I’m a believer in the idea that if you really — really — want to know how good someone is as a business operator you don’t work for them, invest in them, or follow them. You compete against them.

The same goes for sports. Everyone knows that Muhammad Ali was an extraordinary fighter, but no one knew it as well as George Foreman when he got knocked out in the 8th round of The Rumble in the Jungle.

You need to be in the ring going head-to-head to fully comprehend the competitive dynamics and the skill, tenacity, adaptability, speed, and endurance of the competing player. To feel and taste the punches.

That is why, today, I am writing about Blockthrough and invited Marty Krátký-Katz (its co-founder and exited CEO) to join me.

How so? I once ran a company that competed in the same space as Blockthrough — ad blocking solutions for publishers.

Though we only semi-competed for a short while — when Blockthrough was getting off the ground just as I was calling it quits and was selling out — it was enough for me to grasp how laterally astute and tenacious Marty and the rest of the team were.

After gruellingly failing to launch Blockthrough numerous times, Marty found traction with a 4th swing-at-bat product and sold the business 4 years later at a valuation of a little under $100M CAD in 2022.

The key lesson of how he did it? Mindset.

I don’t mean tiresome founder platitudes like “go grind ” or “hustle harder”. Working hard is a given.

Instead, I mean: the effective application of critical thinking. 

Specifically, systematically calling out and questioning tacit assumptions to find the breakthrough idea.

Assumptions that competitors were blind to, or ignored, because of biases rooted in industry exposure. Because of inside-out thinking.

Whilst the ‘who, what, and why’ details of this story are specific to a niche adtech category, the core principles are transferable to just about any category.

Particularly, if you operate in a category in which your value proposition is not the clear choice. Where getting a sale is a grind. Where no one seems to ‘get it’. Where confusion and apathy reign supreme.

To put Marty’s breakthrough into context, I first need to set the scene for Blockthrough’s journey. This is to illustrate why divergent thinking is difficult to pull off, and how to do it.

I’m going to share with you the awkward complexity, to show you the beautiful simplicity. Starting with my vantage point.

It’s time to get my adtech nerd on. Here we go.

Cue 🎵 The Ride of the Valkyries 🎵

Adblockalypse Now

Way back in 2012 I co-founded an adtech company called Yavli that, by 2014, had pivoted to monetising ad blocking traffic by serving native ads via circumvention technology.

Up until that point, ad blocking was not really on the radar of any side of the digital advertising ecosystem.

Many publishers loved the newly ‘found revenue’ we brought them, generated from a problem they never knew they had.

So, we quietly grew pretty fast. In one year we went from $73.20 to $17,448.11 daily recurring gross revenue.

How come? It was a new category and we had a radically differentiated value proposition.

We’d pitch publishers our solution and the primary competing options we’d be up against were not direct functional competitors but instead internal priorities and inertia — “WTF is ad blocking?”

This was quickly followed by: “HOW MUCH REVENUE ARE WE LOSING?”

Do not get me wrong. There were other ad blocking solution companies around, but they rarely came up in sales calls. It was a nascent time.

It was never really an ‘us vs. them’ situation because we were all operating at the frontier of ad blocking monetisation solutions in very different ways with very different prospects.

To be honest, it felt weird to close deals and revenue ‘so easily’.

It was kind of like being first to an exquisite buffet and there’s no one else following in your footsteps. Just a competitive void around you. And, an untapped bounty at your fingertips.

Leaving you unnervingly contemplating… “is there something wrong here?”

Later that same year a company called ClarityRay — who had been experimenting with ad blocking solutions in a different way — was acquired by Yahoo! for a reported $15 to $25 million. Another company called Secret Media also popped up, trying to prevent video ads from being blocked.

The closest thing to a functional competitor was PageFair, but they operated (from an external perspective) more like a think tank than a startup with commercial objectives.

Their annual PageFair ‘Adblock Report’ became the de facto gold standard for the digital media ecosystem.

Then, 2015 rolled around.

A stampede suddenly turned up to the buffet.

Ad blocking went from being a fringe topic to a major concern of the digital media ecosystem in a timespan that felt like a snap of the fingers.

Industry commentators started referring to an “Adblockalypse”. Every conference we attended suddenly had an ad blocking talk or panel. It became a trigger topic.

The problem unfolding was straightforward: digital publishers relied upon ad dollars for revenue and their audiences were adopting ad blocking extensions at an increasingly alarming rate.

Perfect for us? Not quite.

Despite the industry attention, the adoption rate of our solution slowed down.

Why? Multiple reasons.

First of all, the noise motivated the ad blockers to get serious about blocking circumvention solutions.

This crackdown created a cat-and-mouse dynamic that made it untenable for us to scale (more detail on that later).

Secondly, new startups burst onto the scene to tackle the ‘ad blocking problem’. Each with radically different approaches.

Sourcepoint, founded by the team behind AdMeld (exited to Google For $400m), raised a $10m round and helped kick off a paradigm shift in the industry discourse.

Publishers became less interested in rushing to adopt ready-made monetisation solutions and more interested in discussing and analysing their holistic monetisation approach.

It became a conversation of sophisticated ecosystem existentialism — “how do I build a sustainable monetisation model?” — as opposed to plug-and-play dialogues.

This was further fueled by the actions of infrastructure-level stakeholders.

Apple enabled ad blocking on iOS 9. Potent rumours started flying around about mobile carriers default blocking ads.

One thing became immediately clear. Ad blocking was ultimately the symptom, not the problem. This had far-reaching implications (which are still playing out today).

To be honest, the narrative shift took us completely off guard and we were ill-prepared for it.

We had a proven product in terms of value generation, but it was functionally narrow relative to the broader industry conversation. We got outclassed and positioned as “unsophisticated” by competitors.

By the following year, 2016, no one had achieved anything meaningful to fix the ad blocking problem.

All of the sophisticated-sounding solutions proposed by our well-funded competition were “whiteboard fantasies” (as one industry executive said to me at the time). They had no proven practical application.

As 2017 approached, we threw in the towel in endeavouring to build a venture-scale business by circumventing ad blocking software. It was a futile endeavour (I outlined why in AdExchanger).

Our competition started pivoting or going around in circles trying to find some semblance of “product-market fit”. GDPR popped up as the new privacy-related crisis. There was a lot of soul-searching.

By 2017, ad blocking as a topic was out of vogue — yawn — but remained unsolved. Two years prior it would easily get you a meeting with a senior-level exec at virtually any publisher with a cold email or two. Not anymore.

It became passé because it had been discussed to death. Nothing truly meaningful had come off the back of the industry discourse — other than bluntly implemented ‘solutions’ like ignoring ad blocking visitors, begging with them, or banning them entirely — and the sky wasn’t perceivably falling.

Smartphone adoption (with much lower ad blocking rates) neutered urgency and initiatives by Google (default ad blocking in Chrome), The Coalition for Better Ads, the IAB (LEAN and DEAL), and the Digital Advertising Alliance (AdChoices) created a perception that ad blocking was being dealt with as a systemic issue.

This combined sentiment was captured by industry reporting at the time:

Around this time, eyeo — the company that owns the most popular ad blocking extensions — started to enthusiastically promote its Acceptable Ads program.

The acceptable what?

It’s a service in which publishers and adtech vendors can “pay the ad blockers” to reinstate a lighter — Acceptable Ads compliant — ad experience on page.

Simply put: ads are whitelisted (shown) if publishers agree to comply with a certain set of ad standards and pay a non-trivial fee (30%).

In many ways, this move threw another spanner into the works.

Tech giants like Google, Amazon, and Microsoft jumped on board. As did adtech vendors such as Taboola and Criteo.

But, the majority of publishers stayed away.

First of all, it was unproven and publishers had low confidence it would monetise well because of the ad format restrictions of Acceptable Ads.

Secondly, many publisher execs baulked at the idea of paying a “ransom” (their words to me) to reinstate ads that eyeo’s software had removed.

For us, the Acceptable Ads program dealt another blow to the appeal of our value proposition. Two large adtech competitors (Outbrain and Taboola) — who had previously not offered an ad blocking monetisation solution — joined Acceptable Ads and offered a service that provided very similar value to customers.

This severely diluted the appeal of our offering, particularly when eyeo acquired AdBlock (the no.2 most popular ad blocking extension in 2015) and rolled out Acceptable Ads onto it immediately. At that point, eyeo owned orhad partnerships with ad blocking extensions that collectively generated 80%+ of all ad blocked page views online.

As you can tell, the coming years were a tough time to build an ad blocking solution business from scratch. The category was completely broken functionally. Sustained frustration morphed into disinterest — a sense of hopelessness. Not just for us. Everyone.

All of the strong opinions and competing ideas amounted to very little in terms of viable solutions. Many gave up.

The key point I want to make here is perceived complexity.

This all sounds like a confusing whirlwind, right?

When you’re operating inside an undefined category in real-time — whether it’s ad blocking solutions or something else — it can be tough to see through the complexity.

It’s like being inside a tornado.

Inside the tornado, it’s hard to think critically and see clearly amidst a whirlwind of ideas, perspectives, competitive claims, regulatory changes, industry updates, and other noise.

It’s difficult to find something focused and tangible to latch onto. Particularly when every prospect you speak with seemingly has a different set of circumstances and a nuanced perspective. What’s the sustained common interest?

To stay resolute and not get bounced around by external forces is hard. To pinpoint the few factors that matter and grab hold of them tightly is Herculean.

To conceive of the idea that can facilitate hypergrowth and a happy exit requires taming the tornado. Otherwise, you just can’t see it.

Case in point: despite all of the capital and really smart people recruited to tackle ‘the ad blocking problem’ in the beginning, finding a scaleable monetisation solution proved evasive and unobtainable.

Marty broke this cycle. But, it didn’t come easy. It required a mental bridge between outside-in thinking and domain expertise.

Blockthrough’s Breakthrough

Blockthrough was Marty’s 3rd startup.

The previous 2 — which were not in adtech — didn’t get off the ground.

Blockthrough started on a similar pathway to us (Yavli), by developing technology to circumvent ad blockers. As in, bypassing ad blockers with ads.

To use an analogy: imagine trying to get into a bar but the bouncer won’t let you in. So, instead, you go around the back.

It works at first, but then the bouncer notices and kicks you out. You find another way back in. The bouncer spots you, again, and so on.

Each time you’re getting a little more beat up and the bouncer has to go to greater lengths to find you, wrecking the joint in the process.

It feels exhilarating to grab that first beer or two, but it’s not sustainable.

For two years Blockthrough tried this approach. It didn’t work because:

1. To do it effectively, it required “full access” to the publisher’s tech infrastructure (which they generally do not want to give).

2. Playing cat-and-mouse with the adblockers impacted the targeting and measurability of the ads, making them close to worthless with most ad formats and demand sources.

Despite being able to physically load an ad visually on a webpage, much of the underlying infrastructure (enabled by third-party callbacks) that makes the ad inventory valuable gets blocked.

There are some first-party workarounds for this, but it’s janky. You either have to reinvent the wheel by building proprietary tech that’s very limited in scope, or, modify the intended application of 3rd party adtech vendors, who, really won’t like what you’re doing. 

First-party solutions can also provoke the gatekeepers that manage the ad blocking filtering process to ‘break websites’ — by blocking all content on a publisher domain (both editorial and advertising). Essentially, taking editorial content hostage.

Marty reflects on Blockthrough’s circumvention strategy struggles. 👇

First Principles

After exploring the circumvention approach and getting nowhere closer to ‘product-market fit’, it was time for Marty and his team to go back to the proverbial drawing board.

A crucial part of this process was to consciously surface and challenge assumptions and biases. Assumptions that seemingly everyone else within the industry perceived to be fact. Biases that distorted perceived opportunity.

First principles stuff.

This was driven by two core elements:

• Desperation. Blockthrough only had a few months worth of runway left in the bank. Within the broader company vision, nothing was “off the table” in terms of finding a pathway to ‘product-market fit’ fast.

• Category clarity. Marty was not from the adtech world. Meaning that he was not category-biased or prescriptive in the approach to designing a value proposition.

These are subtle, but huge factors.

How so?

Often, I see startups that unconsciously allow biased value proposition design to creep into and guide the de facto execution of the company’s desire to solve a prospect’s problem.

Essentially, the tail is wagging the dog. It’s too zoomed in and prescriptive. You can’t see the other immediate pathways in front of you when holding binoculars in front of your eyes.

This pre-emptively handcuffs iterative ability and the discovery of new, valuable directions that are impossible to identify before the fact.

Blockthrough’s breakthrough — like all journeys to ‘product-market fit’ — was a unique insight that no one else but them saw. Why? Because bias was not innately baked into their vision and view of the category.

They took several steps back and re-evaluated the situation objectively. From afar — outside the tornado.

First, Marty and his team identified the few core factors that mattered:

1. Unsolved problem. Ad blocking was still an unsolved monetisation problem for publishers, and that was observable from going to top publishers' websites and speaking to publishers -- there was no dominant player in the space, let alone one that publishers were happy with.

2. PMF direction. There was a clear direction of what ‘product-market fit’ looked like. Publishers desperately wanted to serve ads to ad blocking visitors via their existing adtech infrastructure — “make my stack work!” was by far the most common customer request.

3. Sustainable monetisation. There was a sustainable mechanism to serve advertising to ad blocking visitors without engaging in cat-and-mouse with the ad blockers: Acceptable Ads.

Marty pieced together a value proposition hypothesis based on these three core factors that would be radically differentiated and valuable to publishers if proven viable.

That was: Serving ads to the majority of ad blocking visitors from a publisher’s existing adtech stack via Acceptable Ads.

In short: Programmatic for ad blocking inventory.

It was beautifully simple.

Contrary to popular GTM discourse, this is an example of a breakthrough idea that originated directly from customers. From their existing frame of reference.

Every vendor, including us, received the same feedback from prospects: “restore my programmatic advertising for ad blocker visitors!”

Most vendors responded to this insight with awkward or over-complicated solutions that dodged the insight.

Why? Partly, because it didn’t seem possible. Partly, because other approaches were an attempt to utilise ad blocking as a trojan horse to pursue a broader long-term market objective.

Neither dodge solved the publisher's problem.

Lesson: If a customer asks for “a faster horse” you should consider delivering a faster horse as your core idea — if their existing horse is missing in action.

Trying to invent the equivalent of a car might be overthinking it. The value proposition changes along with it, so product risk massively increases.

Particularly, if the agenda for pursuing such a direction is driven by a moral point-of-view. Which, was very much the case in the ad blocking solution space.

How so?

It was a polarising topic, so vendors would typically craft a value proposition originating from either side of the table: “adtech vs. ad blockers”. Usually, assertively or aggressively towards one another.

Adtech vendors generally wanted to use mechanisms they were in control of to enable ad blocking users to compensate publishers, and positioned ad blockers as the enemy in their narratives.

Conversely, the ad blockers positioned adtech as the enemy and rocked up with their own monetisation solution, characterising adtech vendor solutions as “more of the same”.

Marty approached the debate from a different starting point: ad blocking users.

This offered more scope to be creative. To be bi-partisan. Unshackling opportunity.

Blockthrough’s ‘programmatic for ad blocking inventory’ value proposition hypothesis emanated from this point-of-view, marrying together the publisher’s motivation to leverage their existing adtech stack together with the ad blockers’ (eyeo’s) motivation for publishers to utlise Acceptable Ads (which had user consent).

However: turning Blockthrough’s hypothesis into a validated product was not straightforward.

Prior to arriving at the value proposition hypothesis, one approach was taken off the table.

A bunch of adtech vendors had already been burned attempting to build solutions utilising Acceptable Ads.

How so?

The generally held perception was that you had to build a proprietary end-to-end tech stack in order to facilitate the transaction of Acceptable Ads inventory.

“End-to-end” meaning: from publishers on the supply side all the way through to advertisers on the demand side. Reinventing the wheel.

In other words, just about everybody thought that utilising Acceptable Ads necessitated that vendors rebuild the supply chain from scratch; without being able to leverage the existing advertiser demand that makes display advertising across the web valuable in the first place.

Numerous ad blocking solution companies tried to do this. The problem was they were trading the cat-and-mouse game for a game of chicken-and-egg.

Advertisers won’t show up unless there’s worthwhile ad space. Publishers won’t join unless there is strong and easily accessible demand for their inventory — a “print money button”, as Marty calls it.

There were early adopters, but razor-thin liquidity meant revenue yield (the metric is “RPM” in adtech speak) was terrible. This approach floundered.

Conclusion: tapping into a programmatic feed of existing advertiser demand (as publishers do for non-ad blocked ad inventory) was critical in order to build a scaleable solution utilising Acceptable Ads.

However, doing this was counter-intuitive through the lens of industry logic.

Other vendors did not pursue this direction materially because, in order to be true, a series of commonly held assumptions would have to be false.

The assumptions were:

1. Publishers refuse to participate in Acceptable Ads as a matter of principle.

   Meaning: Publishers would not en-masse participate in the Acceptable Ads program because they would be “funding the problem” — ad blockers.

2. Acceptable Ads compliant ads generate such little value for advertisers (on a per ad impression basis) that the revenue publishers can receive from serving them is non-material.

   Meaning: The Acceptable Ads standard (rules) were too onerous and restrictive to be commercially viable. Particularly ad appearance specifications, which hindered the ability of advertisers to meet objectives. Consequently, it was assumed the vast majority of ads placed through programmatic pipes (what a publishers’ adtech stack is and connects to in order to serve automated advertising) were not Acceptable Ads compliant and therefore couldn’t be utilised.

3. Filtering out ads that are not compliant with Acceptable Ads from programmatic demand is not technically feasible.

   Meaning: If you can’t filter out the non-compliant ads for a publisher’s ad blocking audience reliably, they will get served. Which, would be in breach of the Acceptable Ads standard and result in termination of a vendor’s relationship by eyeo (i.e. kicked-off the ad blocker whitelist).

4. Supply-side platforms (vendors that broker publisher ad inventory programmatically) will not facilitate the selling of ad blocking inventory.

   Meaning: Supply-side platforms are the gatekeepers to open marketplace programmatic demand. Without their buy-in, there is no scaled advertiser demand.

Marty and the team challenged the assumptions. Here’s what they discovered for each:

1. ❌ FALSE: Publishers refuse to participate in Acceptable Ads. 

   👉 Discovery. By changing the mental frame of reference, publishers were willing to participate in the Acceptable Ads program. Blockthrough was legitimately able to position its solution as paying “for filtering tech” instead of “a ransom” to the ad blockers. Having a ‘middle-man’ in between publishers and the ad blockers also made the transaction more palatable.

2. ❌ FALSE: Acceptable Ads compliant ads generate such little value for advertisers (on a per ad impression basis) that the revenue publishers can receive from serving them is non-material.

   👉 Discovery. Acceptable Ads allowed for a much broader remit of creative scope than many adtech companies perceived. Up until that point, no one had really tested this thoroughly. By utilising the full scope of the Acceptable Ads standard, and not merely the perceived scope, the revenue generated for publishers was material.

   Critical learning: up to 50% of the ads flowing into supply-side platforms were compliant. Meaning, there’s a ton of pre-existing and automated Acceptable Ads compliant demand to tap into.

3. ❌ FALSE: Filtering out ads that are not compliant with Acceptable Ads from programmatic demand is not technically feasible.

   👉 Discovery. Blockthrough were able to leverage Prebid (a then-recent open source adtech innovation) to help solve this technical challenge. They built an ad filter that sat between publishers and programmatic advertisers, only permitting compliant bids from advertisers (which met the Acceptable Ads standard) to win an ad auction and load on the webpage.

4. ❌ FALSE: Supply-side platforms (vendors that broker publisher ad inventory programmatically) will not facilitate the selling of ad blocking inventory.

   👉 Discovery. This assumption proved to be true, sort of. Initially, Blockthrough couldn't work directly with supply-side platforms (what’s known in the industry as having a “seat”). The supply-side platforms were simply not interested. Blockthrough discovered that leveraging Prebid enabled them to get around this problem by working with publishers directly and utilising the publisher’s “seat” with supply-side platforms instead (via a setup that would not trigger problems).

What this all meant: It worked! Restoring programmatic demand for ad blocking inventory was a viable value proposition.

By tapping into into pre-existing advertiser demand, it solved the chicken and egg problem. By utilising the Acceptable Ads program, it solved the cat-and-mouse problem.

From the complexity in the beginning came clarity. Then, focus and simplicity. Genius.

Blockthrough was able to develop an intuitive Positioning idea that both deeply resonated with publishers and was hypergrowth scaleable: push-button programmatic ad block revenue.

This was radically differentiated and valuable versus competitive alternatives.

It tapped into what publishers were looking for:

1. Sustainably restored ad tech stack

2. Plug and play implementation

3. Material revenue

No one else offered anything like this combination. With competing options one or more of these elements were missing.

So, what did growth look like?

Upon launching the new solution in 2018 Blockthrough went from absolutely nowhere — $0 MRR — to $230k MRR in 9 months.

Within three years, they hit $10M ARR.

In 2022, Blockthrough was acquired by eyeo at a valuation just under $100M CAD.

Takeaway

Blockthrough succeeded in achieving ‘product-market fit’ with an obvious problem but not an obvious solution.

What do I mean?

By 2018, ad blocking was a widely known and accepted problem. If you could make the problem go away (restore ads), publishers would pay you handsomely for it.

But, the solution was non-obvious. Or, should I say: the solution was so obvious it was non-obvious.

Publishers clearly told vendors what they wanted (“restore my stack!”) but most assumed it was not possible — dismissing it quickly.

Lesson? With an obvious problem but a non-obvious solution, it’s imperative to identify and challenge what seems like elementary assumptions if there’s a strong signal from prospects that proving those assumptions to be false would deliver ‘product-market fit’.

Therefore, I put it to you: what implicit and unchallenged assumptions are you making about your category? Assumptions that, if proved false, would unlock asymmetric value creation?

Call out your assumptions. Challenge them. Think critically.

They do not have to be tangible assumptions — e.g. objective outcomes you can deliver (like Blockthrough). They can also be intangible assumptions — e.g. physchological outcomes you can deliver (like Liquid Death).

Challenge the mental boundaries and competitive rules of engagement of your category. They are not written in stone, they exist only in the mind.

That’s it for today. I’ll be back in your inbox soon.

Martin 🤘

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