All posts in “Advertising Tech”

Hootsuite nabs $50M in growth capital for its social media management platform, passes 16M customers

Over the last several years, social media has become a critical and central way for businesses to communicate, and market to, their customers. Now, one of the startups that helped spearhead this trend has raised a round of growth funding to expand its horizons. Hootsuite, the Vacouver-based social media management company that counts some 16 million businesses as customers, said today that it has raised $50 million in growth capital — specifically through a credit financing agreement — from CIBC Innovation Banking.

We asked Ryan Holmes, the co-founder and CEO, for details about its valuation and funding, and said that it will be used for more acquisitions in the near future, and with it the valuation is unchanged.

“We opted for to go with non-dilutive credit at this point and found a great partner and terms in CIBC,” he wrote in an email. “The company is cash flow positive and the facility will primarily be reserved for M&A purposes. There is no associated valuation, however our latest 409a is up from last year and growth is very strong.”

Notably, the last time Hootsuite raised money — way back in 2014 — the company was already valued at $1 billion. For some context, at the time it had 10 million businesses as customers, and today it has 16 million including what it says is 80 percent of the Fortune 1000, so it’s likely that its valuation has grown as well.

“This financing is a testament to the strong fundamentals behind Hootsuite and our ongoing commitment to innovation and growth as the clear leader in social media management,” said Greg Twinney, CFO of Hootsuite, in a statement. “The additional capital will help us scale even faster to bring the most innovative products and partnerships to market globally and help our customers strategically build their brands, businesses and customer relationships with social.”

The funding, according to the release, will also be used to expand its business in Asia Pacific, Europe and Latin America. It also plans to add in more tools to serve the needs of specific verticals like financial services, government and healthcare.

You may not know the name Hootsuite but you might recognise its mascot — an owl — and more specifically its corresponding shortened link — it starts with ‘’ — that is used a lot on Twitter, the social network that gave Hootsuite its first customers and ubiquity.

Things have moved along quite a bit since those early days, when Hootsuite first started as a side project for Holmes, who himself was running a marketing and advertising agency when he started it.

Social media is now the fastest-growing category for marketing spend — partly because of the popularity of social networking services like Facebook, Snapchat and Twitter; and partly because “eyeballs” can be better tracked and quantified on these networks over more legacy channels like print and outdoor ads. At the same time, presenting yourself as a business on a social network is getting harder and harder. Sites like Facebook are focused on trying to improve engagement, and that is leading it to rethink how it shares and emphasizes posts that are not organically created by normal people. On the other side, we’re seeing a new wave of privacy and data protection regulation come in that will change how data can be used across and within these sites.

All of this means that Hootsuite, and others that it competes with, need to get a lot smarter about what it offers to its customers, and how it offers it.

Starting as a modest tool that plugged into Twitter, Hootsuite itself now integrates with just about all of the major social platforms, most recently finally adding Instagram earlier this month. Its customers use a dashboard to both monitor a variety of social media platforms to track how their companies are being discussed, and also to send out messages to the world. And they now use that dashboard and Hootsuite for a growing array of other purposes, from placing ads to content marketing to analytics across an increasing number of platforms — a range of services that Hootsuite has developed both in-house and by way of acquisition.

One challenge that Hootsuite has had over the years has been the company’s focus on the freemium model, and how to convert its initially non-paying users into paying tiers with more premium offerings. Some of that expansion into new services appears to have helped tip the balance.

“In the past year, Hootsuite has seen tremendous growth from acquisitions like AdEspresso, to strategic partnerships with market leaders such as Adobe, to recognitions such as being named a leader in the Forrester Wave and G2 Crowd,” said Holmes in a statement. “This financing allows Hootsuite in continuing to create strong value for customers looking to unlock the power of social.”

Another challenge has been the fundamental fact that Hootsuite relies on third parties to essentially “complete” its offering: Hootsuite offers analytics and tools for marketing, but still needs to connect into social networks and their data pools in order to do that.

This makes the company somewhat dependent on the whims of those third parties. So, for example, if Twitter decides to either increase the fees it charges to Hootsuite, or tries to offer its own analytics and thereby cuts off some of Hootsuite’s access, this impacts the company.

One solution to this is to continue to integrate as many other platforms as possible, to create a position where its stronger because of the sum of its parts. Unsurprisingly, Hootsuite also says that some of the funding will be used to increase its partnerships and integrations.

More generally, we are seeing a trend of consolidation in the area of social media management, as several smaller, and more focused solutions are brought together under one umbrella to improve economies of scale, and also to build out that “hub” strategy, becoming more indispensable, by virtue of providing so much utility in one place.

As part of that trend, we’ve seen two of Hootsuite’s rivals, Sprinklr and (not an owl but another bird of prey), also grow by way of a spate of acquisitions.

MoviePass CEO backpedals on location tracking and talks strategy to break even by 2019

In a rare moment of contrition, MoviePass CEO Mitch Lowe admitted misleading both consumers and advertising execs with statements last week that the company tracks the location of users before and after they go to the movies. “We don’t do the things I described,” he told TechCrunch. As for location, “We don’t record it, we don’t save it, we don’t follow it.”

Customers may find this total about-face since last week unconvincing, especially since the company issued an update to the app days after Lowe’s remarks that “removed unused app location capability.”

That too was inaccurate, Lowe told me. “The update didn’t change anything, only the menu options.” He later wrote to the same effect in a blog post on the company’s site.

The way I portrayed what we do is not accurate.

— MoviePass CEO Mitch Lowe

This series of “misstatements,” as Lowe called them, doesn’t inspire confidence in a company that has openly said that it intends to use exactly this kind of data to build a personalized evening out to its customers — courtesy of advertisers who would make offers based on that data, of course.

But Lowe explained that he was the victim of his own excitement. Talking to a crowd of data mongers at the Entertainment Finance Forum, in a talk specifically about monetizing the data MoviePass collects, he claims to simply have gotten ahead of himself and talked about plans as if they were reality.

“Sometimes I get all excited about our future vision of a night at the movies and building an ecosystem around it,” he said. “I need to correct what I said. The way I portrayed what we do is not accurate. I implied we know where you are when you’re on the way to the movies, and that’s not what we do.”

Specifically, he said that the app checks location when the user has the app open in order to find theaters near them, in case they want to look up movie times or the like. Then there’s another location check when the user checks in, to make sure they’re at the theater their ticket is for.

“We only know where they are at that instant. Once they go out of the app, we don’t know where they are. We don’t know where they go afterwards, we don’t record it. That’s all we do, that’s all we’ve ever done.”

I had pointed out earlier that tracking like he had said they did would be a flagrant violation of their own privacy policy, which would put them at risk of lawsuits or even FTC action. Lowe specifically said that they do comply with it; although technically checking in the background for nearby places isn’t listed there (only “a single request for your location” when you check in is), the nearby theaters feature is hardly the kind of invasive data collection about which one would actually complain.

MoviePass Premium?

If the company decides to launch a more comprehensive “night at the movies” service, complete with pre- and post-movie tracking, “we’ll comply by all the rules and acceptable terms by first sending an opt-in or opt-out, explaining in plain English what we are doing with that information.”

As for other changes to the product, Lowe said to expect some new offerings soon.

“There’ll be new stuff in the near future,” he said. “We’ll come out with a premium package, a bring a friend package, a couples package, a family package.”

I’d lay money on some kind of “red carpet” branding. He didn’t detail what these packages would comprise exactly, but he did say that you can expect the original monthly system will be in place for the foreseeable future.

“Most people assume the number of movies our subscribers go to is much higher than it is,” he said, which is consistent with the early adopter pattern of squeezing every last drop of value out of an all-you-can-eat service. He declined to quote actual averages, but said “you’d be shocked at how low it is.”

He said, for instance, many users go from seeing on the order 4 or 5 movies a year to 10 a year — not 10 a month as some believe is the case. The value, he speculated, was in “de-risking” seeing a bad or small movie — which also can increase ticket sales for those films.

Filling the money pit

That said, Lowe pleaded guilty in response to the most frequent and obvious criticism of the service, which is simply that it is losing money at a phenomenal rate and only survives by frequent cash infusions.

“In the old days it was raise a ton of money and then grow a business. Today what you do is you raise enough money month by month to fund essentially that negative cash flow,” he explained — which really is just a nicer way of phrasing the problem. But Lowe compared MoviePass to the likes of Netflix and Spotify, which have taken on huge debt to position themselves to grow and monetize their user base.

Whether the comparison is apt or aspirational depends on MoviePass’s success over the next year; Lowe said “We are 100 percent confident that we have the committed funding… to get to the cash flow break even point, which we believe will be early next year.”

The steps in that plan:

  • Get users to an average of 1.1 movies per month
  • Get average monthly cost of goods (i.e. what MoviePass provides the user) down to $9
  • Generate $6 per user in revenue from advertising and data plays

“Obviously we’re not there yet,” he concluded. But he pointed out that “the cash required is coming down dramatically from what it was even a few months ago.” He later specified in an email that this is from “a combination of revenue from studios and brand partnerships, lower costs of tickets, lower member churn and lower usage.” However, the road to getting a share of concessions — famously the most profitable part of the business — will be a bumpy one, especially given the antagonistic stance MoviePass has taken with industry leaders like AMC.

For now it at least seems safe for consumers to use the app without fear that they are being surreptitiously tracked — any more than they are the rest of their time online, at any rate. 2018 will be the year MoviePass either becomes a major force in the industry or collapses, its expended millions a sad examplar of peak subscription economy.

Featured Image: Bryce Durbin / TechCrunch

Platform power is crushing the web, warns Berners-Lee

On the 29th birthday of the world wide web, its inventor, Sir Tim Berners-Lee, has sounded a fresh warning about threats to the web as a force for good, adding his voice to growing concerns about big tech’s impact on competition and society.

The web’s creator argues that the “powerful weight of a few dominant” tech platforms is having a deleterious impact by concentrating power in the hands of gatekeepers that gain “control over which ideas and opinions are seen and shared”.

His suggested fix is socially minded regulation, so he’s also lending his clout to calls for big tech to be ruled.

“These dominant platforms are able to lock in their position by creating barriers for competitors,” Berners-Lee writes in an open letter published today on the Web Foundation’s website. “They acquire startup challengers, buy up new innovations and hire the industry’s top talent. Add to this the competitive advantage that their user data gives them and we can expect the next 20 years to be far less innovative than the last.”

The concentration of power in the hands of a few mega platforms is also the source of the current fake news crisis, in Berners-Lee’s view, because he says platform power has made it possible for people to “weaponise the web at scale” — echoing comments made by the UK prime minister last year when she called out Russia for planting fakes online to try to disrupt elections.

“In recent years, we’ve seen conspiracy theories trend on social media platforms, fake Twitter and Facebook accounts stoke social tensions, external actors interfere in elections, and criminals steal troves of personal data,” he writes, pointing out that the current response of lawmakers has been to look “to the platforms themselves for answers” — which he argues is neither fair nor likely to be effective.

In the EU, for example, the threat of future regulation is being used to encourage social media companies to sign up to a voluntary code of conduct aimed at speeding up takedowns of various types of illegal content, including terrorist propaganda. Though the Commission is also seeking to drive action against a much broader set of online content issues — such as hate speech, commercial scams and even copyrighted material.

Critics argue its approach risks chilling free expression via AI-powered censorship.

Some EU member states have gone further too. Germany now has a law with big fines for social media platforms that fail to comply with hate speech takedown requirements, for example, while in the UK ministers are toying with new rules, such as placing limits on screen time for children and teens.

Both the Commission and some EU member states have been pushing for increased automation of content moderation online. In the UK last month, ministers unveiled an extremism blocking tool which the government had paid a local AI company to develop, with the Home Secretary warning she had not ruled out forcing companies to use it.

Meanwhile, in the US, Facebook has faced huge pressure in recent years as awareness has grown of how extensively its platform is used to spread false information, including during the 2016 presidential election.

The company has announced a series of measures aimed at combating the spread of fake news generally, and reducing the risk of election disinformation specifically — as well as a major recent change to its news feed algorithm ostensibly to encourage users towards having more positive interactions on its platform.

But Berners-Lee argues that letting commercial entities pull levers to try to fix such a wide-ranging problem is a bad idea — arguing that any fixes companies come up with will inexorably be restrained by their profit-maximizing context and also that they amount to another unilateral impact on users.

A better solution, in his view, is not to let tech platform giants self-regulate but to create a framework for ruling them that factors in “social objectives”.

A year ago Berners-Lee also warned about the same core threats to the web. Though he was less coherent in his thinking then that regulation could be the solution — instead flagging up a variety of initiatives aimed at trying to combat threats such as the systematic background harvesting of personal data. So he seems to be shifting towards the need for a move overarching framework to control the tech that’s being used to control us.

“Companies are aware of the problems and are making efforts to fix them — with each change they make affecting millions of people,” he writes now. “The responsibility — and sometimes burden — of making these decisions falls on companies that have been built to maximise profit more than to maximise social good. A legal or regulatory framework that accounts for social objectives may help ease those tensions.”

Berners-Lee’s letter also emphasizes the need for diversity of thought in shaping any web regulations to ensure rules don’t get skewed towards a certain interest or group. And he makes a strong call for investments to help close the global digital divide.

“The future of the web isn’t just about those of us who are online today, but also those yet to connect,” he warns. “Today’s powerful digital economy calls for strong standards that balance the interests of both companies and online citizens. This means thinking about how we align the incentives of the tech sector with those of users and society at large, and consulting a diverse cross-section of society in the process.”

Another specific call he makes is for fresh thinking about Internet business models, arguing that online advertising should not be accepted as the only possible route for sustaining web platforms. “We need to be a little more creative,” he argues.

“While the problems facing the web are complex and large, I think we should see them as bugs: problems with existing code and software systems that have been created by people — and can be fixed by people. Create a new set of incentives and changes in the code will follow. We can design a web that creates a constructive and supportive environment,” he adds.

“Today, I want to challenge us all to have greater ambitions for the web. I want the web to reflect our hopes and fulfil our dreams, rather than magnify our fears and deepen our divisions.”

At the time of writing Amazon, Facebook, Google and Twitter had not responded to a request for comment.

Featured Image: Southbank Centre/Flickr UNDER A CC BY 2.0 LICENSE

UK watchdog wants disclosure rules for political ads on social media

The UK’s data protection agency will push for increased transparency into how personal data flows between digital platforms to ensure people being targeted for political advertising are able to understand why and how it is happening.

Information commissioner Elizabeth Deham said visibility into ad targeting systems is needed so that people can exercise their rights — such as withdrawing consent to their personal data being processed should they wish.

“Data protection is not a back-room, back-office issue anymore,” she said yesterday. “It is right at the centre of these debates about our democracy, the impact of social media on our lives and the need for these companies to step up and take their responsibilities seriously.”

“What I am going to suggest is that there needs to be transparency for the people who are receiving that message, so they can understand how their data was matched up and used to be the audience for the receipt of that message. That is where people are asking for more transparency,” she added.

The commissioner was giving her thoughts on how social media platforms should be regulated in an age of dis(and mis)information during an evidence session in front of a UK parliamentary committee that’s investigating fake news and the changing role of digital advertising.

Her office (the ICO) is preparing its own report this spring — which she said is likely to be published in May — which will lay out its recommendations for government.

“We want more people to participate in our democratic life and democratic institutions, and social media is an important part of that, but we also do not want social media to be a chill in what needs to be the commons, what needs to be available for public debate,” she said.

“We need information that is transparent, otherwise we will push people into little filter bubbles, where they have no idea about what other people are saying and what the other side of the campaign is saying. We want to make sure that social media is used well.

“It has changed dramatically since 2008. The Obama campaign was the first time that there was a lot of use of data analytics and social media in campaigning. It is a good thing, but it needs to be made more transparent, and we need to control and regulate how political campaigning is happening on social media, and the platforms need to do more.”

Last fall UK prime minister Theresa May publicly accused Russia of weaponizing online information in an attempt to skew democratic processes in the West.

And in January the government announced it would set up a dedicated national security unit to combat state-led disinformation campaigns.

Last month May also ordered a review of the law around social media platforms, as well as announcing a code of conduct aimed at cracking down on extremist and abusive content — another Internet policy she’s prioritized.

So regulating online content has already been accelerated to the top of government in the UK — as it is increasingly on the agenda in Europe.

Although it’s not yet clear how the UK government will seek to regulate social media platforms to control political advertising.

Denham’s suggestion to the committee was for a code of conduct.

“I think the use of social media in political campaigns, referendums, elections and so on may have got ahead of where the law is,” she argued. “I think it might be time for a code of conduct so that everybody is on a level playing field and knows what the rules are.

“I think there are some politicians, some MPs, who are concerned about the use of these new tools, particularly when there are analytics and algorithms that are determining how to micro-target someone, when they might not have transparency and the law behind them.”

She added that the ICO’s incoming policy report will conclude that “transparency is important”.

“People do not understand the chain of companies involved. If they are using an app that is running off the Facebook site and there are other third parties involved, they do not know how to control their data,” she argued.

“Right now, I think we all agree that it is much too difficult and much too opaque. That is what we need to tackle. This Committee needs to tackle it, we need to tackle it at the ICO, and the companies have to get behind us, or they are going to lose the trust of users and the digital economy.”

She also spoke up generally for more education on how digital systems work — so that users of services can “take up their rights”.

“They have to take up their rights. They have to push companies. Regulators have to be on their game. I think politicians have to support new changes to the law if that is what we need,” she added.

And she described the incoming General Data Protection Regulation (GDPR) as a “game-changer” — arguing it could underpin a push for increased transparency around the data flows that are feeding and shaping public opinions. Although she conceded that regulating such data flows to achieve the sought for accountability will require a fully joined up effort.

“I would like to be an optimist. The point behind the General Data Protection Regulation as a step-up in the law is to try to give back control to individuals so that they have a say in how their data are processed, so that they do not just throw up their hands or put it on the ‘too difficult’ pile. I think that is really important. There is a whole suite of things and a whole village that has to work together to be able to make that happen.”

The committee recently took evidence from Cambridge Analytica — the UK based company credited with helping Donald Trump win the US presidency by creating psychological profiles of US voters for ad targeting purposes.

Denham was asked for her response to seeing CEO Alexander Nix’s evidence. But said she could not comment to avoid prejudicing the ICO’s own ongoing investigation into data analytics for political purposes.

She did confirm that a data request by US voter and professor David Carroll, who has been trying to use UK data protection law to access the data held on him for political ad targeting purposes by Cambridge Analytica, is forming one of the areas of the ICO enquiry — saying it’s looking at “how an individual becomes the recipient of a certain message” and “what information is used to categorise him or her, whether psychographic technologies are used, how the categories are fixed and what kind of data has fed into that decision”.

Although she also said the ICO’s enquiry into political data analytics is ranging more widely.

“People need to know the provenance and the source of the data and information that is used to make decisions about the receipt of messages. We are really looking at — it is a data audit. That is really what we are carrying out,” she added.

Featured Image: Tero Vesalainen/Getty Images

FreedomPop moves into financial services, in partnership with Prudential

Ahead of a big fundraising to fuel its mobile ambitions, “free” mobile service startup FreedomPop is taking an unexpected strategic side-road to expand into a completely different area: financial services. The company is licensing its customer conversion platform to Prudential, which plans to use it to up-sell existing customers to more of its products.

FreedomPop itself is not turning away from mobile services. The company — which has services in the US, UK, Greece, Italy, Spain, Mexico and Asia — appears to be doubling down on mobile after expanding internationally beginning in 2014. From what we understand, it is now Ebitda positive and on track to turn profitable at the end of this quarter.

On the back of that, we’ve heard from reliable sources that the company is planning to raise a large growth round in the coming months, to continue its expansion. It has raised $109 million since being founded in 2011, and this round is likely to include strategic investors. Previous backers include Atomico, DCM, Intel and Mangrove, among others.

FreedomPop built its so-called “Accelerate Platform” as part of its own business model: the company offers a bundle of completely free voice, text and data services to customers — using network capacity that it buys off mobile network operators like Sprint in the US and Three in the UK — and then upsells those customers on lots of extras like voicemail, extra data, extra phone numbers, and so on, via Accelerate.

Stephen Stokols, FreedomPop’s co-founder and CEO, says that it is built on machine learning algorithms that sifts through attributes that are based on the person’s usage patterns and other factors, and uses these to recommend products. “It gets smarter with time,” he said in an interview.

FreedomPop claims that the platform has given it one of the highest conversion rates on the internet, with nearly half of all its users buying at least one value-added service. As a point of comparison, it notes that Spotify and Dropbox only manage to convert their free users 23 percent and 16 percent respectively.

I’d argue that part of the reason for that is that the main service is free, and also very bare bones, so it’s no surprise that people are willing to pay for some extras. But in any case, that business model has made FreedomPop financially stable, so for a company like Prudential, it’s a safe and smart bet to try it out, and it will be interesting to see how it works in a different vertical.

The move is an interesting twist for how FreedomPop is building and monetising its assets, and speaks to the wave of adtech and marketing technology that legacy businesses are now trying to bring into their platforms to expand their business with customers.

While the switch to online interactions and web-based portals has definitely expanded the horizons for a company like Prudential, on another level it’s made business a lot more challenging.

Consumers have a lot more choice, and usually a lot less attention, and are generally more reluctant to take big financial leaps online than they might have been in an in-person encounter. On top of this, the rise of big data analytics and a myriad of tools to track your every online move has made it very possible for companies, if not to know you directly, know everything about you based on that online footprint; and to sell to you accordingly.

Those who don’t have the ability to capture and use that information end up at a disadvantage, and that’s something that Prudential will also be trying to tackle here.

“They would have had seven or eight different segments in the past,” he said, referring to the demographic buckets that Prudential would have used to figure out what further products to offer their customers. “Now we’re talking about thousands of micro-segments, based on actual experiences.”

The idea will be for suggestions of products to come up in places where customers are already hearing from Prudential, whether it’s through messaging on their site, direct marketing or through customer service / advisory conversations.

“We chose to work with FreedomPop because they have a proven model and have already demonstrated reliability and scalability with world-class companies,” said Al-Noor Ramji, Prudential Group Chief Digital Officer, in a statement. “We are excited to leverage FreedomPop’s Accelerate platform to surface, assess and maximize data monetization opportunities in new and innovative ways.”

Stokols said that Prudential is the first, but not the last, financial services company that will be using FreedomPop’s recommendation engine, with four more deals with financial services businesses planned to be rolled out later this year.

While the company is not revealing the financial terms of the deal, the size of the financial services market — $100 billion annually — means even a cut might end up having a strong impact on FreedomPop’s balance sheet. “We think financial services might even be bigger than telecoms for us in the long run,” Stokols said.

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