TechCrunch reported yesterday that TellApart is now at a revenue run rate of $100 million per year (full story). This is good news for ad tech investors who are on the lookout for proven business models within the space.
Started by Google veterans, TellApart offers a predictive customer analytics platform to enhance the management and use of ecommerce data, which means that they help online retailers precisely target relevant ads to customers based on user data. According to TechCrunch, TellApart drove nearly 1% of all Cyber Monday e-commerce in the United States this year. They only have 762 followers on Twitter (myself included), but with this sort of result, TellApart is on their way to a bigger fan base and beyond.
TechCrunch sat down with CEO Josh McFarland and James Slavet, the Greylock partner who has worked with TellApart since McFarland and his co-founder Mark Ayzenshtat started working on the concept.
I won’t dive into too many details, you can watch the video for yourself here, but there are a few points I thought were worth noting. The first is the vision for the company, which Josh defines as “realtime personalization” – predict or “tell apart” the high value customers from the low and then personalize their shopping experience via advertising. Basically, it’s behavioral/cookie targeting: a user goes onto a retail or product website and as they search for products, TellApart’s technology retargets them with ads that feature suggestions or messaging the algorithm deems to be relevant to that user.
Of course, the age old “creepiness” argument over this type of targeting is brought up, but I think Josh has an interesting spin: “…if you think about a multichannel retailer…what [TellApart is] trying to do is re-infuse the personalization of the shopping experience that used to exist that has gotten very impersonal and sort of very generic.” Advertisers are always looking for ways to justify cookie and behavioral targeting; McFarland’s “help us help you” spin on the strategy may be one that advertisers can start to use for a range of cookie targeting techniques.
McFarland’s explanation of their business model was also an important point. TellApart only gets paid when the retailer “makes money.” Think of it as a “cost-per-confirmed-purchase” model: the user must click and actually purchase an item through the TellApart targeting. While this in itself is not completely new, plenty of digital ad vendors use cost-per-click or cost-per-engagement models, it is an important milestone for a space that, as TechCrunch points out, is not use to using the word “profit.”
The last, and maybe most important point that McFarland and James Slavet make together is that the “realtime personalization” concept TellApart’s technology is built on is not only important for the future of advertising, but for the future of business in general. Both claim that TellApart’s technology is a stepping stone, if not a building block, towards any industry that could take a real-time approach to marketing and customer relationships. McFarland goes as far as to suggest doctors will one day be getting a report that analyzes a patient’s history and suggests to the doctor a list of questions to ask during the examination, all before walking into the room. “‘The banner ad is heroic,'” McFarland says, quoting John Battelle’s recent blog post, “…the tech that companies like TellApart is building is so core to the future of pretty much everything we do with technology….”
I encourage everyone to watch the video to learn more about TellApart’s technology, how McFarland avoided the trap of becoming an “entrepreneur-in-reticence,” and the importance of the VC-founder relationship.