Gradient X Raises $3.75 Million to Unlock Mobile Advertising, Because Someone Needs To

By Michael Carney , written on June 20, 2012

From The News Desk

We've seen this problem coming for a while: Mobile advertising's promises of untold riches remain an enticing but unrealized fantasy.

Users are flocking to mobile in droves, both in the US and worldwide, but the ability to monetize that attention has not kept pace. As a result, there is enormous pent up demand for ways to actually capitalized on mobile's enormous potential.

Gradient X is a nascent Los Angeles-based startup launching today with plans to create a Demand Side Platform (DSP) for performance-based advertising in mobile media. In a mere 45 days since conceptualizing the business and leaving their former companies, the founders have raised an oversubscribed $3.75 million seed round from an impressive list of investors including Rincon Venture Partners, GRP Partners, Crosscut Ventures, Founder Collective, Double M Capital, Siemer Ventures, Baroda Ventures, Walter Kortschak, Jim Willenborg, and Clark Landry.

Its founding team consists of knock-you-on-your-ass-impressive industry insiders who have experienced the problems in this space first-hand. Perhaps more importantly, they also possess the skills to develop the necessary solutions.

The company’s CEO is Brian Baumgart, former chief strategy officer at Adconion Media Group. Its CIO is Rubicon Project co-founder and former chief technologist Julie Mattern. Just yesterday, the pair added a third co-founder and CTO, Michael Lum, former head of engineering at OpenX.

Gradient X hopes to provide large-scale direct response advertisers and performance-based aggregators with the previously unavailable tools to monetize mobile media. Unlike brand advertisers, these folks only pay for results and therefore demand the ability to measure and manage ROI. The forthcoming tools will include rich analytics, optimization, and targeting, as well as new ad-units and calls to action re-imagined for a mobile environment.

The issue with current solutions offered by market incumbents is that they are retrofitted Web advertising tools. Advertisers will be the first to point out that this doesn’t work. The environments are too different and, as a result, the tools don’t translate. According to Baumgart, “The company that wins this space will do so by building a ‘new technology stack’ from the ground up, specifically tailored to the unique qualities and requirements of a mobile environment.”

“There is currently a dramatic gap between mobile growth and mobile monetization,” says Baumgart. “To date, the mobile channel has not been easy to navigate for performance marketers. The focus of Gradient X is to help close the delta between revenue and time spent by providing technology, tools, and services to unlock the direct response potential of mobile.”

The company has yet to build or release anything to judge their big promises against. And there’s no guarantee they can deliver. At this early stage, the only indicator to judge Gradient X against is the team of people surrounding it. The pedigree of those involved and the speed with which it came together speaks to the magnitude of the opportunity and the belief in the early team’s ability to solve it.

The three co-founders certainly know digital advertising and have participated in building some of the biggest companies in the space. In addition to his seven years building Adconion from its early roots as a European content and advertising network, Baumgart was previously a member of the executive management of Fastclick, which he helped take public on the NASDAQ in 2005 and subsequently sold to ValueClick.

At the Rubicon Project, Mattern led the development of the company’s yield management optimization platform and was previously a founding engineer at Adconion. Prior to joining OpenX, Lum was a director of engineering at Yahoo and before that an engineering manager at Overture.

The company’s board of directors is no less impressive. Its chairman is Adconion founding investor and serial entrepreneur Fred Krueger. Its additional three directors are: founder and former CEO of Fronline Direct founder and current Adconion CEO Kim Reed Perell; Burstly founder and CEO and serial entrepreneur Evan Rifkin; and CEO Brian Baumgart.

Baumgart plans to use the newly closed financing to build the team of engineering and product development talent. The team of three co-founders are well into their development road map and anticipate having a beta product completed in the next 90-120 days. At that point we’ll have a much better idea whether this is next AdMob or InMobi or whether it's simply an ambitious and well-intentioned concept.

To put it lightly, mobile advertising is a space that will be hotly-contested. It's a potentially enormous market, but advertisers are getting fatigued from ineffectiveness. Innovation needs to happen fast to capture the current momentum and interest. No one has brought a compelling solution to market yet, and if Gradient X can execute, it looks to be the first. There’s still a lot of ifs with this young company, but it certainly feels like the right team, in the right space, at the right time.