I’m very pleased today to announce (via TechCrunch) that I invested, on behalf of GRP Partners, in Burstly alongside Rincon Venture Partners, an early stage VC in Southern California whith whom we love to work (and were our co-investors on RingRevenue). Burstly, a Santa Monica based company, provides an open and free ad management platform that helps mobile application developers better monetize their inventory. I’ll explain in detail below.
As I naturally get asked all the time why we invested in Company A or Company B, I thought I’d just put forth my thesis in writing. Naturally I’m excited about this investment or I wouldn’t have done it. As a result this post is bound to sound a bit self promotional to some and to competitors may sound like I’m taking shots. I don’t intend either, Burstly has respectable and strong competition. This post is mine and written by me based on my understanding of Burstly. It isn’t written by them or any marketing department – so please take it for what it is. So with these disclaimers, here’s why I’m so excited:
As a starting point I’ve made clear in many posts that my primary investment thesis always starts with team and that I believe that the best investments will be in people whom I’ve gotten to know over a long period of time rather than a shotgun wedding where I have 3 weeks to decide whether or not I want to invest.
So when I started talking with Evan Rifkin almost a year ago about the company he was planning to build, I was intrigued. Evan and I met regularly over a three year period from the time he was running Flux, which he sold to Viacom (who was his strategic investor). He has many of the attributes I look for in an entrepreneur and importantly he has deep domain experience in ad management. This is his third company that is in this related space and he was an early investor in Adconion. He knows the ad management and ad network businesses. He’s a natural leader, appropriately competitive, very customer focused and a pleasure to work with. Both of his co-founders worked with him previously and both worked on ad management platforms. So on the 70% criterion – team – I was already anxious to see what they would build.
So what about the ad management business excites me?
Let’s start from the highest level that will not be rocket science. The way we use “computers” is dramatically shifting. The first big wave of this change came from the introduction of the iPhone, which was the first well built mobile device for using the web. It broke the hegemony that the carriers had over software on mobile phones and the industry will forever be changed (for the better) for this.
The next major entrant is the Android platform, an open source mobile operating system that has led to the introduction of several handsets that are based on this OS and many more to be released over time. We know that in early April Apple will deliver the iPad, which with a larger format may have an impact on the consumption of newspapers, magazines and videos. The Kindle has already revolutionized book reading. But there are also major mobile initiatives by Microsoft (Windows 7 Mobile) and eventually Blackberry surely will pull their heads out and deliver a real browser experience (how such a great company could have missed this for so long confounds me … but then again look at what happened to Palm).
There will be many more changes afoot that we can’t even imagine today. Who would have guessed 5 years ago that Netbooks would have had such a big impact on the PC market? And don’t count out Nintendo whose popular Nintendo Dsi had already shipped 2.1 million units in the US alone prior to Xmas last year (couldn’t find a more current number, I’m sure it’s much higher post Xmas).
The world is going mobile. And as we know that means your device is with you at all times, is location aware, has advanced features such as a camera and accelerometer but also has the drawback of having short battery lives, slower bandwidth than our typical Internet consumption and importantly smaller physical screens / real estate for content. We also currently have an “app marketplace” metaphor that drives mobile consumption and eventually I believe there will be a mobile browsing metaphor that becomes popular as HTML5 becomes more widespread and as mobile browsers improve.
This means that changes are afoot. What worked on the tethered Internet will not necessarily dominate in the mobile world. Much of the infrastructure to make the mobile ecosystem work well still needs to be built. Mobile traffic consumption is rising dramatically and everybody expects it to become the major commerce platform of the future.
Enter Burstly. It’s still in the first inning of its development (as is the whole industry) but it is already solving many pain points for mobile application developers and with an experienced team they already know their next 20 moves. I like that. I know that there are competitors, so in typing up my understanding of their product I’m not trying to attack anybody else or claim that we’re the only one who does each thing. But I believe it’s a very comprehensive solution and our due diligence with large app developers confirmed as much.
What does it do?
Summary view for people who don’t want to read all of the details:
- it helps you optimize your revenue by comparing the effectiveness of all possible monetization types: cross promotion, in-app purchasing or ads
- it provides complete transparency in how much advertisers are paying, how much Burstly takes and what your revenue is
- it has created an ad marketplace where you can promote your application in other applications where its performance will be strongest and allows you to help drive installs of other people’s apps and get paid for it
- it has created a comprehensive rules-based ad “flighting” system, providing you with the same tools that ad networks currently use to help themselves make more money
- it lets you sell your inventory directly and without any middle man taking fees
- it has built in iPad support from Day 1. This means you can set the ad size for their larger format rather than dealing with a predefined size. Burstly aslo has iPad video ad support
- it guarantees you that you will make more money with your ad space than if you aren’t using it
Now, the details …
1. Optimization – If you’re a mobile application developer you may be monetizing your real estate perfectly now and you may not even think you need advertising. But basically your goal in your existing application should be to optimize your revenue across multiple factors: charging for your existing app, promoting your other apps (cross promotion), getting people to upgrade to your more expensive app (up sell), selling in-app purchases (unlock paid features, sell virtual goods), promoting other people’s apps (and getting paid for it) or good old fashioned advertising (e.g. banner ads on a CPM, CPC or a Cost-Per-Install [CPI] basis).
Burstly is the first open and free platform that helps you optimize all of these options. By bundling Burstly’s SDK into your mobile application you’re guaranteed to make more money. How can they claim this? At its core it provides a free and open “mediation” layer that can work with any ad network or ad exchange. This lets you run A/B tests on your inventory and tells you what performs the best and then optimizes for this. For example, if you start promoting in-app purchases for 99 cent cents to unlock certain features (levels, virtual gifts, etc) you can compare how much of these you sell vs. how that inventory performs against ad network advertising you might choose to run. You can also compare how in-app purchases perform vs. cross-promoting the other apps you may have for sale. You can choose to allocate inventory to various uses based on your preference or have the system auto-optimize for what is converting the best and making you the most money.
Optimization also helps you optimize ad sales if you’re doing pure advertising. It compares how ad units perform across all of the ad networks you might want to use and it also will compare the performance to your own direct sales of the inventory. It can automatically “serve up” ads from the ad networks based on performance and daisy-chain ad-networks if the first network can’t fill your inventory.
Optimization, at its core, is an analytics platform that gives you the power to figure out how to make money. And this part of the product is entirely free to use. Optimization technology is not new. It has existed on the tethered web for some time and open and free platforms like Open X have gained much traction. What we believe is novel here is that Burstly is the first optimization platform to allow mediation for all mobile ad networks and to optimize against in-app purchases, other people’s apps, your direct inventory and your cross promotions of other products.
2. Transparency – Burstly also hopes to compete on the transparency plane. Within the overall ad business, transparency rarely exists and there are multiple places from where you can black box the information. Burstly believes that since the developers are not only sellers of their inventory, but also buyers, they will benefit the most by having access to the data. Currently, that does not exist in the mobile marketplace. With a typical mediation layer you will know the amount your ad network or broker is paying you but you have no visibility into what the advertiser is paying them. Burstly will provide complete transparency where it has data. Obviously if Burstly is fronting another ad network that network may still be a black box. But to the extent that Burstly has advertiser data they will make that fully available to you.
3. Application Marketplace – One of Burstly’s focus areas is creating a marketplace for application developers to promote your applications with other developers. It’s also a great example of why transparency is so important. For example, when a user downloads somebody else’s application by clicking an ad in your app and then downloading it from the App Store, you will be paid on a CPI (cost per install) basis. On this transaction Burstly takes a straight 10% fee on all transactions and the CPI is totally visible to you so you’ll know exactly what your take is and what Burstly’s is. They’ve even built in the ability to go around the Marketplace and avoid the 10% fee by entering in your deals manually. However, we feel the automation and ease of use for such a small percentage will be acceptable to most developers. Hey, ya gotta make money somewhere to stay in business, right?
We think this will create a very healthy ecosystem across developers. It’s a way for you as a developer to promote your app with other developers to drive more installs. Burstly will help you to optimize and also see which other application provider’s drive better installs for you and vice versa. This way, if something works, the buyer has the option to go direct to the seller and determine the best way to work together. For sellers, the entire advertiser list and rates are published so they can see all this information. It’s not always easy promoting your app in the App Store and over time we know this will be hard on Android and other platforms. Burstly is attempting to provide a better, more transparent way to promote your product.
4. Rules-Based System for Flighting Campaigns – Another area that we believe will be a big differentiator for Burstly is their rules-based system for flighting campaigns. Evan and the team knew exactly what features have been important in the website publishing world and noticed that many of the mobile ad platforms were not sophisticated enough. Our system will allow you to take control of your inventory. If you are new to running and optimizing ads you can leave the work to Burstly. If you have or develop more expertise you can take control of the cockpit. Burstly allows you to do many sophisticated things to both deliver a better experience to your audience and to deliver better financial results. These include frequency capping, prioritizing inventory types, geo-tagging so that you serve up location relevant ads, time-of-day campaigns (e.g. you might switch to restaurant coupon ads from 4-7pm every day) and you can set up budgetary rules (caps by budgets, clicks, actions or impressions). These are tools the ad networks and ad exchanges use for themselves so they can make a profit. We think you should have access to them to.
5. Direct – Another area the team wanted to deliver for app developers is the ability to sell your own “direct” ads and to flight them alongside your other inventory. Again, as an open and free ad management platform we let you do this for free. Why should somebody take a cut off of an ad that you sold directly?
6. Support for iPad Out of the Box – None of us have actually seen the iPad but it’s coming in less than a week! They did give companies access to an iPad simulator to pre-build apps and that’s what Burstly has done. Burstly allows you to configure your ad size on the iPad rather than accepting a pre-defined size for your ad unit as many platforms and ad networks dictate. Burstly has also built in video as support as we know that’s likely to be a focus area for the iPad.
So, if you’re giving away so much functionality for free – how will you make money? Surely there must be an angle (or are you that dumb)? So far, the initial monetization strategy is a 10% fee for Marketplace transactions. Having worked in the ad network and ad platform business for many years Evan and the team have some clever ideas for where they want to take the business and how they believe mobile advertising will ultimately evolve. They feel if they offer an open, transparent and low cost solution they have a few great ways to increase monetization down the line. And not just for themselves, but more importantly for the developers.
But, wait a second, aren’t you the guy who said “App is Crap?” What up with that? Yeah, that’s me. So I’ll try to be clear. Applications are here today and that’s not going to change for the short-to-mid term and the market needs better infrastructure. In the long-term there will always be some applications that are better to be natively installed versus used through your browser. But when I talked about the investment with Evan I wanted to be sure that he was committed to also building a platform that would scale to the mobile web and not just the mobile application environment. He is. We hope Burstly will become a major and relevant player in both ecosystems.
Good luck, guys. I feel proud to be involved with your project.