Our recent £2m investment in StrikeAd

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News broke last week of our latest investment – a £2m Series A in mobile advertising startup StrikeAd. As the world’s leading mobile demand side platform (or DSP) StrikeAd enables agencies to plan, execute, and measure mobile advertising campaigns at scale and with high efficiency. We spoke with a number of agencies in the run up to this investment and it was amazing how many of them have them have significant budgets to deploy on mobile, but lack the tools to execute the campaigns.

The idea of mobile advertising isn’t new any more and as many of you will know there have already been a couple of significant exits from this market – including DFJ investment Admob which was acquired by Google for $750m in 2009. StrikeAd is different from Admob and the other large mobile advertising businesses because it is not an ad network. The ad network business model is to buy inventory from publishers and sell it onto advertisers at a markup, usually without disclosing the margin they are making. Over the last couple of years on the web publishers and advertisers have started to eschew the ad network business model, preferring to connect directly via ad exchanges. Ad exchanges allow for better targeting and realtime buying which results in more efficient spend for advertisers and higher rates for publishers. This trend is now coming to mobile, and DSPs, of which StrikeAd is the market leader in mobile, provide the sophisticated software and supply connections that advertisers need to target and execute their campaigns in realtime.

So from a market perspective StrikeAd stands to benefit both from the growth in mobile advertising and from the shift within the mobile advertising market from ad networks to exchanges. My favourite stat on the coming growth in mobile advertising came from Mary Meeker’s Internet Trends 2011 presentation last October – in 2010 8% of time spent on media was spent on mobile, but only 0.5% of ad spend was on mobile. Improved devices, larger screens, and above all the growth in m-commerce will drive convergence in those figures.

StrikeAd also has a great team with a long history in AdTech. I’ve known founder and CEO Alex Rahaman for seven years now and in that time he helped grow a UK ad network called Unanimis and sell it to Orange, and also there led the spin out and finance of a very large open source adserver and exchange called OpenX. Alex and his team have been a delight to deal with since he first came to tell me he was setting up a mobile DSP and all through the investment process. Addtionally, Thomas Falk, who could well be Europe’s most successful adtech entrepreneur, provided the angel funding and is an important part of the team.

Finally, a quick word on the product. StrikeAd manages a complicated technical infrastructure that processes huge volumes of data at very high speeds. The software processes over 20bn ad impressions per month, combines them with third party data sources for targeting purposes, bids on the impressions if appropriate and serves ads if the bids win. Total round-trip time from ad impression called to adserved has to be less than 100ms to maintain a high quality experience for the smartphone user. Campaigns are targeted on a wide range of parameters, including demographic data, location, time of day, and device type, and they are optimised for a wide variety of outcomes, including click through, app download, click to call (and even click to call where the call lasts longer than a specified time). All of this is presented to the advertiser (normally via their media buying agency) in an intuitive user interface. In short, this is heavy duty software, and not the sort of thing that can be knocked up by a couple of hackers overnight.

We’re excited by the prospects for this business. Revenue momentum is strong and hopefully StrikeAd will quickly become a substantial company.

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