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A Roundup of India VC Investment

VC money from everywhere is flowing into India. While  e-commerce site Flipkart may be the company receiving the most publicity, it is the tip of a very deep iceberg, followed closely by online shopping site SnapDeal. Mainline VC firms like Sequoia Capital, which used to think of India as risky, are making their bets.  VC investment in Indian companies is on track to hit nearly $7 billion this year, up 35 percent from last year, which was  up more than three times from the previous year.

However, American VCs have to contend with two uncommon factors when they invest in India: first, there is still widespread corruption, built into the culture from centuries ago, and an overactive regulatory environment built to combat it.

Traditionally, VCS have only invested in India after the risk was largely accounted for  — in the later stages. But  in 2015, investments have shifted to early stage,  according to PitchBook, a global private equity firm that compiled the data.

Some of the key investments this year:

  •  Zomato, a restaurant search engine, which raised $60 million last November at a post-money valuation of $660 million and another $50 million in April at a $1 billion valuation.
  • Classified ad site Quikr India, similarly, raised $150 million at a pre-money valuation of $892 million in April, just seven months after raising $60 million at a $460 million valuation.
  • CarDekho, an auto portal, which raised $50 million at a post-money valuation of $300 million in January.
  •  Flipkart raised $550 million in May
  • Olacabs, India’s equivalent of Uber raised $610 million in two separate fundraisings since last October. Olacabs, whose app is on more phones in India than Uber’s app is on U.S. smartphones, recently acquired TaxiForSure.

Tiger Global Management and strategic acquirers like Softbank and Alibaba Group Holding are still the biggest investors in India, but in the past five years, Sequoia has invested in more deals than any other firm, with 97, while Accel is the number two and Tiger is number four behind Blume Ventures Advisors.

Also investing in India now are Intel Capital, Omidyar Network and Qualcomm Ventures.  PitchBook ranks investors based on the number of deals in which they’ve participated, not on the amount they’ve invested.

Big investment dollars in India are based on the hope that access to the Internet is going to grow rapidly, creating an enormous online market, thanks in part to the spread of mobile 3G cellular services. However, an economy like India’s still emerging, is not without its growth problems. And even the biggest companies are not yet making money. Even Flipkart, valued at $15 billion after its most recent fundraising, says it will not turn a profit for two or three years.

Indian Smartphone Users Are Targets for Brands

Expect more global analysis from us in the future on this blog. No one can ignore the growth of markets outside the US and Europe as the smartphone takes over the rest of the world and replaces computers in the developed countries.. We’ve recently opened offices in Singapore and Australia, and we have a sizable team on the ground in India, where we recently hired a new advertising salesperson to harvest the strong demand from agency trading desks for our platform in the SEAN countries.

With India becoming an increasingly important market for all things mobile, Vserv — a prominent smart data platform for mobile marketing and commerce — released its “Smartphone User Persona Report” (SUPR) for 2015 recently. Vserv worked with Nielsen Informate Mobile Insights to gather information and segment mobile users by app usage, time spent on the apps they used, data consumption patterns, and demographics.

This research is extremely important because it demarcates the shift in India from feature phones to smartphones, and thus to a completely different usage pattern for the phone. We expect to see voice services used less and data services used more in the future, as they are in North America and Europe.

The Indian smartphone user base will continue to grow at a 26% compounded annual growth rate from 2013 to 2017, propelled primarily by people under the age of 25. Young people, like young people all over the world, are more internet savvy, more connected, and therefore more anxious to buy a smartphone. They already see the smartphone for what it is, a computer in your pocket.

The study also highlights the different usage patterns between smartphones and feature phones: smartphone users spend on average close to three hours a day on their devices. Much of that time is spent interacting with apps.

There is a sizable segment of smart phone users that the report categorizes as App Junkies. Nearly 25% of them download 18 or more mobile apps and games every month.

Another large portion of the smartphone user base (20%) spends over two hours a day using chat and social networking apps. Vserv categorizes these as Social Stars.

And then there are the “Entertainment Buffs,” that 15% of smartphone users that spend almost an hour each day playing games, listening to music, or watching video on their phones.

We provide this information because it has potential significance for brands when combined with the right premium publishers: it’s another way of targeting the correct mobile users at scale.

ZEDO Thanks Ad:Tech India for a Great Conference

As founder of ZEDO, I have been to many ad:tech events. The first  I can remember was at the Hilton hotel in San Francisco – probably in late 1999 or early 2000. The keynote speaker was from a company called Engage: a long gone ad serving company.  Another memorable one was in LA in 2001. We had a joint booth with Specific Media who was a big customer of ours at the time. It was memorable mostly because there were only exhibitors there – no one was walking between the booths!

But it was great to be at ad:tech Delhi 2014 this year. This was the third or fourth ad:tech in India and it was probably the best. The energy all around was high. Everyone was in a good mood and ready to do business. Our booth was taller, wider, and better lit than the others. It looked great. The ZEDO and ZINCbyZEDO logos were modern and vibrant and well co-ordinated. The ZEDO bags were seen all over the place.

Our annual party at the Rubicon bar was full of senior people, fun and energy. Even the BBC worldwide head of Ad Ops and 5 people from his team attended and stayed at the party.  Terence, Abbas and Abdulla made sure that I spent at least a little time with all the people who wanted to meet me. The Associate VP of Sales for Money Control  had not seen our InArticle or mobile High Impact Format and was excited to see them and said they are looking for innovation.

One other noticeable thing  was that  India Today, which is selling our High Impact/High CTR formats, is our biggest supporter. They were evangelizing ZEDO technology and service proudly to all their friends. That is the best thing for us. The whole ZEDO team should be very proud of this. Our innovation is really helping our customers and in return they are really rooting for and helping us. So let’s keep pushing for publishers to implement the InArticle and the mobile High Impact Format, and also sell it themselves.

In advertising it is always important to test two things and see which works better. Therefore we changed our flyers to talk about High CTR Formats instead of High Impact Formats to see if this got us more interest. I am waiting to see if that language works  better.  Personally, I think advertisers just focus on CTRs, no matter how much the dialogue appears to change.

When advertisers ask me how we get higher CTRs, we  explain that because we have years of technical experience we innovate new formats and continually improve them . Only real technology companies can do things like this. Examples of continuous improvements are our leave-behind on the InArticle and the static clickable image that is shown after the video ad has finished playing. Because we are a tech company, advertisers can easily believe that we get click-throughs from better technology – not the fake clicks many networks offer through bots and fraud.

The time is right in India. Internet usage is finally taking off. Mobile is also taking off with many sites now seeing half their impressions coming from smart phones. This is exciting. We have timed our best technology and best video formats just when publishers are most in need of them.  Mobile and video ad demand is rocketing and will take ZEDO with it. The same move to video and mobile (away from banners) is happening in the US too. Jack Wagner, ZEDO head of Publisher Development, says that everyone at Digiday  Publisher Summit was looking for video formats and mobile ad formats. 2014 is our year.

Are There Differences Between Ad Servers?

We don’t write much about our flagship product, ZEDO ad server. This is because the perception is that changing an ad server is tedious, complicated and doesn’t increase revenue. Instead we write about our High Impact Formats because using them is exciting to publishers; they are easy to implement and they get the publisher new ad revenue instantly.

However, sometimes publishers do need a new ad server. And ZEDO is both different and better. For example, the ZEDO intuitive UI and unlimited 24/7 customer service keep winning us new business. Our customer service team does anything at all that a publisher wants – we are a true partner for publishers. We often build demos for the publisher sales teams and even edit the advertiser flash files over the weekend if helps win the publisher more revenue.

Further we have the biggest ad server development team in the industry – it is spread across 4 development centers around the world. And as you have probably heard, ZEDO has the most modern, most state of the art -ad server in the industry. It has just been rebuilt from the ground up. We used all our years of experience and knowledge and understanding of the challenges of the next 10 years and built a perfect brand new product that operates on the any cloud (including AWS) and scales and performs beautifully. We are very, very proud of this technology and love the positive and surprised reaction we get from publishers who are initially skeptical but decide to test it out.

Many publishers still feel that all ad servers are about equal. Yet even some of those try our High Impact Formats, love the revenue they get, then decide to use ZEDO for all ad serving – they prefer one platform for all standard units and for the High Impact Platform.

ZEDO is the only ad server that can accurately refer to itself as full service. ZEDO’s ad server has an integration tool to all major ad exchanges (RTB exchanges and others), offers an ad network optimization platform, supports VAst 2.0 and mobile. Unlike its larger and smaller competitors, it also offers ad operations and creative assembly services that reduce the headache of operating an ad server.

And we help you make more money from all the ad exchanges – much better than being tied in to just one ad exchange – that knows too much about your inventory. Typically those tied in exchanges only pay $0.01 CPM more than the next campaign – because they know the price of your next campaign – which they shouldn’t.

Last, all our customers get a dedicated local account manager. That’s in addition to support by phone, email and chat.

More than Hype: Mobile is Coming Quickly

Mobile advertising, in the words of people who know it best, is still all hat no cattle. Most publishers don’t have the technical capability to create ads that brands will feel are worthy of them, and thus advertisers give more lip service than budget to mobile advertising.  Advertisers have to know that the new mobile formats can guarantee viewable impressions.But it’s easy to make the change to mobile with good creative and new formats.

Our advertisers want executions that inspire — while we often have to settle for the basics. To be successful in mobile advertising today on the brand side, it takes a bit of imagination. Unfortunately, the big ideas are often held back by brand restrictions and lack of technological investment.

We saw this coming, and that’s why we have spent the last year developing high impact formats that are optimized for tablets and mobile. We think the tablet will be the mobile device of choice for consuming content, although the phone will certainly play a big role in countries where it’s the only electronic device the consumer owns.

High impact formats that produce real, quantifiable viewable impressions are where the puck is going, and we are already waiting there with our InView suite. Publishers can trust us to produce ads brands will find worthy of them, and that’s why we are now reaching out to the advertising side of the industry to show them what we have. We think it will take publishers and advertisers working together to make the shift to mobile worthwhile.

This has to be done quickly, because the consumer is already shifting. This will be the year in which mobile sales outstrip PC sales, and we can see from our publisher clients that content consumption on mobile devices in the evenings and on weekends is growing monthly.

In this same article, the mobile executive points out that to be successful, companies will have to invest ahead of the curve. Mobile is in the hype cycle now, but it will move into broad adoption almost before we know it, because the consumer has already shifted.

The leaders of this upcoming communication revolution will be brave enough to take a short term dip in revenue in order to adapt to a dramatic change in consumer behavior. There will always be a place for desktop computing, but cloud-enabled wireless devices are clearly fast on their way to becoming the dominant choice for consumers.  Faster than any technological shift in our history.

As a technology leader, we DID invest ahead of the curve. Publishers who want to try out the new technologies are brand safe with us.

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