Putting the ‘ad’ in venture: Why investors are excited about the AdTech market

Have you ever been surprised to see an ad appear on your computer screen with exactly what you were looking for? Sometimes, it seems like the Internet can read our minds. It turns out that with the growing adtech industry, it can. Adtech platforms work to connect advertisers and consumers efficiently, by using sophisticated analytics to enable targeted advertising.

The growing global adtech market is currently worth approximately $142 billion, with some estimates putting it at over $200 billion by 2018. Nearly 70% of these revenues come from mobile advertisement, which brings in about $100 million annually, according to emarketer. As the digital advertising industry expands, with revenues growing at 11% annually, it continues to make gains on the market share of traditional media outlets.

But, what is adtech?

When advertisers seek to place ads, they face the dual challenge of identifying their target audience and figuring out where to spend their money searching for it. Adtech companies solve these problems in one, by providing a means for advertisers to target the right people and know exactly where to find them. The most notable adtech company is Google’s online advertising platform DoubleClick, whose monumental analytics services dominate the market. DoubleClick provides companies with the information to target customers with banner ads and sponsored content, as well as facilitating search engine optimizing and an advertisement exchange.

Despite Google’s ubiquitous name, other rising adtech companies are beginning to fill specific niches in the industry. This can mean targeting mobile users with ads relevant to their location (Ubimo), tracking a user’s activity between their devices (Crosswise), building optimal consumer profiles for a given product (MentAd), and much more. New York City based Appnexus operates online advertisement auctions and provides infrastructure for data management and financial clearing. Adtech is also not limited to data collection – it  encompasses a wide variety of platforms designed to optimize ad potency, whether it is through effective site design (eyefeelit) or customized video ad presentation (Viewbix). The possibilities of adtech go on ad infinitum.

The Israeli adtech scene

Unsurprisingly, the Startup Nation has made an impressive entry into this market, with a considerable amount of startups focused on developing such technology. A number of Israel-born companies have even become major players worldwide. Taboola, a content delivery company founded in 2007, has become the world’s leading provider of “you may also likes,” improving sponsored content on many high-traffic websites, such as NBC and The Weather Channel. Another success story is the end-to-end video ad platform Innovid, which just recently partnered with Cisco Investments to raise an additional $10 million and is expecting to reach 100 billion ad impressions this year. And one exciting adtech company with a revolutionary concept is KwazyLABs, a platform that uses games to make ads an interactive experience.

A striking example of Israeli drive in this market is the annual Adtech Summit in Tel Aviv, which facilitates collaboration between startups, advertisers, and publishers to explore adtech innovations and future growth. By bringing together the key players in each rung of the advertising ladder, this summit does in person what the adtech products do online – make advertising more efficient for everyone.

Why are Israelis so mad about ad(tech)? Taboola CEO Adam Singolda has pointed out that success in this rapidly evolving industry is all about adjusting to change. As discussed at length in Dan Senor and Saul Singer’s bestselling Start-Up Nation, Israelis are programmed to be quick thinkers from their army experience and are not fazed by starting over. This trial and error mentality has been key to the numerous adtech companies sprouting around the country.

Investment opportunities

As advertisers seek to keep up with the rapidly advancing Internet community, and consumers desire more and more to get relevant information instantaneously, adtech promises to be a crucial field for growth. According to Coady Diemar Partners, merger and acquisition deals in the digital media industry are up 25% from 2014, of which a large portion are ad tech focused. The reason for this success, simply put, is that ads are everywhere. In fact, according to Christopher Mims of the Wall Street Journal, adtech may be “responsible for much of what is magical, automated and ‘smart’ about our gadgets and the Internet today.” Mims argues that ads enable services such as Facebook and Google to function as we know them, and that the capability to select and display ads instantaneously has revolutionized the tech industry.

OurCrowd has also identified this growing industry as a key game changer in the tech world and currently invests in nine adtech companies.

For info on all of OurCrowd’s portfolio companies, go to ourcrowd.com

[xyz-ihs snippet=”MarissaYoung”]