Distillery

Distillery launched in 2008 as a pure-play demand-side platform (DSP) in the advertising technology space. For nearly a decade, the company focused solely on being an activation platform—a middleman facilitating ad buys for brands. CEO Michael Bebe and his team recognized that the real value wasn't in the platform itself, but in the data that powered it.

The original DSP business proved successful. Over the 12 months prior to this interview, Distillery was processing roughly $55 million in total spend through the platform and generating $27 million in net margin. However, like other ad-tech companies, Distillery faced industry headwinds: the "middleman" model was increasingly viewed as adding unnecessary cost rather than value.

In late 2017, Distillery made a strategic pivot. Rather than abandon its DSP, the company decoupled its proprietary audience data from its activation platform. This allowed brands—and crucially, Distillery's existing DSP customers—to access Distillery's audiences through third-party platforms like The Trade Desk and AppNexus. Some customers who had previously moved away from Distillery's DSP were now returning to purchase its data independently through these third-party channels.

The data product proved remarkably effective. Within months of launch, Distillery was processing $25 million in spend against its audiences through third-party platforms and collecting a 20% revenue share—standard for third-party data providers. This generated approximately $5 million in annual revenue from what was essentially a new product line launched from scratch. Bebe acknowledged that the 20% take rate seemed expensive to some, but argued that the superior performance of Distillery's audiences—created by ingesting and integrating ad-supported behavioral data, non-ad-supported behavioral data, mobile data, location data, and app data—justified the cost. Examples of Distillery's audience segments included "backyard chicken farmers" and "people in market for a new kitchen," built from sophisticated behavioral signal analysis.

The company also began developing a pure SaaS "insights" product, a dashboard allowing brands to understand their customer segments and uncover hidden audience sub-populations. This product was being delivered both on a consulting basis and developed into a subscription model, recognizing that consultative relationships with early customers often reveal patterns that can be productized.

After raising $60 million in venture capital (with a small inside round in 2018 to fund the new data and insights businesses), Distillery had scaled to 107 employees across New York headquarters and sales offices in San Francisco, Chicago, Atlanta, Los Angeles, and Boston. The company's net revenue margin on its legacy DSP product (including audiences) was approximately 50%, demonstrating strong unit economics. Bebe positioned Distillery's core competency—highly performant, high-resolution behavioral audiences—as the true currency of the business, whether monetized through its own activation platform, third-party platforms, or emerging insights products.