, and you’ll see the links to LinkedIn, Twitter and to the e-mail.
I highly recommend people actually do implement your SDK. Thanks for such an inspiring episode and making a big change in the world, and all the best to the future. We’d love to see how you progress and have you back on the show after a while to see how it’s gone.
Christian Rouffaert: Fantastic, thank you very much, Paul. It’s been a pleasure.
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