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.
by Nima Wedlake on April 2, 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.
Is the cookie crumbling?
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.
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.
by Thomvest Team on December 5, 2013
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.
by Kip Knight on April 1, 2013
Once the funding process is completed for a start-up, the real work for a VC begins in terms of helping to grow its business. A primary way this is done is via on-going Board meetings in which the VC partner/Board members actively engage in understanding how well (or not) the business is performing. Board meetings ideally provide a constructive forum to offer suggestions and advice on how to deal with various strategic and tactical issues that all start-ups inevitably will face.
The Agony and The Ecstasy - The focus of this blog is to share some suggestions for those members of the start-up team who need to present to their Board. We’ve seen presenters rise in esteem following a brilliant Board presentation (and unfortunately have witnessed others crash to Earth when things don’t go very well).