Banking and Lending in the US: A Market Overview

by Laura Cain on August 25, 2015

The banking industry appears to be undergoing a renaissance driven by changing consumer behavior and technical innovation.  Software is eating the industry.  In retrospect, we can see how the first wave of innovation came in areas such as online account access and payments.  Changing consumer behavior (such as the shift to mobile) and the use of big data has enabled increasingly complex transactions (such as lending and asset management) to move online.  Consumers have largely stopped going to retail branches, and reserve the occasional branch visit for major one-off transactions.

Our first investment in the financial services industry came many years ago with an investment in LendingClub. We put both equity and debt into the company, making a sizable purchase of loans via the platform itself. We saw the company’s potential to bring marketplace dynamics and software disruption to the lending industry.  The end goal for borrowers and investors on the platform was simple: lower cost loans for borrowers, increased yields for investors, and high levels of customer satisfaction.  As a result, LendingClub has grown into a sizable public company. With experience on the platform and a realization of the potentially transformative nature of this model, we’ve gone on to invest in companies across the online lending space: Kabbage (, LendUp (, and SoFi (

The renaissance in financial services has drawn in substantial amounts of venture capital.  In the past year alone, the number of fintech deals has grown 16% and the capital funded is up 46%.

While many entrepreneurs develop expertise in the specific segment they intend to disrupt, we’ve noticed that startups usually don’t have the time or resources to look outside their niche and understand how they fit into the larger context of banking and lending markets.  To help put the industry in perspective, we developed an overview of the banking industry in the US.  What’s remarkable is not only the insights this gives into the financial lives of Americans (be it millenials or seniors), but also the perspective this gives us on the large banks we’ve all come to use.  Indeed, consolidation over the last several decades has led the four major banks (JP Morgan, Bank of America, Citigroup, and Wells Fargo) to hold around half of the market’s depository assets.

Today we’re happy to provide the first version of this industry overview.  We’ve chosen brevity over depth, so as to provide a snapshot of the overall banking landscape.  We’ll continue to iterate on this overview and welcome questions and comments.  In subsequent posts, we plan to provide deeper dives into sectors that are of interest to both ourselves and others. We look forward to contributing to what feels like yet another opportunity to be at the front door of history-making companies.

Banking and Lending in the US: A Market Overview from Thomvest Ventures

Advertising Technology Overview

by Tweed on September 29, 2014

Our firm has been focusing on investing in ad tech for the past few years. As part of our focus on the space, we’ve brought on board research analysts to take a close look at specific segments of the market and to conduct more general market overviews.  In discussing our findings with entrepreneurs, we’ve found that the research we were doing generated a lot of interest, and we thought it might be useful to make some of the more general market findings available.  We’ve included below a link to download our general market overview for the ad tech market.

When we really began focusing on ad tech few years ago, the investor sentiment was generally negative on the space. Many firms had placed bets that hadn’t panned out, and there was frustration with the perceived lack of the large exit opportunities for startups in the space. We saw a potential place for a contrarian play that involved going deep into mobile, video, and technology that allowed brand marketers to displace middlemen and connect directly with consumers. The big trends that we have been investing in focus on key themes such as transparency and attribution, the migration of ad dollars to mobile and video formats, and marketers moving towards bringing ad tech into their own hands.

Mobile has evolved considerably in the past few years.  Much of the ad spend has been driven by app gaming companies.  Burst campaigns of downloads allowed a new app to drive to the top of the app store charts.  Once there, these gaming companies hoped that organic downloads would take hold and in turn lead to a lower cost of customer acquisition as consumers discovered and downloaded their apps via the app store ranking.  The market has exploded in terms of download dollars, with companies like Facebook relying heavily on app downloads to drive their advertising revenue growth.  Trends that we continue to see in mobile aim to develop a better understanding of user acquisition and include measurement, attribution, emerging formats like in-app mobile video, and cross device targeting.

We view video as one of the most interesting categories.  In the U.S., the ad budgets for television continue to lead spending among formats.  With the proliferation of smartphones, tablets, and connected devices, however, much of the time is being shifted away from watching TV.  Brands already spend millions of dollars hiring agencies to produce high quality video content, and that creative can be easily ported to smaller screens.  The ability to effectively target specific geographies, demographics, and time periods allows for great messaging.  While brand dollars are still relatively nascent in mobile, there has been increased movement to bring video ads, with their potent storytelling capability, into mobile.  We feel that the advent of programmatic marketing and real-time bidding will enable these brand marketers to ramp ad spend into mobile video in a dramatic way.

Finally, brand dollars have long gone to agencies or other parties who use technology to buy ads. If you follow a dollar of advertising that goes through this cycle, the percent that gets taken out before the ad is even shown is substantial.  Many brands are now realizing that they can use advanced technology from DSPs (demand-side platforms) and other self-service tools to accomplish similar goals. This allows for full control, transparency, and iteration of strategy for brands. As budgets shift to the marketing department within brands, internal teams who harness these technologies will become increasingly important.  As we have argued in earlier posts, the middlemen in the industry will begin to be displaced, and there will be ample opportunity for software for use by brand marketers to emerge as a key ingredient in targeting and delivering ads.

We hope that the slides we have compiled are helpful and shed some light on the market.  Aside from the general overview provided here, we also have been working on more specific research projects in other areas such as mobile exchanges and real-time bidding, and we’ll post our findings on those topics in subsequent blog posts.  In the meantime, we welcome any comments or feedback you might have on the general market summary below.



As advertisers phase out cookies, what’s the alternative?

by Nima Wedlake on April 2, 2014

Also published on GigaOM 3/29/2014

What will become of the humble cookie? The tiny data files sent from websites to browsers have come under much scrutiny recently, particularly from privacy advocates and policy makers. Even advertisers agree that the web needs a viable alternative that balances privacy concerns with marketers’ desire to target users effectively.

As investors focused on the advertising technology space, we’ve paid close attention to the discussions surrounding cookies and other tracking mechanisms, given their importance to the ad ecosystem. In this post, we’ll summarize these discussions and touch on emerging tracking technologies that may ultimately replace cookies.

Third-party cookies (i.e., cookies set by someone other than the website being visited) have enabled digital advertising to flourish into the multi-billion dollar industry it is today. They are used to run retargeting campaigns, enable real-time bidding exchanges, and reconcile user-specific demographic data across multiple sources. And they’re everywhere–nearly 85 percent of the top 1,000 sites have cookies set by a third party, according to a study by the UC Berkeley Center for Law and Technology.

Yet many industry leaders have grimly declared “the death of the cookie” sometime within the next few years. What’s the cause of their cynicism? Here are some of the most common critiques:

Privacy concerns: Critics argue that third-parties collect and store excessive data on consumers, often without their knowledge. Consumers agree–57 percent of Internet users are either “concerned” or “very concerned” about their online privacy, according to a recent study by analytics firm Annalect. Law makers are concerned as well, and have floated potential legislation to limit the scope of tracking by third-party advertisers. They’ve tasked industry and consumer groups with defining a browser-based “Do Not Track” standard that would allow users to easily opt out of tracking.

Limited reach: Cookies aren’t effective in mobile environments (third-party cookies are blocked by default on iOS devices, for instance). This can be limiting for advertisers, given that we spend more time on mobile devices than we do laptops and PCs. Additionally, many desktop browsers including Firefox, Safari and Internet Explorer have chosen to preemptively opt users out of accepting third-party cookies.

Poor cross-device tracking: Cookies can’t provide cross-device targeting capabilities (i.e. targeting the same user across mobile and desktop devices). As consumer attention continues to bifurcate across devices, the value of desktop-only cookies starts to decline.

internet-tracking-fingerprint-idPhoto from Thinkstock/bestdesigns

Stacking up the alternatives

So what’s next? What’s the magic bullet that balances privacy considerations with sophisticated cross-device tracking capabilities? Some interesting cookie alternatives have emerged, each with their own benefits and drawbacks. We can classify these identifiers into three buckets: known, stable and statistical.

Known identifiers are typically associated with some form of personal information, such as a name or email address. Large consumer internet companies have access to millions of known IDs, across both desktop and mobile. These IDs have some important advantages over third-party cookies:

  • Known IDs are highly accurate given that we typically pass highly accurate demographic and interest data to social media companies like Facebook and Twitter. Known IDs have large mobile and cross-device reach (persistent login across desktop and mobile devices)
  • Privacy concerns may be mitigated by giving users ample control over the how/when the ID is passed to advertisers
  • Both Facebook and Twitter are expected to begin allowing advertisers to use their known IDs outside of their “walled gardens” (Twitter’s acquisition of MoPub has many industry observers predicting that this will happen on mobile in the near future).

Stable identifiers are typically associated with a specific device or browser. Apple’s IDFA (“identifierForAdvertising”) used on iOS devices is a good example of a stable ID. These IDs are typically persistent (don’t expire or erase), anonymous and allow for user opt-out.

Most notably, Google is rumored to be developing a stable ID system, known as Advertising ID. The Advertising ID would be a unique identifier associated with the Chrome browser and Android devices that persistently identifies users. It would be anonymously passed to advertisers approved by Google, while giving users greater control over how they are tracked online (such as the ability to opt-out or block specific advertisers). The Advertising ID could also include “known” data for users logged in to Google products like Gmail and Google.

Details on Advertising ID are sparse, but its implications are vast given Google’s massive reach and scale. See Ari Paparo’s excellent post for some predictions on how the Advertising ID may be designed.

Finally, statistical IDs attempt to bypass cookies entirely by using other attributes to identify users, such as IP address, device type, and browsing patterns. Using these attributes, companies like Drawbridge, TapAd and AdTheorent can probabilistically determine whether two devices are connected (for instance, your phone and PC). The resulting statistical ID can then be used for ad targeting. Here’s a more detailed description of the technology.

Although promising, the technology is still in its early days; most statistical IDs are typically only 60 to 70 percent accurate. Nonetheless, many within the industry are optimistic about the potential of statistical IDs because they allow for cross-device targeting, are anonymous (quelling some privacy concerns) and aren’t owned by a single large player like Google or Facebook.

Mobile in 2014: Brand Dollars will Flow, RTB will Rule, and Video will Win

by Andrew Tweed on February 6, 2014

From our experience working with mobile ad tech companies, their customers, and industry veterans, we formed a few predictions on what the big mobile advertising trends will be for 2014:

1. Brand advertising dollars on mobile will take off
2. RTB will enable online programmatic buyers to push increased budget to mobile
3. Video will provide the best gateway for these brand dollars to scale on mobile

Brands will begin to become the behemoths

The first wave of mobile advertising was heavily skewed towards driving app installs. The larger game publishers were great clients because they were early in adopting the necessary tools to track user LTV and advertising attribution with which they could optimize their ad buys. Coding for the iOS and Android operating systems, integrating SDKs, and working with ad tech partners has been in their DNA. Companies like Supercell,, and Zynga played a big role in buying ads, and while CPI campaigns continue to drive the market, we believe that in 2014 the mobile advertising spend from large brands will grow faster than mobile publisher spend. The brand dollars for digital have traditionally flowed through agencies and programmatic buyers like Criteo, DataXu, and MediaMath. These types of programmatic buyers are beginning to increase their use of mobile advertising, and with them come far deeper pockets than the pure app publishers. What is enabling them to push into mobile now?

Mobile RTB and programmatic buying are opening up the category, and mobile web will play a big role

For large brands, mobile historically had smaller reach and less user data they could use for targeting. This meant that many programmatic buyers weren’t focused on buying mobile ads because online advertising provided wider reach and easier user tracking.

The barriers to adopting mobile advertising are beginning to fall. Scale is increasing with mobile RTB exchanges, user tracking is becoming more accurate, and there are publishers with persistent logins. We feel that mobile web has been under-appreciated by the market and will help mobile brand dollars to flow into the ecosystem. Many of the large auto companies, for example, have spent their online ad budgets driving people to their website in order to sign up for a test drive, click to call a local dealer, or try an interactive car design experience. Contrary to what some people believe, there are cookies on the mobile web that can now be leveraged alongside responsive mobile web design. Auto companies today can create a responsive mobile web site, integrate user tracking into their DMP/DSP, and drive either in-app ads with a mobile web-landing page or direct mobile web buys. This opens up a massive opportunity for programmatic buyers to pitch their brand clients.

Nexage published great data showing the increase in RTB and online programmatic buying dollars shifting to mobile:

Nexage ChartSource: Nexage Analytics Report – Q3 – 2013

Rich information is coming from publishers like Facebook and Twitter who have persistent login information on their users. Most app publishers are trying to triangulate who their users are, but companies like Twitter and Facebook can identify users across devices because they are logged into the service. At the time Facebook had their IPO in 2012, mobile revenue was close to zero. During the latest earning announcements that number climbed to 53% of total revenue. One large gaming company that we know achieved a user LTV from Facebook installs that was nearly 7X that of users who were acquired through their other ad partners. We believe that Facebook and Twitter will dominate much of this ecosystem as both move towards opening their inventory up on mobile RTB exchanges (Twitter acquiring Mopub, at some point Facebook opening up FBX). This will help drive the channel for larger programmatic buyers on mobile. But things will become interesting for one more reason.

Video will provide the gateway for both big brands and publishers to drive performance at scale

The majority of brand advertising budgets are spent on TV ads. PwC and eMarketer reported that in 2013, U.S. television ad dollars were $66bn vs. $4bn in digital video (both online and mobile). However, IAB found that 75% of U.S. senior executives plan to shift ad budget from television to digital video ads this year. High-definition mobile video will experience great growth due to recent technology developments. The industry received a big boost in early 2013 when the IAB and some partners announced the OpenRTB 2.1 spec.  This framework opened up mobile video via RTB, paving the way for large ad tech players to bid programmatically on mobile video ad inventory. Many traditional mobile ad networks are racing to launch their video exchange offerings, so expect to see more announcements this year. While the foundation has been built on the supply side, we have been told that some of the larger digital programmatic buyers are still catching up from a technology standpoint. They are being pushed in this direction for a good reason.

The stats are staggering when comparing eCPMs from video ads to other forms of advertising such as display and mobile banner:

eCPM Across Ad Formats

Source: DataXu, Turn, Thomvest Research – 2013

Instead of a hard-to-read banner ad, the user can view an entire video brand experience in the palm of his/her hand. There are large sums being invested by brands and agencies into creating video ads for TV. With those videos being adapted to mobile, the RTB plumbing being laid, and the programmatic buyers coming in, brand ad spend on mobile will ramp dramatically in 2014.

What this means for an investor in ad tech

We took a look at the market and tried to pinpoint how we could take our view and find companies that benefit from these three trends. One that stood out above the rest was Vungle. The company provides HD video ads on mobile, and has been on one of the most impressive growth trajectories we have seen. They began by building out a large video network of premium app publishers and advertising partners, but have had increasing demand from larger programmatic buyers. Vungle’s data science team found that they could leverage their rich user behavior and tracking data in an RTB environment. This has led to the development of the Vungle Exchange – the first in-app mobile video ad exchange. Their focus on mobile video has yielded results great results for both publishers and advertisers relative to other ad formats. We are pleased that Vungle has announced our lead investment in a $17mm funding round. Their amazing team harnessed these three trends and made our investment decision an easy one. We look forward to watching them continue to grow and are glad that we are part of the Vungle family.

Life at Thomvest

by Thomvest Team on December 5, 2013

Investing in Digital Marketing for the Enterprise: A Look at the Current Market

by Thomvest Team on November 4, 2013

It’s a very interesting time to be in marketing. You’ve got more raw data about consumers now available than ever before, so much so that it must feel like you’re standing on the beach wondering just how high the next wave of data is going to be. As investors focused on the enterprise – including enterprise saas and ad-tech for the enterprise – we’ve pulled together data from a number of sources, including roughly 75 interviews that we conducted over the last six months among both brands and vendors in the space, in order to get a sense for where the market is heading. We thought we’d share this for those entrepreneurs who might be either working in this area or considering starting a company focusing on the junction between the enterprise and ad tech.

If you reflect on some of the goals of marketing for the enterprise – building brand awareness, establishing a sense of connection and desire among potential customers, positioning one’s products as a means of satisfying customer problems, or simply performance-based marketing – all of these are areas that are undergoing a transformation as a result of the increasing use of digital channels for consumer engagement. These channels offer the promise of greater measurement and, presumably, marketing effectiveness.

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