Vungle: Mobile Advertising and App Monetization
Headquartered in San Francisco with 190 employees worldwide, mobile ad firm Vungle announced in February 2017 that it was profitable after six consecutive years of growth, reaching a $300 million run rate for annualized revenues from its performance-based, in-app video ad platform. Backed by Google Ventures, Thomvest Ventures and Crosslink Capital, the company was poised for exponential growth. By October of the same year, however, the outlook suddenly darkened as the company learned its 29-year-old founder and CEO Zain Jaffer had been arrested for felony assault, child abuse, battery upon an officer and emergency personnel, lewd act upon a child and oral copulation with a person under 14. The arresting officers were said to have a video of their encounter with Jaffer, which took place at his home. Within 24 hours, the company’s board of directors voted to remove Jaffer from the board and replace him as CEO with then-COO Rick Tallman. At this point, Rick was engaged to help navigate the looming crisis that could irreparably damage the young company’s reputation and threaten its very existence.
Since the news about Jaffer’s arrest wasn’t yet public and the charges didn’t relate to his work performance, we immediately helped the company draft a media statement about the leadership change that did not include a reason for Jaffer’s replacement. The company considered it a personal, not personnel, issue, and leadership did not want to preempt the district attorney in breaking the news.
In a matter of hours, the team worked quickly with the company’s leadership and public relations firm to identify key stakeholders, refine internal and external messaging, and outline a crisis communications plan. When the media learned of Jaffer’s arrest the next day, Vungle was ready with a new statement saying the seriousness of the charges obviously led to the immediate removal of Jaffer from any operational responsibility at the company.
At the CEO’s request, Rick sat in on several telephonic board meetings to answer questions about the communications strategy and provide perspective on how stakeholders were reacting.
Committed to full transparency, Vungle immediately set about to reassure employees, customers, partners, investors and other stakeholders that the company was much more than one person and remained under strong, solid leadership. From all-hands meetings with employees to one-on-one calls with partners, investors and key customers, the company leveraged their long, trusted relationships to build considerable support and goodwill during this difficult time.
There was immediate media and social media outrage at Jaffer’s alleged behavior in particular and the overall debauchery of Silicon Valley in general, and the indignation ratcheted even higher when it was revealed the children involved in his arrest were his own young son and daughter. Since Jaffer still owned a large stake in Vungle, many questioned how anyone could associate with a company that ostensibly could make him rich one day.
The company also received continuous social media criticism from a female ex-employee who said the tech company had a toxic, male-dominated culture, reminiscent of those flagged by the Me Too Movement. She said Vungle had taken down its negative reviews on Glassdoor to hide them, which was untrue. Per Glassdoor policy, reviews are automatically removed when there is a new CEO.
To prevent the rhetoric from escalating further, the reviews were reinstated on Glassdoor with a note about why they were removed. Rick also suggested the team closely monitor the media and public sentiment but take a deliberate “hands-off” approach, only correcting the record with journalists when necessary. This counsel proved valuable. The furor lessened within a couple weeks, with several voices even coming to the company’s defense organically.
The Rest of the Story
Jaffer was released on $300,000 bail a few days after his arrest, and pled not guilty at his arraignment in November. A preliminary hearing was set for Dec. 15.
Rick and the team at Vungle stayed vigilant, expecting there might be resurgence in media attention at the December hearing. In the meantime, they explored how the company might respond to a variety of possible scenarios, ranging from charges being dropped to new accusations of misconduct. They also evaluated the impact of the crisis on Vungle’s bottom line, discussed next steps to ameliorate any damage, and considered what their response would be if Jaffer made a bid to regain his position in the company.
Vungle also seriously considered rebranding during this time with a new name and logo. Rick counseled against this approach since it could backfire and make the company look like they were trying to hide something or deceive people.
The hearing was pushed to February 2018, and then delayed again until May, moving the pretrial to June and the trial to August. On July 2, 2018, in an astonishing move, the district attorney dropped all charges against Jaffer. The next day, Jaffer hinted he may want to return to Vungle.
After consulting with Rick, the board and investors, Vungle issued a statement that the company had moved on and unanimously agreed there could be no role for Jaffer going forward.
In early March 2019, Jaffer sued Vungle for wrongful termination, and the company vowed to vigorously defend the claim. Later that month, the company moved forward with a planned brand refresh to update their visual identity and personality without changing their name.
Since Vungle was in litigation with Jaffer as of March 2019, the company did not comment or respond to inquiries regarding his status for several months. In July, it was announced that private equity giant Blackstone (NYSE:BX) agreed to acquire Vungle for more than $750 million. The companies also said the lawsuit involving Jaffer was settled.
As of the acquisition closing on Sept. 30, Vungle now has more than 250 employees in seven regional offices, spanning 30 different nationalities. Vungle’s data-optimized ads are running on over 1 billion unique devices to drive engagement and increase returns for publishers and advertisers ranging from indie studios to powerhouse brands, including Rovio, Zynga, Pandora, Microsoft and Scopely, among others. The company is serving more than 4 billion video views per month over a billion unique devices, and is consistently ranked No.1 for cross-platform user retention by industry mobile performance indexes.
Vungle overcame a very difficult crisis situation to not only survive, but thrive.