In June 2006, Jamie Tedford quit his job at one of Boston’s highest-profile ad agencies, Arnold Worldwide, to start his own company. He had a hunch that big companies needed help first to understand what people were saying about their brands on the Web and social networks, and then to participate in those conversations. His first office was in his Marblehead attic, and he bankrolled the company with credit cards.
“Big companies were doing experiments back then, dipping their toe in, sort of just to check the box that they were doing something social,” he says.
Today, Tedford’s company, Brand Networks, employs 135 people in five offices, and its clients include American Express and Starbucks. In June, the company collected its first capital from outside investors: $68 million. Up next for Brand Networks, Tedford says, is international expansion and a major acquisition.
Brand Networks is just one example of a local advertising tech company that’s on fire. In fact, it’s hard to find a hotter area of Boston’s tech scene today. Nexage, focused on mobile advertising, just poached a former Apple executive to staff its new office in London. Nanigans, which may be the largest independent software tool for buying ads on Facebook, says it is hiring one new employee every business day and opening new offices in Singapore and Australia.
DataXu, which helps automate the process of buying digital advertising, was ranked as the fifth fastest-growing private company in the United States this year by Inc. Magazine, and is likely to surpass $100 million in revenue in 2013, according to chief executive Mike Baker. And Twitter, before filing its initial public offering paperwork , scooped up a Cambridge company focused on advertising, Bluefin Labs.
What’s going on here? We’re witnessing the death throes of advertising’s “Mad Men” era, and the birth of the Mr. Spock era. Mad Men were all about coming up with clever ideas for ads, treating clients to steak-and-martini dinners, and putting TV spots on the most popular shows. You didn’t know exactly who saw your ad when it ran on “Bonanza,” or what impact it had on sales, but you knew it reached a lot of people.
Mr. Spock is all about making logic-driven decisions based on data collected about consumers and the context surrounding the ad. Who is clicking, and is that click leading to a transaction? Is this ad worth what we’re paying?
Basically, explains venture capitalist Jeffrey Bussgang, “The geeks have taken over the advertising industry, and it turns out we have a lot of geeks in Boston.”
In the Spock era, it’s amazing how much information an advertiser can get about who’s seeing their message, and how automatic the purchase and placement of these ads are. As you click around a website on your iPad, for instance, advertisers can bid to have their ad shown on a page as it loads.
What price is Zappos willing to pay to reach a 37-year-old woman in Wellesley on a given Sunday? They can pay for their ads to follow you from one site to another, a practice called re-targeting. They can even set ads to show up only when the weather is below 30 degrees.
“Honda might try to encourage people to do test drives by ‘geo-fencing,’ ” says Jennifer Lum, cofounder of Adelphic Mobile, an ad tech start-up in Waltham. Geo-fencing uses your phone’s current location to determine which ads to show you. “They can have mobile ads show up only when someone on a phone or tablet is within a mile of one of their dealerships. Or Starbucks could advertise to users who are close to Dunkin’ Donuts locations.”
And just like programmed stock market trading, many of these ad campaigns are being run automatically. “If you are a company like Wayfair with millions of products, you want to use software to figure out what products to advertise where, and with which kinds of ads,” says Ric Calvillo, chief executive of Boston-based Nanigans, which is nearing 150 employees.
Boston start-ups like Jebbit and SessionMare trying to devise new ways to incentivize consumers to watch or interact with ads. SessionM, for instance, offers a kind of “frequent flier point” for using mobile apps; they can be given out by the app itself, but you get more when you do something with an advertiser, like watch a video or fill out a survey.
With enough of SessionM’s points, “You can shop for Amazon or iTunes gift cards, or make a charitable donation,” says chief executive Lars Albright. “It turns advertising into a more positive experience than just slapping up a banner ad, which people see as basically spam.” His Boston company has 60 employees and has raised $26 million from investors.
All of these new forms of digital influence may skeeve out consumers, who’d prefer to remain untargeted and unmolested. But it’s important to remember that in the Mad Men era, we had soap operas and “Seinfeld” on TV because we watched the commercials. In the Mr. Spock era, we have free apps and social networks because we watch — and occasionally click on — the ads.
“It’s an explicit value exchange,” says Lum. “Consumers get apps and content, but the creation is being subsidized by advertisers that want to reach them.”
The technology delivering the ads may be new, but the trade-off is the same.