"Money doesn't rain down on us from the sky": AppsFlyer founder on business

What was the most difficult period in historyAppsFlyer? Is it profitable today? How does it fight fraud? Answers to these questions in an interview with the co-founder and CEO of the company Oren Kaniel

Alexey Pisarevsky, CEO of Getloyal, interviewed Oren as part of a series of Mobio Talks programs.

Alexey Pisarevsky, CEO of Getloyal: AppsFlyer has grown very rapidly over the past couple of years. How many people do you have in your team now?

Oren Kaniel, Co-founder and CEO of AppsFlyer: 344 employees.

How many of them do you know personally?

OREN: I try to know everyone. I try to communicate with every employee and make sure I conduct an interview with newcomers myself.

Many entrepreneurs and managers are surprised by this, but I advise everyone to get to know the people you work with better.

For me, communicating with everyone is a great experience. I interview all candidates before they become employees. That’s why I don’t meet strangers in the office. I like to be open: anyone can contact me on any question about the company’s strategy, for example, or about the product, or about the market, about anything.

A big company is a big responsibility. Is it difficult to manage Appsflyer?

OREN: In terms of personal responsibility, I don’t see much difference. Is it more difficult today than three years ago? No, I don’t think so. It is no more difficult to lead today than it was three or four years ago. Today I’m just solving completely different tasks.

What has changed?

OREN: Let’s go back, say, 4 years ago. We had very little money.

If I remember correctly, did you get $7 million then? This is not so little.

Oren: Did I say 4 years ago? Okay, let’s rewind some more. For example, in 2012 our budget was much smaller — only $0.5 million.

I then kept a spreadsheet in Excel. At the very bottom of the table was a line showing how much money we had left to maintain the company. With each new employee, the term was shortened: six months, five months, four months. The bigger the team was, the less time was left for the company to exist.

Such pressure!

Oren: Now it’s in another one. Then we had to either look for money or change something in the company – otherwise in less than 4 months we would have to close the company.

The last round of investments in AppsFlyer amounted to $56 million, you have 344 employees on staff. How many months will this money last?

Oren: The situation is different now. Today we have to decide how fast we want to grow. We can control this process. When we have enough customers, we can already seriously talk about growth and pace. At first, there were customers, too, but there was no constant income stream to consistently pay employees, suppliers and everyone else.

Regarding investments: in round “C” you received $56 million, before that in round “B” — $20 million, and in round “A” — $7 million. Which of the rounds was the most difficult?

Oren: The very first, seeding round. It is not written about it on Crunchbase [in fact, it is written, only the volume is not specified, – approx.editorial offices]. It was in 2012, and then we got those first half a million.

And this was the most difficult round?

Oren: Yes, the most difficult.

Why?Oren: We started together with a partner — we developed a new technology, went to local investors here [Oren means Israel, – approx.editors] and talked about our technology. No one believed in us, everyone said no.

It was a difficult time, we didn’t feel any market support. But this is understandable. Investors could not blindly trust our history, trust our knowledge, because we were new to the market.

As soon as we gained experience and were able to show how our ideas really help companies, we were given money.

Round “A” turned out to be much simpler than the seeding. In round “B” several investors came to us at once, and in round “C” there were even more of them. Investors asked the companies they had already invested in what tools they used, and thus learned about us. Investors were interested in what we were doing even before we met with them.

When do you plan to reach profitability?

Oren: We have a positive cash flow now, and as for profitability, everything depends on our decisions. Most of the resources go into development. If we want to reach profitability…

You can just reduce the staff.

Oren: Yes, but we don’t want to do that. Instead of 100 developers, we can only have 20 to support what we have. And tomorrow we will start making a profit. But this is not our strategy — for us it is now a priority to invest in the development of the product.

And if we talk about the future — in five or ten years? Amazon, for example, was not profitable for the first 20 years.

Oren: That’s Amazon‘s culture. They invest all their income in new business ideas – this is the idea of its founder and CEO Jeff Bezos. We at AppsFlyer are inspired by his example.

You have 13 offices around the world: in Israel, USA, China, Germany, UK, Thailand, Japan, Korea, Ukraine, Argentina and Brazil.

Oren: Yes.

Which one was the hardest to open?

Oren: It’s not so much the country as the people. If you managed to assemble a talented team and find a good leader, everything will go easily.

How do you recruit employees in different countries?

Oren: I meet people, get to know them, talk to them.

We consider the Chinese market to be one of the most difficult in our industry. You managed not only to reach it, but also to achieve success. What’s the secret?

Oren: First of all, in the product. The fact is that Chinese customers know exactly what they need and tell them directly if something doesn’t work. They are demanding. I think this is their positive trait. They push us to develop the product and its new features. They know exactly what they want. We were lucky that we started working in China from the very beginning.

How it all started, I do not know. As it turned out, there is a great demand for our services there. We didn’t expect this to happen, and at the same time we tried to focus on other regions too. At some point, we started working with the largest Chinese companies and met wonderful people. All of them speak excellent English and in general are real professionals in the field of mobile application development. I realized then that it was with such companies that we were interested in cooperating.

What about the Russian mobile advertising market?

Oren: We love him.

Now you have a team from the Israeli office working with Russia. Are you planning to open a branch there?

Oren: We love the Russian market! One of our first and largest clients was a game developer company from Russia. So the history of our company is closely connected with this market. It can be said that it all started from there.

What do you think about the success of Yandex AppMetrica? This product is free, and it seems that’s why many companies use it.

Oren: When something is offered for free, there is always cause for concern, especially when it comes to analytical services. Any company stores data, not only its own, but also client data: who bought what, how much they spent, and so on. After all, no one would think of sharing information about their own customers with competitors — using such data, any company will find a way to take these customers to itself. Let’s say you are a game developer, and you have one percent of users paying. Would you give them to a competitor just to save on an analytics tool?

It turns out that if the tracking tool is free, then most likely it transmits client data somewhere else?

Oren: I mean, companies need to be more careful with data. When something is given for free, there is a reason for that. After all, to create a tool, you need money.

In the case of AppsFlyer, money does not rain down on us from the sky. Some companies do monetize data—that’s their business. Others charge for services or for a product. We have chosen to be independent and impartial — the only way we can guarantee our customers the safety of their data in a world where data is being hunted. This is a potential threat to any company.

The word “fraud” has become the word of the year in the tracking systems industry. According to your estimates, what is the share of fraudulent traffic in the total volume?

Oren: A good, but difficult question. I’ll explain why. All you see is the AppsFlyer ecosystem. Within our ecosystem, we fight fraud in two ways.

Firstly, with the help of technology.

AppsFlyer’s market share is 60%, which means we process huge amounts of data. Every day we see 30 billion events in mobile applications that are installed on 4 billion active devices — about as many smartphones exist on our planet. We constantly analyze this data and identify fraud in it.

The other way is through dialogue with partners. We ask them to make sure that our clients do not receive fraudulent traffic from them. Otherwise, we will detect it and demand active actions.

The situation with fraud in mobile advertising illustrates the so-called “prisoner’s dilemma”. I wrote about it in a blog. The bottom line is that with the general connivance of fraud, it will be bad for everyone. Trying to be competitive, many market players drive fraudulent traffic, or turn a blind eye to it for the sake of a beautiful ROI. By developing our ecosystem, we motivate all its participants to fight fraud for the benefit of customers.

Do you believe in such an ecosystem?

Oren: Yes. For example, we stopped cooperating with two partners who, according to our information, did not make enough efforts to clean up the fraud. In general, it is wrong to call such companies “partners” — their entire business is built on fraud. We simply blocked their accounts, forbidding access to the platform.

What do you think are the prospects for retargeting?

Oren: From the very beginning, we knew that retargeting had a great future and bet that sooner or later, from measuring the number of users and installations, the market would come to concepts such as genuine engagement and re-engagement. It took longer than we expected, but now this concept, fortunately, has finally begun to gain popularity. We have invested a lot of effort in developing retargeting and engagement capabilities in our product: for example, in our OneLink mobile retargeting solution based on deeplinks technology. “Deep links” make it possible to direct users to a particular page, depending on whether they have an application installed or not.

Last year, we created a new mechanism for consistent audience segmentation, which allows you to segment users based on first-hand data and transfer them to partners for retargeting and re-engagement. Many customers immediately began to actively use it.

As a manager, what are you focused on first? What are your daily tasks?

Oren: I think about everything. The tasks are different. Product development, promotion strategy, company structure, negotiations with colleagues. I personally communicate with every person in the team, be it a manager or a developer. I think about everything. If you ask me what is the most important thing, I will say – people. People are the main thing in our company, and I consider it important to invest in their development and professional growth. Culture is also important. I would like everyone who works with us or has worked with us before to be proud of their AppsFlyer experience. I am sure that when you make a product and are proud of it, everything works out.

And the last question: what is the main goal of AppsFlyer for 2018?

Oren: Continue to maintain a leading position in the market. There is nothing complicated here — the main thing is to please customers and partners with the capabilities of our platform and useful services. We want everyone to be satisfied.

Customers need two things — to make it faster and cheaper. We understand this and will move in this direction in 2018. And we also hope that the fraud will be over, and everyone will forget about it as a terrible dream, and start talking about such useful things as retargeting. When people or companies are afraid that they will be deceived, it’s bad. Thanks to technology, this fear can be cured and new opportunities for growth can be created instead. I hope this will happen this year.