news - september 24, 2012

Online Data Provider Exelate Nabs $12 Million Investment to Fund Expansion

By: Jason Del Rey
As Seen In: AdAge

Online data company Exelate has taken on $12 million in a Series C investment round as it looks to capitalize on the continued growth of automated buying in online ad exchanges. The round was led by NewSpring Capital, with participation from existing investors Carmel Ventures, Menlo Ventures and Trident Capital.

Exelate, founded in 2007, has now raised $32 million.

Exelate makes money in three ways. It’s probably best known for its data marketplace, which plugs into ad exchanges and demand-side platforms to let advertisers target online campaigns based on consumer data from both online and offline sources, such as Nielsen Catalina offline shopping info. A second business line sees Exelate help sell data for companies that focus on offline data aggregation.

And most recently, Exelate has started to create custom pools of online audiences for individual advertisers to target. Mark Zagorski, Exelate’s CEO, walked through an example in which Exelate, hired by an insurance company, would look at the 20,000 people who requested an insurance quote in a given month, then look at other online users who have similar demographic characteristics, behavioral interests, and online purchase behavior to create a much bigger pool of perhaps several million people who might be good prospects for the advertiser to try to reach with online ads.

The approach can give advertisers the reach they can’t get with a tightly-defined retargeting campaign, where they might market to people who have actually browsed their online store but miss out on other potential customers. The tradeoff, of course, is that the modeling only gives advertisers an educated guess on who those future customers might be.

Overall, Mr. Zagorski said the company is focused on answering three questions for advertisers: Who is my audience? How do I target them? And after I target them, did it work? He said the company feels confident that it’s excelling at targeting but has work to do on the other fronts. As a result, some of the funds could be used to acquire analytics companies whose technologies could help advertisers determine whether their targeted campaigns paid off.

The funds will also be used to staff up efforts to accumulate and analyze mobile data as well as to expand operations across Europe, the Asia-Pacific region and South America.

Exelate has about 70 employees and expects to grow 30% to 40% within the next eight months, Mr. Zagorski said.

The startup expects to finish the year with revenue approaching 300% higher than 2011, Mr. Zagorski said. Asked whether that growth comes atop a small revenue base, Mr. Zagorski said last year’s revenue was in the “double digits,” meaning at least $10 million.

While Mr. Zagorski said his focus is on running the business, he acknowledged that Exelate could eventually become an acquisition target for two types of companies: Those in marketing services and those who have big presences in the offline data world but aren’t as strong online.

While the company has been growing quickly, worries about online privacy could affect all the players in the data space. Microsoft’s plan to release the next version of Internet Explorer with a “do not track” setting as the default, for example, could make it much harder to collect the information the sector needs.

Even if “do not track” defaults become prevalent, however, Mr. Zagorski and others in similar businesses argue that web publishers will be able to convince readers to opt in to sharing when they explain the tradeoffs. “The death of behavioral targeting has been heralded for seven or eight years,” he said.

The accuracy of online targeting may prove to be a greater concern. Exelate’s privacy page tells this reporter that, according to its information, he is between the ages of 35 and 44, which he is not. It also tells him that he is a woman.

Exelate said its data, which it aggregates from online and offline sources, has been rated as extremely accurate but can contain anomalies, partly because of the privacy protocols it follows. It also allows consumers to manage and update their information.

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