YieldMetrics closes buzzy $1.7 million Seed round, delivers radical transparency to online advertising

By Michael Carney , written on January 10, 2013

From The News Desk

My first introduction to Los Angeles startup YieldMetrics included the phrases “industry chaos” and “massive disruption.” These weren’t the words of an over-exuberant founder, but rather those of a local VC hoping to get a piece of the action. In the weeks following, I heard accounts of those who got in on the hot Seed round, and those who missed out – and even those who thought they were in to find out that there was no more room in the reportedly triple oversubscribed round.

The online advertising data company is finally revealing the details of its much rumored seed financing, which ended up as a $1.7 million all LA affair at a $4.8 million pre-money valuation. The round was led by GRP Partners, with participation from Baroda Ventures, Bertelsmann Digital Media Investments (BDMI), Daher Capital, Double M Capital, Karlin Ventures, Clark Landry, Andy Rankin, and its accelerator Launchpad LA.

The skinny on YieldMetrics is that the company was founded by two engineers, CEO Gabe Gottlieb and CTO Tom Lorimor. Notably, both founders are ad-tech industry outsiders. While working at Microsoft they saw an opportunity to add transparency to the historically opaque online advertising industry and jumped on it. Less than a year later, and YieldMetrics is legitimately profitable – as opposed to “Ramen profitable” – and has more inbound customers inquiries than its limited team can accommodate.

“They’ve identified and legitimately addressed the needs of advertising networks, which is an incredibly intelligent customer base,” says GRP founding partner and YieldMetrics board member Steven Dietz. “Being an arbitrage business, advertisers are used to working with data and are comfortable paying for it. And the data is relevant to many other constituents in the advertising value chain as well. They’re just scratching the surface.”

YieldMetrics provides real-time and historical intelligence on advertiser spending and creatives, publisher monetization, and ad network and RTB inventory sourcing. The company’s core technology, PathSource, utilizes cloud-based, intelligent crawlers, to capture detailed information about advertising activity across top publisher sites.

The information gives advertisers, publishers, and ad networks insights about their own ecosystem and, equally importantly, that of their competitors. Who’s advertising where, and through what channels or intermediaries? What creative assets are brands deploying? All the data is wrapped up into a friendly dashboard called AdRoutes, which is updated daily – rather than the industry standard monthly data reports.

The initial product covers the top 3,000 publishers worldwide (excluding Facebook), and customers get all-you-can-eat access to this data via SaaS subscription. Early on, the company was offering a $25,000 annual subscription, but this number is likely to change as it gathers market feedback. Eventually, the company plans to offer various products tailored to specific industries. For example, there might be an Automotive industry intelligence product, and another for CPG advertisers. All in due time. Right now, the company is content to be making money and building out its technology foundation.

Having talked to several industry insiders, I’ve come away confident that there’s no other company currently providing this dataset. Although that’s not to say that competitors won’t crop up. If two engineers without ad-tech experience were able to whip this up in eight months, teams of data-scientists can likely do a fair approximation.

Dietz disputes the fact that YieldMetrics is “pissing people off,” with the disruption of the industry status quo. “They’re too small still to piss people off,” he tells me. “Online advertising is not a mature industry. The market is evolving rapidly, so there’s plenty of room for everyone to make money.”

YieldMetrics has a number of advantages being based in Los Angeles, which is home to a number of large ad networks and other ad-tech companies. The founders can meet many of their current and potential customers in under an hour’s notice, and can access a deep bench of industry advisors and talent. Perhaps not working to its advantage, the company would have likely commanded a higher valuation had it been based in Silicon Valley, something the founders reluctantly admit.

Gottlieb and Lorimor aren’t complaining though. The two founders are moving into new offices this month and plan to grow their team to six over the next year. Eventually they’ll need a salesforce in advertising hotbeds of New York, Chicago, and Los Angeles, but that’s likely a few phases down the road. In the meantime, the ad industry newbies are wearing many hats, undergoing a trial by fire of sorts. Early feedback says that the product lives up to the hype. With new capital in the bank, the clock starts ticking and the two two engineers get to prove they can turn it into a sustainable business.