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Why We Invest Heavily In Retail Media; Legacy Ad Tech Just Cannot Move On
This is the FirstPartyCapital weekly newsletter. It covers news and updates about the FirstPartyCapital fund and its portfolio companies.
Explosive Potential: Why FirstPartyCaptial Invests Hard In Retail Media
Another day, another monster data point for the burgeoning retail media: Walmart announced yesterday in its financial year earnings that it is doing $2.1 billion in retail media revenue. As a benchmark, that’s nearly as big as Pinterest..
FirstPartyCapital has been bleating about this for well over 12 months: that retail media is the biggest opportunity for ad tech this decade
Instead of FPC blithering on about “opps” over a series of meandering paragraphs, here are five handy bullet points you can ram into the faces of your C-level superiors that can’t see the wood from the trees, and prefer to waste resources on privacy hacking.
It is a GAFA-free zone: the mid-market - the sector that will apply most to independent MadTech and the service layer - will not work with any of the big platforms
Google has not distorted the ad tech layer: online retailers and marketplaces have not got hooked on the Google adwords demand, leaving Google very little leverage to f*** this new market in terms of its well-known black box data and pricing chicanery
It is new money: essentially, this is trade budgets normally allocated to big retailers, but it’s likely much of performance display spend is also heading this way
The emerging retail media ecosystem is a mess: there is so much opportunity around aggregation, segmentation, media execution and attribution
The space is wide open: nobody, apart from TTD and Criteo in some areas, has a proper grip of this market
FirstPartyCapital has invested in a number of startups heavily involved in the space. Here is a snapshot of just four companies making serious headway in retail media.
Passendo: Our favourite “boring” portfolio company, building the media execution layer for the email marketing channel. The company has already signed up the biggest publishers in the world to use its tech solution. But the big opportunity is arguably in retail media.
With online retailers about to pull the trigger on their advertising strategies, email is going to be a huge part of that monetisation mix. And guess who is in the position to help those 1000s of marketplaces and online retailers realise that potential? That’s correct, Passendo.
Passendo is currently raising on our syndicate platform (join our syndicate here - no commitments). This is a great time to invest in this company - because its next raise (Series A, mid-to late next year) will likely be 3x the current valuation given their impressive revenue and market growth.
Cavai: The creative commerce platform is already partnered with the biggest holding companies. Now its creative ad suite - specifically the conversational ad unit - is primed for the retail media explosion as retailers look to engage customers beyond static product display units. The company is also working on outcomes based attribution in retail media. Stay tuned for more news on that one.
Evorra: This evolved clean room solution is focused on bringing the $200 billion data market into the privacy-first era. Clean rooms will be crucial to the growth of retail media. Concerns around data leakage and privacy will mean that very little data will be passed in the bid stream. Evorra provides the marketplace for buyers and sellers to trade, segment and scale - integrating via an API. This will be attractive to any retailer/marketplace looking to retain control.
Carpio: The success of retail media will depend on tight attribution. If I spend X on the site, I will get Yin terms of sales. Marketers love tight attribution models. Carpio is building the retail media attribution layer, aggregating ad performance and sales data from over 80 marketplaces in Europe and beyond. Your cookie look-back window won’t work in retail media. Carpio will be a critical component in the retail media stack.
The Delusion Of Legacy Ad Tech
Ruben Schreurs, group chief product officer at Ebiquity, wrote an excellent article this week entitled, “Large-Scale Third-Party Addressability On The Open Web Doesn’t Work”.
The piece goes into detail as to why the TCF is doomed to failure and why it is unfixable:
“Trying to redesign the TCF to make it compliant is therefore futile, because the underlying processes for which it seeks to gather consent will never be compliant unless the system itself is radically redesigned.”
Schreurs goes on to discuss how the industry has developed a fixed and inflexible mindset on the matter of privacy. Those protecting TCF and OpenRTB, he says, often describe detractors as privacy fanatics - and the tired value exchange argument (data-for-free-access) is now a redundant retort in this privacy-first era.
We at FirstPartyCapital support Schreurs’ argument. The logical thing for the industry would be a) to innovate their way out of a failing model and b) invest in a FirstPartyCapital, funding the next generation of privacy-first ad tech companies.
Why Jeff Green Is Ad Tech’s Great Strategic Brain
We have known Jeff Green for well over a decade. The most important thing to note about the great man: he’s literally the nicest guy you are ever likely to meet in this industry. He’s also very generous with his time and his industry know-how.
FirstPartyCapital recalls a story about Jeff when TTD was going through the public listing process that really sums up the man. Sensing that this was a transitional moment for the industry, Jeff decided to invite ad tech cos execs out to California to discuss the IPO process in detail, which for ad tech at the point in time akin to base jumping without a shoot.
He’s a good guy but Jeff has the best strategic mind in the business. You don’t go from 5th place DSP in the early 10s to the biggest independent omni-channel DSP in a matter of years. Getting to a $50 billion valuation is no fluke either. Jeff is many steps ahead.
That’s why FPC was so impressed with the recent product launches and business wins from TTD.
OpenPath, its product launch this week, is a genius move to access premium inventory while cutting costs for access (skipping the SSP fee). It also gives UID2 a fighting chance of winning post-cookie, post-id. SSPs are in real trouble going forward now that OpenPath sits in the header alongside their own demand. They can’t see it yet, but Jeff has outflanked them..
The company is also quietly making serious inroads into a huge GAFA-free zone, specifically in retail media (see above). TTD now powers the Walmart and Walgreens programmatic layer - and looks set to sign up other big retailers.
It’s definitely been a good week for Jeff and TTD. We salute you, sir.
Deals Live On The FirstPartyCapital Platform
Evorra: The perfect application of “clean room” technology to a real world problem, moving a $200 billion data market into the privacy-first era …
Passendo: The leading category tech vendor in the email ad server space that just raised a pre-series A €2.3 million round …
The FirstPartyCapital fund: A $15 million fund investing in the next wave of innovative ad tech, martech and digital media startups, predominantly at the seed stage…