Today we welcome Google Ventures to the Trada family. Can I just say for one second, “Woot!” For those of you who have not read the news today, we announced that Trada closed a $5.75M Series C round of financing lead by Google Ventures and participated in by our other existing (and awesome) friends at Foundry Group. For many obvious and some not so obvious reasons we are over the moon about this.
The rest of this post provides a lot more color around the deal than one would get from the press release and likely most news coverage of the announcement. Before I wade into that, I would like to take a moment to thank the Trada team.
For almost 2 years now (Sep 15th, 2010 is the official 2nd birthday of Trada), this team has kicked some serious butt. We’ve had a lot of long nights, quick scrambles, healthy debate, failures, recoveries and cupcakes along the way. We’ve probably compressed more “startuping” into 2 years than most startups experience in 4. And throughout this whole time the team has kept it together, stayed positive, always played for the bigger team game, and simply just been about the best damn startup team that anyone could hope for. We’re quickly blowing past the 30’s in terms of number of employees and heading toward 50 soon. I spend a lot of time thinking about how to scale and preserve the amazing cultural dynamic that we’ve built and has emerged at Trada. I have a few ideas but I’d always love to hear yours. That aside, thank you to everyone at Trada for helping get our awesome company to this announcement today; it’s an unbelievable milestone for our business. I’m stating the obvious to say it’s important because it shows that we’ve done enough of the right things to get the attention and support of one of the most influential players in the ecosystem we operate in.
Okay, back to the announcement.
How Did this Happen?
Well it’s funny how things happen in the startup world. About 3 months after we funded Trada, I was in Boston talking to a fraternity brother of mine, Oliver Roup, about some interesting ideas for businesses. I mentioned an idea I had in the affiliate marketing space, which he glommed onto and starting running with. He proceeded to work the idea into something much more robust than the original basic idea I had, decided to call the company VigLink, and went off to raise money. About 4 months later, he closed his first round with First Round Capital and Google Ventures, and thus, VigLink was born. I joined the board as an outside Director and off we went. Getting to know both Josh Kopelman from First Round and Rich Miner from Google Ventures has been a great side effect of working with Oliver on VigLink. About 3 months ago, we decided here at Trada to raise some more money and Seth Levine and I made a short list of who would be the ultimate players to have in the deal. Google Ventures came to the top, and fortunately through the VigLink board I knew Rich.
Why Rich?
A lot of entrepreneurs think of Venture Firms as the firm before the people (“Oh, let’s go try to talk to Kleiner!”). I believe this is actually the wrong way to think about it. Venture firms are first and foremost people, loosely collected around a fund strategy and collective approach. Every partner has a different style and finding the right combination of personal style and fund approach is important. Seth and I have forged a unique relationship as investor/CEO at Trada. I view him basically as an operating executive on the team. He’s involved every day in some form, our relationship is one based on total transparency into the business, and this dynamic is one that I did not want to change with someone new on the board. Fortunately, I had worked closely with Rich at VigLink and understood his approach to being an investor in the business (as well as Google Ventures). It can be summed up as lots of help, deep knowledge of the business, and lots of leverage. I’ve seen this be critically valuable for Oliver at VigLink, and I knew Rich would fit into the working style Seth and I had created for Trada. In fact, when Seth and I built a short list of venture firms we wanted to talk to about this round, we actually first built a short list of partners we knew would fit our style and reached out only to those people. So really my pleasure in this announcement is as much about working with Rich more closely as it is about working with Google Ventures.
What Are You Going to Do With All That Money?
Our press release refers to three basic things we’re going to do more of with the money and of course having money in the bank lets us accelerate what we’re already doing. The blanket use, and most relevant to our existing customers, is to scale the business to meet the unbelievable growth we’re seeing. Our market has grown an order of magnitude in 4 months, and we’re hoping with in 6-9 months we’ll see the same growth again. Any business going through that kind of growth simply needs cash in the bank to hire and spend ahead of growth. So that’s the basics.
Item #1 from the release is about agencies. About 25% of our business now comes through agency relationships. A number of agencies have signed up to use Trada as the way they deliver PPC to their clients. A PPC offering for many agencies in now a required checkbox when proposing a full-service solution to a client. But delivering scalable paid search is hard and expensive, especially if you need to scale it in house. Many agencies are finding that Trada is a better way to do this. As we expand into new forms of advertising (I’ll talk about this below) they see the value of being able to offer these new forms of advertising to their clients without having to build in-house expertise. Trada’s attitude is that the agency relationship with the client is fundamental. We want the agency between us and the client. So there’s a lot we have to build to facilitate this relationship and help agencies operate the way that they want to, not the way we want to. This is mostly plumbing like reporting, billing, branding, communication, etc. but these features are important items that we’re working on quickly as we grow our agency offering.
Item #2 is international. We have seen great demand for international business. This comes in three forms in our market: English speaking international campaigns, non-US companies wanting to run US campaigns, and US companies wanting to run non-US campaigns. The first form is about Canada, the UK and Australia primarily. We service some of these clients now, but it’s hard to do that from a time zone perspective. There are also small issues like currency representation, handling credit card types, etc. We’re going to get better at that and eventually put feet on the ground in some of those locations to make everyone’s lives easier. (Thank you to my sales and AM team who are on the phone at 4:30am and 10:00pm sometimes servicing customers in these time zones. The cavalry shall arrive soon.) The second type of international is something that surprised us. For example, we see many requests such as a Chinese company that has a US consumer electronics site and doesn’t have English PPC skills in house. We service these customers now but still have a lot of plumbing and support time zone issues to worry about. The third is the biggest part of going international. This is about a US company (or non-US) who wants to run a campaign in another language and locale. For example, if a US company wants to run a French campaign or an Italian company wants to run a domestic campaign in Italy. We have optimizers all over the world, and we want to leverage that to get native speaking PPC experts working on localized campaigns. You can imagine all the complexity that comes with this: localization of the app, documentation, currencies, time zones, local terms of service issues (e.g. you can advertise betting sites in the UK on Google but not in the US), monitoring PPC expert quality in various languages, call centers, etc. It’s doable but there’s a lot to do there. We’re going to start working on all of this in a very organized fashion.
Item #3 is about new forms of advertising. About 6 months ago, we had the bright idea that our model might work just as well for display campaigns as it would for paid search. The challenge of doing display well is that to optimize a display campaign against a CPA you really need to source, price, and optimize each URL (or “placement”) in the campaign the same way you’d manage a keyword in a PPC campaign. It turns out that in a world of millions of URLs (just like millions of keywords), the Trada model works really well. Display means a lot of things: content network (text ads on blogs), banner display, mobile and video. I won’t say too much here but we have some pretty killer ideas about how to innovate around the display marketplace and bring the power of this form of advertising to the small and medium sized businesses that we serve. Beyond display there are all sorts of other interesting performance based online marketing options gaining traction. The most obvious is Facebook (advertising in social media) but you can also see potential in what Twitter is doing and other companies that are trying to build sociographic targeting networks. We think what we’re doing works really well in those environments as well. Also – let’s not throw the PPC baby out with the bathwater. While the traffic is smaller, there are some other PPC networks that are interesting to us. Whether it be second-tier search engines in the US or region specific search engines (China, Russia, etc..) there’s a lot of territory in our existing patch to cover. We’ll be putting some of this funding to work on expanding that too.
When you sum this all up, what we’re trying to do is fundamentally change the experience of a small -and medium-sized business advertiser. Soon they will be able to come to Trada, state their budget and CPA goals, and then pick and choose from many different forms of advertising they think might work for their product or service. Trada will have a market of pre-certified experts in all of these categories that go to work against the advertisers’ goals. And everyone (including Trada) only gets paid when we perform against the advertiser’s stated targets. I think that’s a pretty killer value proposition. We do this now for businesses that want to explore paid search on Google, Yahoo and Bing. In the future, we’ll be adding more options to this list. We want businesses to be able to focus on what they themselves are experts in and let us worry about making them experts at online marketing. In the end, our fundamental vision is to help businesses grow through effective online advertising without having to become in-house experts or spend massive amounts of time doing it themselves. It’s a noble vision but I can see how we’re getting there quickly.
Do You Get Any Preferential Treatment from Google?
No, quite the opposite. Google has a very large and mature ecosystem of players they work with. There are many companies that are designed to help certain types of customers. Efficient Frontier is designed to help very large companies spending hundreds of thousands or millions a month. Clickable is a great solution for people that want to manage paid search campaigns themselves. The ReachLocal’s of the world are well designed for people that primarily do business over the phone at a local level and want an alternative to the Yellow Pages. We focus on a specific segment of the overall market (businesses spending between $5000 and $50,000 a month on paid search), and Google gives us no preferential treatment at all. They have great relationships with all of the players across the ecosystem, and Trada has a lot of respect for what those companies do for the customer-types they serve. This is a very big market and the needs of the customer change dramatically if you’re spending $300/mo or $3M a month.
Also, Google Ventures and Google Corporate are two different entities. It is not the charter of Google Ventures to invest in companies that help Google. If you look at their portfolio, this is actually obvious as they make a wide array of investments in many markets Google doesn’t even play in. The charter of Google Ventures, if I may be so bold to paraphrase it, is to invest in good companies that have exciting prospects.
Lastly, I will add that Google Ventures made it clear to us that we’re going to be under even more of a scrutinous eye when it comes to which customers we work with, how we build our interfaces, etc. We’ve been careful about the types of clients we work with for a while now (we don’t take supplements, rebills, etc.), and we’ll stay even farther away from any gray areas now with this investment. This will end up likely meaning we’ll have to say no to some advertising dollars that come our way. We’re okay with that and know it’s our job to play by the letter and law of the rules. This was an easy decision and trade off to make for us as our goal has always been to be a long-term player in the ecosystem
What about Microsoft and Yahoo?
We are huge fans of Microsoft and Yahoo and big believers in the Unified Marketplace. We run a substantive amount of our spend across these networks now, and it’s growing daily. Our goal, which Google Ventures adamantly supports, it to help customers get the most out of paid search. In many instances this can be accomplished simply by taking advantage of the searchers (and buyers) on Yahoo and Bing. All search engines have different demographics. Yahoo has a bifurcated demographic strong in younger markets as well as older. Bing has marketed well to attract retail and travel searchers. We encourage every advertiser in Trada’s to use Yahoo and Bing especially if they have not done so before. In many cases, we find that there is more volume of conversions and/or lower costs of conversions in Yahoo or Bing. It depends on the campaign type and you never really know until you try. Our whole philosophy is to let the market determine the best place to spend your money and to make it really easy to find the best place to spend it. In the end, success with paid search in general means all boats rise with the tide. The more options we provide a customer to be successful, the more they invest in paid search. We talked about this a lot with Google Ventures in the early days and the consistent response we got was along the lines of “That’s great – we think advertiser’s dollars should go where they best work. Our job is to keep trying to make our products the place where that is true, but if it’s elsewhere then by all means spend the money there.”
The traditional challenge for advertisers has been how much friction (time, learning curve, cost) there is to try something new. Many of our customers haven’t tried Yahoo or Bing before. This isn’t because they don’t see value there, but because the effort to rebuild a campaign on a second network is high and all the keywords have to be repriced and optimized to that market (each ad network has a different auction which means prices for the same keyword are different on all three networks). In Trada, with one click advertisers can add any network and try a slice of their budget on Google, Yahoo or Bing (some customers have only run on Yahoo or Bing and we help them get onto Google as well). Case in point, the amount of money spent in our marketplace on networks other than Google is about 2x what their search market share is. This to me is the biggest demonstration that there is “gold in them thar hills”. If you just make it easy for people to try it, they will. And again, the more success people see with paid search, the more they invest in it across the board.
We continue to look forward to working further with Yahoo and Microsoft (and others as well) as our market grows and we hope to become a more significant member of their eco-system as we grow as a company.
Conclusion
As you can imagine, we’re very excited not only to have a great new partner to help us take Trada to the next stage of our growth, but also the resources to tackle some of the bigger opportunities we see. The paid search marketplace is massive, there are lots of different types of customers, and we fundamentally believe that for many of them bringing expertise to the table is the right solution. If you’re interested or even just intrigued by the idea, please contact us, and we’ll walk you through how we do things.
