Right before 2016 started, Israeli video advertising company Innovid raised $28 million, closing out its $65 million round of funding going back to its founding in 2007. The company, founded by Zvika Netter, Tal Chalozin, and Zack Zigdon, has been lauded as one of the most successful Israeli startups of the past decade.
But one statistic cannot be ignored for every startup that succeeds, nine others fail. But each success of a startup which only manages to break even or achieve marginal profits nine years after its founding should be taken with a grain of salt.
In a bid to better understand the success behind Innovid and how it intends to invest its capital we decided to call co-founder and CEO Zvika Netter. Innovid, in brief, developed a platform for creating interactive video ads.
What does that mean?
“Television as we knew it in the past has changed,” said Netter, “It’s not so obvious what television is anymore is it a device, is it content? After all, you have the choice to watch, for example, ‘Survivor’ on the TV or on a smartphone.
“Instead, there was a convergence between the different screen types and the different types of content; it no longer matters how the content was broadcast to the screen whether by cable, satellite, or the internet. What does matter, in our case, is the fact the infrastructure used to distribute content is digital an internet protocol instead of a traditional infrastructure like satellite. An IP-based infrastructure, unlike older forms, allows for a dialogue between the viewer and the brand that is advertised on their screen at that moment.”
Netter explained: “When Coca Cola advertises one of its beverages, it wants to communicate a message, it wants it to reach the most suitable audience. When it advertises at a major event, like the Super Bowl, it doesn’t really know who watched it and the effect it had on the brand. However, the Innovid solution allows it to personalize the commercial in other words, personalize for each target audience and thus to interact with the viewer.
“In another example, say a Coca Cola ad was running the site you were visiting, with a link saying ‘Share Coke with a friend’ and you can send your friend a coupon for a Coke by putting his phone number in the link. The IP infrastructure with all its information on the viewer and their preferences makes that possible.”
Netter emphasized that information (often called big data) was collected by the advertiser or a third party. “Our job is to create the personalization and the interaction.”
Competing with Google and Facebook
Innovid does not charge its clients subscription or usage feeds its income is based solely on the number of exposures for the ads that use its platform, whether it was a mere second, four, or ten.
“We charge each client based on actual exposure, meaning someone watched the ad, regardless of viewing time. However, we do pass on the data on viewing times to the client, to draw their own conclusions for the future.”
Innovid’s main competitor, shockingly, is Google (through its subsidiary DoubleClick); Facebook also entered the game recently by acquiring Atlas. Netter claimed Coca Cola and other clients can measure the efficacy of the platform because it creates savings and profits: “Savings because the platform enables the distribution of an ad on almost any screen type, and profit because it generates personalization and interaction.”
As to the bottom line, Netter claims the company had revenue last year in the dozens of millions of dollars and that it was profitable in the third and fourth quarters of 2015. “But we might sacrifice profitability to fuel expansion in the next year. That is why we raised the funds, and the funds will be used to reach 300 clients, to reach a 50% market share, and to recruit employees.”
On that end, Netter said it is difficult to find suitable hires in Israel. “Our R&D center in Israel mercilessly tests and sorts potential recruits. I don’t know if I would even pass them.”
Published by Globes [online], Israel business news - www.globes-online.com - on February 4, 2016
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