Advertisers are trying to reach an increasingly mobile populace. And with a much smaller canvas on which to paint an attention-grabbing picture, mobile advertisers face a gigantic challenge:
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How can they turn ignored spam into information that people need to make decisions that are important to them now? One way to do that is to understand what each individual cares about at each point in time as they move through the physical world with their mobile devices.
By doing that, advertisers can offer, say, a 10% discount coupon to a consumer right before she is about to purchase a pair of shoes in a retail store. Instead of ignoring the advertising message, she will realize that it will save her a few bucks on a pair of shoes that she was about to pick up and carry to the store’s cashier.
If this happens, then the advertiser gets a return on investment in the advertisement and the consumer gets a deal on her shoes.
A Boston-based startup, Localytics, offers this service — dubbed closed-loop marketing — to advertisers. This is hardly an original concept — I wrote about the idea in my 1998 book, Net Profit – but Localytics’ execution of this closed-loop approach for mobile users is working very effectively (and its use for mobile devices is not something I had anticipated back then).
The company is growing very rapidly. As CEO Raj Aggarwal — who told me last August about his work helping Steve Jobs to get AT&T to support the iPhone — explained in a February 3 interview, “2013 was a record-breaking year for Localytics during which we tripled revenues for the fifth straight year. In 2013, we grew our customer base significantly — adding ESPN, Clear Channel and SoundCloud to customers including eBay, Fox and Microsoft. We also opened offices in San Francisco and London and our platform is now used by more than 5,000 companies, and is installed in over 1.4 billion devices across the globe.”
Localytics is growing because it delivers a return on investment for mobile advertisers. As Aggarwal explained, “18 months ago, 10% to 15% of consumers were using mobile — now about 60% of digital usage is mobile. Advertisers are looking for the best-of-breed mobile platform and we have been building it for five years.”
Localytics’ platform can boost an e-commerce provider’s revenues. Said Aggarwal, “One of the biggest problems in e-commerce is shopping cart abandonment. People are about to make an online purchase and then they stop — perhaps as they are entering their payment information. We will enable an advertiser to test various offers to a consumer at that point — such as free shipping coupon or a 10% discount coupon — and see which one leads to a purchase.”
Localytics can also serve consumers a message based on his interests and location. “If I know that you are a Red Sox fan and you are in Boston, I can make an article about the Red Sox appear on your home page. Advertising tied to that article is more likely to lead you to make a purchase,” explained Aggarwal.
This growth has not been lost on investors. On February 4, Localytics announced that it had raised $16 million in a Series C round from Foundation Capital and Polaris Partners — bringing its total capital raised up to $25 million.
Aggarwal is pleased to get the capital and knowhow from Foundation Capital. He said, “When we went out to Silicon Valley, CEOs kept telling me that Foundation Capital was entrepreneur-friendly. I am thrilled that Foundation Capital General Partner Ashu Garg will be joining our board. He has deep expertise in the marketing software space and is a great personal fit. With this injection of capital we will continue to enhance the platform, expand our business internationally and deliver even more value to our customers.”
Foundation Capital has “more than 80 high-growth ventures in the areas of consumer, information technology, software, semiconductors, and clean technology” in its portfolio and has enjoyed 19 initial public offerings including ”Control4, Envestnet, Financial Engines, Netflix, NetZero, Responsys and Silver Spring Networks.”
And Garg sounds pleased to add Localytics to its portfolio. As he said, “Businesses are operating in a world transformed by the app experience. In 2014, the winners will be those that can leverage insights from both mobile and web for competitive advantage across the entire marketing chain. Localytics is uniquely positioned to serve these companies.”
Will Localytics be able to hit the $100 million revenue target that is commonly considered the benchmark for high tech IPOs? Aggarwal seems to hiring with that expectation in mind. As he said, “Our chief operating officer Duncan McCallum built and sold at least two companies. And we just hired Dave Witting who had previously spent 8 years as head of customer success at Brightcove.”