BlueKai CEO Omar Tawakol, who just landed $21 million in financing and whose company has an interesting vision for the future of the Internet advertising industry, spoke with The Rayno Report on Monday about the direction of his company and the new financing. Tawakol believes his company is onto a multi-billion dollar opportunity.
BlueKai aggregates anonymous user data from across the Internet for advertising agencies. It tracks the anonymous user data with a cookie. BlueKai’s partners and customers then pay for access to that data and the cookie through an auction process, so that they can see more detailed information about users and target their ads more specifically.
Tawakol believes the industry is in the midst of a data “paradigm shift,” in that the data aggregation model exists in the offline world, but has not yet been effectively implemented in the new online world. “It’s a paradigm issue,” says Tawakol, “The new winners usually come from the new paradigm, not the old one.”
Tawakol points out that large “offline” data companies that sell data for traditional media markets including print and TV include companies like Nielsen and Acxiom. He says there are a dozen companies in this market, many with revenues more than $1 billion, therefore the opportunity must be mutiple billions of dollars in the online space.
Tawakol describes his “data marketplace” as kind of a “reverse Google.” Instead of buying a search keyword, which is matched to what users are going to search for, the advertisers are buying data on what Internet users are actually doing, looking for the ones that are likely to look for their products in the future. “We’re like a search marketplace for the user data,” says Tawakol. “It’s fully transparent — you can see the data. There is not personally identifiable information.”
For example, an advertiser might purchase the rights for people who are searching for flights to Hawaii on a travel site. In this model, Tawakol says he thinks the “data adds value” for the advertiser. If you know through the data that your ad is going to target only those people looking for flights to Hawaii, and you are advertising for that consumer, you are willing to pay many multiples more for the targeted customer rather than broadcasting the ad to a broader audience.
Tawakol says that this means the “data actually adds a lot more value to the ad… If BlueKai is right, the data is actually more valuable than the ad itself, so the future is bright,” says Tawakol.
BlueKai says that the company does not compete with Google, but rather it is a partner. “Google does not have a pure data play,” he says. “We’re a data pure play.”
If Google truly does not have that capability to create its own data marketplace (I am a bit skeptical, Google collects more data than anybody, so why couldn’t they do this?), then BlueKai must be an obvious acquisition target. This might explain that $21 million investment, eh? Tawakol says that there was “a lot of interest in the round.” If VCs know there is the possibility for a quick exit, they’re all over a company. I smell a possible acquisition of BlueKai coming.
The $21 million C round of financing was led by GGV Capital (formerly Granite Global Ventures) and included money from prior investors Redpoint Ventures and Battery Ventures. Redpoint partner Scott Raney talked with us about BlueKai here. The company had previously raised a total of $13.7 million in two rounds of funding from Redpoint and Battery. As part of the current funding round, BlueKai added Jeff Richards, Partner at GGV Capital, to its Board of Directors.
Tawakol says much of the $21 million will be used to expand BlueKai’s “ecosystem” by building development APIs that allow ad networks to build BlueKai’s data auction system into their networks. He says the company currently has 42 employees and that it will be scaling up in 2010. Revenue in the fourth quarter of 2009 was 11X larger than that in the comparable quarter of 2008, said Tawakol. The company is not yet profitable.
Tawakol was previously Chief Advertising Officer of Medio Systems, a mobile search and advertising provider for carriers such as Verizon and T-Mobile. He joined Medio from Revenue Science, where as Chief Marketing Officer and General Manager.