Chalice Custom Algorithms is an Ad Tech company that provides advertisers with alternatives to generic algorithmic models, which are typically designed to meet broad advertiser objectives or favor the companies behind them, such as Google and Meta. In an era of deep technological and regulatory changes for the ad industry, advertisers are increasingly seeking systems that provide programmatic platforms with bespoke bidding instructions tailored to their specific needs. We spoke with Adam Heimlich, CEO and co-founder, to gain insights into their business model and his perspectives on the current challenges facing the industry.

This interview has been edited and condensed. Comments collected on March 29, 2024.

For our AdLeaders interviews, we like to talk to AdTech influencers who have a clear-cut opinion on the industry's current predicaments and who know what they're talking about. Adam Heimlich is one of them. After starting as a journalist with a focus on music reporting in his 20s, he transitioned into marketing and advertising during the emergence of Google AdWords. His career trajectory led him deep into programmatic advertising within various agencies. Notably, at a major full-service agency, Adam pioneered the establishment of a programmatic trading desk. Following this, he ventured into ad tech consultancy for a couple of years, amassing over three decades of industry experience. In 2020, Adam realized his entrepreneurial vision with the founding of Chalice, marking the culmination of a long and diverse career journey. 

AI now serves as a fundamental component of AdTech, providing solutions to a multitude of challenges, with a primary focus on targeting. It’s at the heart of Chalice’s offering: "Chalice a standalone custom algorithm software advertisers can add to the ad platforms that they use" explains Adam. The idea is to go further than what platforms offer "Ad platforms offer two things: a bidder and an algorithm, and we think those should be unbundled. Big platforms, such as Meta, AdWords, or YouTube, are highly effective for placing bids. They offer numerous integrations into various inventories. However, algorithms, which serves as the decision-making technology embedded into the bidder, would be even more beneficial if it were brand-specific.This is particularly true for large brands, as their extensive data can be used to exclusively train an algorithm on their own data." Companies like Apple are at the forefront of this change, introducing new and powerful custom algorithms that empower advertisers to maximize their targeting and campaign efficiency. "New capabilities that will help a lot to overcome the cookieless paradigm shift," Adam adds. Chalice is one of the companies leading the change : "Think of Chalice as a pipeline that ingests all your data, processes data science activities on them in a transparent and auditable manner, and then produces bid instructions that the advertiser can deploy wherever they want, on key ad platforms including the Trade Desk, DV360, Xandr, Beeswax, etc.” AI-based brand-specific algorithms appear as a tailored approach that allows brands to own their own targeting models while retaining ownership of all the data, a proposition that resonates strongly with retail companies. As AI continues to reshape the Ad Tech landscape, embracing these advancements becomes paramount for advertisers aiming to stay ahead of the curve.

"AI-BASED BRAND-SPECIFIC BIDDING ALGORITHMS ALLOW BRANDS TO OWN THEIR OWN TARGETING MODELS WHILE RETAINING OWNERSHIP OF ALL THE DATA, WHILE GOING FURTHER THAN AD PLATFORMS DEFAULT ALGORITHMS."

When discussing the AI revolution in AdTech, Adam reminisces about the impact of "Competing in the Age of AI" by Marco Iansiti & Karim R. Lakhani (Harvard Business Review Press), a book he read in 2019, which underscored the early adoption of AI by pioneering businesses like Alibaba. "It's fascinating to see how AI has evolved since then," Adam reflects. Central to this evolution in AdTech is the concept of targeting, a cornerstone of digital advertising strategies. "Targeting is kind of a misnomer. Google and Facebook have moved beyond audience targeting towards a more nuanced understanding of valuation." Herein lies the essence of Chalice's approach: personalized valuation. "Every page load presents an opportunity for valuation," Adam elaborates. "For Hershey, it's about determining the value of that page based on specific business outcomes." This tailored valuation process, driven by AI algorithms, considers a multitude of factors—from user data to contextual cues—resulting in dynamic and nuanced assessments. "It's akin to predicting stock prices, but with the added complexity of varying valuations based on product, timing, and campaign objectives." Indeed, the power of AI lies in its ability to rapidly process vast datasets, enabling advertisers to navigate the intricate landscape of programmatic advertising with unparalleled agility, empowering them to optimize their strategies with precision and efficacy.

"AI-BASED AD TARGETING IS AKIN TO PREDICTING STOCK PRICES, BUT WITH THE ADDED COMPLEXITY OF VARYING VALUATIONS BASED ON PRODUCT, TIMING, AND CAMPAIGN OBJECTIVES."

Precision and efficacy are more fundamental than ever as the industry moves past the age of third-party cookies, a seismic shift in which AI is set to play a crucial role. "Cookies served as a crude matching technology, originating from a time when digital measurement was in its infancy," explains Adam. "But the landscape has evolved, and the inherent insecurity of cookies has become increasingly apparent." The imminent deprecation of cookies leads to a major bifurcation for the advertising sector: "Advertisers must navigate a divide between those reliant on legacy methods and those embracing alternative solutions," Adam observes. Innovating firms are capitalizing on this transition, offering cloud-based interoperability solutions that promise enhanced security and privacy. "There's been a huge amount of motion and investment in cloud-based interoperability," Adam notes. "Solutions like LiveRamp and data clean rooms are paving the way for a new era of digital advertising." The reliance on personal data for predictive analytics may not be as indispensable as once thought. "There's this enormous arms race between Google and Facebook in the collection of personal data," Adam acknowledges. "But for most advertising verticals, predictive analytics can be achieved using broader datasets that are less personal in nature." As the industry charts a course towards a post-cookie and privacy-first era, adaptability and innovation emerge as the cornerstones of success.

"FOR MOST ADVERTISING VERTICALS, PREDICTIVE ANALYTICS CAN BE ACHIEVED USING BROADER DATASETS THAT ARE LESS PERSONAL IN NATURE."

AI is also paving the way for cleaner inventories, in a context of widespread controversies regarding MFAs, or so-called 'Made-for-Advertising' websites. "MFAs are partly an artifact of cookie-based measurement. They’re trying to game the 1998 measurement scheme, so it's hopeful that the end of cookies and the rise of authenticated will make it much harder for these sites" remarked Adam, highlighting the challenges posed by outdated measurement methodologies and the resilience of MFA tactics. Indeed, the reluctance to adopt innovative solutions has perpetuated this issue. "There's some companies actually solving the problem - including Adloox - and advertisers themselves definitely have a share of responsibility for not looking harder at their own buys and demanding better measurement." These sentiments underscore a broader market dysfunction, where viable solutions exist but lack widespread implementation. "I do think some powerful publishers benefit from the open web looking dirty and polluted. Also, there’s a lot of focus on Open Web bad actors, but maybe it is the same elsewhere. The worst pages inside the Walled Gardens are much harder to see, but it might be just as bad. Plenty of blame to go around; it's a marketplace issue. The solutions are there, and I'm optimistic that there's going to be a critical mass of tech enablement, especially with AI" As the industry navigates these complexities, the convergence of technological innovation and collective action offers a glimpse of a more transparent and accountable digital ecosystem on the horizon.

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"MFAS ARE PARTLY AN ARTIFACT OF COOKIE-BASED MEASUREMENT. THEY’RE TRYING TO GAME THE 1998 MEASUREMENT SCHEME, SO IT'S HOPEFUL THAT THE END OF COOKIES AND THE RISE OF AUTHENTICATED WILL MAKE IT MUCH HARDER FOR THESE SITES."

In conclusion, ongoing debates about the future of digital advertising are stirring up attention. Many actors are sharing their worries on the possible effects of cookie deprecation: "When someone comes to me and says there's going to be carnage in digital publishing and half of digital publishers are going to go out of business, my thought is ‘good’," Adam asserts, underscoring the need for a shift towards quality over quantity in online media. While the prospect of widespread job losses looms, there remains hope for resilient publishers capable of curating engaging content without relying on personal data collection. "The hope that remains true is that if you're a good publisher and you produce interesting content that gathers an audience, then you will be able to sell advertising on that and make money," Adam explains. Amidst the uncertainty, the debate over authentication emerges as a pivotal point of contention. "Is this site good enough that they can get people to authenticate that they're human?" says Adam, highlighting the potential role of authentication in preserving the integrity of digital publishing. 

Looking ahead, the impending antitrust cases and the growing awareness of AI's impact on advertising promise to reshape the industry landscape. "The next 12 months will see a broader wave of people signing up," Adam predicts, envisioning a transformative shift akin to the advent of search engines or the introduction of desktop computers. As the industry navigates these turbulent waters, the imperative for adaptation and innovation remains paramount, ensuring a sustainable future for digital publishing.

🎙 Listen to the full interview on Spotify and Apple Podcasts.
💡 Learn more about Chalice Custom Algorithms on their official website.