Amobee hopes to enable content creators to survive today’s free Internet culture by providing their output in exchange for embedded advertising. Is this Google’s next acquisition?
Web publishers worldwide are in dire need of new revenue streams. The content-is-free culture of the Internet is killing off venerable companies and preventing new ones from achieving their potential.
Amobee Media Systems, located on Israel’s central coast in Herzliya, hopes to reframe the equation by allowing publishers to make their products available to consumers in exchange for embedded advertising.
The idea is not particularly revolutionary – Internet advertising is hardly in its infancy. But mobile presents particular challenges, from the wide variety of delivery channels – SMS, MMS, video clips, games and browser-based content – to the size of the screen (you try putting an ad on a three-inch cell phone display).
Mobile phone users are no different in their diffidence to paying for news, videos, messaging or games. It’s one thing to brag about your startup’s nifty new iPhone app; it’s another to actually make any money.
Sucking ads in and pushing them out
Amobee isn’t a mobile ad network like fellow Israeli startup AdMob (which was acquired late last year by Goggle for $750 million). Rather, it’s a backend telco-grade infrastructure for mobile operators that sucks in ads from third party partners (like AdMob) and pushes them out to consumers based on preferences that the operator has collected, as well as advertiser geo and behavioral targeting data.
For example, Amobee can automatically roll commercials before, during and after a video clip, or place a dynamic banner inside the menu of a game. In 2008, the Obama campaign used Amobee’s software to target a young audience in four states, primarily via the mobile WAP interface.
Amobee has certainly got the chops to succeed. The company has 28 customers including some of the largest operators in Europe and Asia, like Vodafone and Telefonica (there are Amobee customers in the US, too, but they haven’t been disclosed yet). Big brand advertisers including Coke, Adidas and Nike are also using the system.
Amobee was recently honored by the World Economic Forum (WEF) as a Technology Pioneer of 2010. The WEF cited Amobee’s accomplishments “as an innovator of the highest caliber, whose mobile advertising technologies and business model will have a deep impact on business and society.” The company was also dubbed Israel’s “most promising startup” by Ernst & Young in 2008.
Raising $42m. in four years
Even more impressive, the company has raised more than $42 million in its four and a half years of existence from both major VCs (Sequoia and Accel), as well as corporate partners (Motorola, Cisco and Amdocs). Amobee has 75 employees in Israel at its R&D facility and 10 in its Redwood City, California-based headquarters.
Amobee CEO Zohar Levkovitz is a long-time mobile executive. He worked at Comverse as CTO of the company’s 3G, MMS and WAP Push technologies. He founded the company with partners Gil Shulman and Shaul Rurka who he credits with coming up with the idea (the two are no longer with the company). Levkovitz is a something of a jack-of-all-trades: He started his career as a copywriter for a Tel Aviv ad agency before taking up technology.
The company doesn’t lack for competitors. All the big vendors, including Nokia, Ericsson, Oracle and Levkovitz’s former employers at Comverse, are trying to beat Amobee at its game. The difference, Levkovitz tells ISRAEL21c, is his company’s DNA.
“Our DNA is both mobile and advertising,” claims the CEO. “The DNA of Comverse and Amdocs is all about the operator, but they don’t know advertising. On the other side, Google and Yahoo know a lot about advertising but don’t understand mobile.” (Tell that to Google, which just this month announced its own branded mobile phone, The Nexus One.)
So what about the iPhone, which is unquestionably the largest distribution platform for mobile applications? Levkovitz dismisses the Apple device as “nice but small,” and in any case, inconsequential to Amobee’s business which is entirely via the operators not the consumer hardware manufacturers.
Google’s next big purchase?
When interviewed by ISRAEL21c a year ago, Levkovitz said that the stars had aligned in the mobile phone advertising space, and that a number of basic, but essential conditions in the industry were making it possible for cell phone operators to deliver rich and targeted advertising to the cell phone.
This year he has a prediction about video: Sexy but not as popular as you might think. “Advertisers love video, but it’s not a big market. Video,” he says, “is just one more channel.”
Is there any pushback from consumers on seeing ads in their favorite applications and content? While Amobee’s system can make two versions available – an ad-supported free version and a paid option without the intrusion – “99 percent of users will take the free content with the ads,” Levkovitz asserts.
An article last month in the local financial daily The Marker, grilled Levkovitz on the possibility that Amobee might be Google’s next big acquisition after AdMob. Levkovitz was coy, but conceded that “The Marker mentioned two years ago we were in talks to be bought by Yahoo for $200 million.” He wouldn’t comment any further on details, but that figure has undoubtedly gone up.
Levkovitz grew up on Kibbutz Dafna next to the northern town of Kiryat Shemona. When asked why he opted for a career in high-tech he quipped: “It’s nicer to be a CEO than to go out to the refet (the cow shed) every day.”