I’ve spent the last few years looking closely at various segments of the online advertising space broadly defined and of the 10 new investments Trinity made in the past 12 months, 4 fall into this category. Those four include TubeMogul (online video analytics and ad targeting), RedAril (announced but stealth), gWallet (online virtual goods and social gaming) and one soon to be announced (will blog about it when public). While 2009 was a rough year for the economy overall and the online advertising space in particular, things are looking up in 2010 as TechCrunch and JPMorgan note in a recent post. Hopefully the “invest aggressively during the downturn” strategy that my colleagues and I at Trinity decided to execute on a year ago will ultimately bear fruit and this expected online ad rebound may be a helpful step toward that.
As for 2010 and beyond, clearly we’ll see growth of the online ad exchange for non premium display inventory, but I’d take this one step further and posit that 2010 will see the advent of ”Local” meets the “Online Display Ad Exchange”.
Let’s look at Local first. As this theDeal.com article mentions, companies like Yelp, Foursquare and others have captured mind share quite nicely as leading local consumer web services which are attracting the attention of potential acquirers and venture investors alike. What do these startups have that is so attractive? Is their user base? Revenues? Technology? I’d argue that it is none of those, rather, it is the data they have accrued or will continue to accrue via highly scalable and viral social gaming (in the case of FourSquare) or seo/ugc (in the case of Yelp) methods. While geo targeting has been around for a while via products like Digital Element which provide data streams that enable somewhat crude IP address-based geo targeting, these new entrants have or will have two highly sought after data attributes when it comes to local: purchase intent and freshness. This is why Google, a cash machine which thrives on purchase intent and freshness in its core search business, is interested in acquiring startups that bring viral, scalable and low-cost generators of such data so that it can further expand its targeting efforts into the lucrative local ad market.
Now what about online ad exchanges like Yahoo’s Right Media or Google’s DoubleClick? As many of the recent interviews and posts on AdExchanger note, there is an increasing trend around the use of data to augment the identification and prioritization of which exchange based impression to buy and how much to bid to win it. Demand Side Platforms (DSPs) like Turn, Invite Media, DataXu, Triggit and others are providing agencies and brands the tools and mechanisms to leverage data to make smarter and more granular ad buys.
So how does Foursquare meet Right Media? It happens via innovative startups, ad agencies and advertisers who look to innovate the ~$60b direct marketing category by taking advantage of this tsunami of local data coming from either consumer web services like the ones mentioned above, mashed up forms of more traditional sources of offline data and/or the plethora of gps/location data streaming from services like Twitter, Facebook or smartphones. I believe 2010 will see some exciting new developments at this intersection and I’m happy to compare notes with others, just drop in a comment below to start the conversation.