Investing in the Future of Online Brand Advertising
In June 2010, Brand.net, the first online advertising network focused exclusively on brand advertising, announced that it had closed a $14 million Series C, including a reinvestment by InterWest. Flip Gianos and Doug Pepper both sit on the company's Board.
Click to Listen to Doug Discuss Brand.net & Online Advertising:
On being "Ahead of the Curve":
Q: THERE ARE A LOT OF ONLINE ADVERTISING COMPANIES. WHAT MAKES Brand.net DIFFERENT?
Doug: The difference with Brand.net is the market they are going after and the technology platform that they have built.
Let me take a step back. It's important to distinguish between the two basic forms of online advertising. There's direct response, where companies are looking to drive short-term online sales. And then there's brand advertising, where the focus is on driving offline sales — which is where the majority of retail spending happens.
Now, in the traditional, offline world of advertising, brand advertising — a $91B market — dwarfs direct response advertising — a $55B market.
But the reverse is true online: approximately one-third of direct response advertising has moved online, while only about 5-6% of brand advertising has made that move. That is changing. Brand.net was created in anticipation of that shift — and has become a major driver of that shift.
Flip: One of the things we found so appealing about the company is that the executive team has such a deep understanding of what brand advertisers need when they move online. In large part, that's because so many of them came out of Yahoo! — which prior to Brand.net was probably doing the best job of catering to online brand advertisers. But Yahoo! is just one corner of the Internet. The team at Brand.net has taken that experience and used it to create an independent technology platform that resolves the key issues brand advertisers face.
Q: WHAT ARE SOME OF THE UNIQUE ISSUES THAT BRAND ADVERTISERS DEAL WITH ONLINE?
Doug: The brand advertising process has a long cycle time; planning is the key to optimization. It requires coordination with the supply chain and with offline media. Ads need to be delivered predictably according to an overall media plan. And then the measurement is totally different — because you need weeks and possibly even months to measure the actual offline sales impact of a media campaign.
Flip: To meet those needs, Brand.net has created a proprietary Media Futures Platform, which gives brand advertisers the ability to do up-front buying — seeing very precise price and inventory forecasts. Essentially, they are bringing some of the practices of traditional media ad buying into the online world — and then they are improving on those practices by using powerful, online, data driven systems.
For instance, brand advertisers are very concerned with brand safety. So, Brand.net has created a technology called SafeScreen that allows advertisers to associate their advertisements with appropriate content — not just at the domain level — but at a page level.
They've also created measurements and metrics that really matter to the advertiser: reach and frequency, composition of the audience, and breadth of delivery. And they are providing guarantees of delivery so that when advertisers launch a campaign they get a guaranteed reach and a specific price.
Q: WHAT MADE Brand.net A GOOD FIT FOR INTERWEST? AND WHAT MADE INTERWEST A GOOD FIT FOR Brand.net?
Doug: InterWest's investing strategy includes a focus on marketing innovation. We're backing technology providers that offer tools for businesses to acquire, retain and monetize customers online — including mobile and social media. We are investing in products that help companies in the consumer markets and B-to-B markets. Brand.net is a perfect example of a company focused on customer acquisition for consumer companies. Tapjoy fits into the monetization space; they help developers and small businesses monetize consumers in the social media space — specifically in social gaming. Varolii is a leader in technologies that help large enterprises communicate with — and thus retain — their key consumer customers through one-to-one communication. Marketo provides a service that assists companies in managing their interaction with potential customers in the B-to-B markets. We believe this concentration helps us do a better job of understanding these markets and helping to guide our investments.
Flip: In addition, we get significant benefit by being involved with experienced teams who are looking to the future of online marketing. Specifically the executive team at Brand.net isn't just thinking about the needs of online advertisers today; they are thinking several years into the future. The Brand.net team is using their experience to work with the world's largest and most sophisticated advertisers — companies like Procter and Gamble, and Walmart — to plot the future of online marketing. Because we are intimately involved with them, we get a front row seat in planning the future of this industry.
All of which is to say that collaborating with the Brand.net team gives InterWest great perspective on how companies are leveraging new technologies — and that helps us across our portfolio of online advertising and digital media companies.