The Israeli Startup That Turns Video Ads Interactive

Innovid, whose client list includes Coca-Cola and Disney, says its tech extends the time viewers stay with ads.

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Innovid managers. (L-R): CEO Tzvika Netter, VP R&D Yuval Pemper, Creative Director Shai Ryter, February 2015.
Innovid managers. (L-R): CEO Tzvika Netter, VP R&D Yuval Pemper, Creative Director Shai Ryter, February 2015.Credit: Innovid Media

If the goal of ads is to get people’s attention and persuade them, how about a technology that pulls viewers right into the message?

Meet Innovid, which produces technology that renders video advertising interactive.

For example, the company is turning a 30-second commercial for Jaguar into a 360-degree display that enables Web users to simulate accelerating in one of its cars on a mountain highway.

Innovid clients benefit, the company says, because viewers of their ads are directly involved in the ads. This extends the amount of time that they’re exposed to the ad messages.

This Ramat Gan startup, employing 150, has annual revenue of about $40 million and a prominent client list.

Its growth path is steep: Innvoid plans to add 25 employees this year for its Israeli operations.

The company, founded in 2007, has raised $37 million (including $10 million last year from a television sector investor) and has decided to try to turn profitable so it doesn’t need to look for further capital.

In addition to the technology turning video interactive, the company works directly with advertisers and ad agencies on ad design.

Shift of ad budgets to digital

Driving Innovid is the accelerating shift of ad budgets to digital media from TV.

An ad for another client, Netflix, takes viewers to the company’s content world, where they can see trailers for its various series, such as “Orange is the New Black,” or go behind the scenes in the ads.

“Brands produce a huge volume of video content, and there is no global brand that doesn’t have a YouTube channel. But people don’t go to YouTube to watch all this content,” says Zvika Netter, Innovid’s CEO and a co-founder.

“We are a distribution system for them. Take, for example, ... a commercial for a German car [that leads the viewer] to a documentary film on quality car production.”

Innvoid sees “that the rate of involvement of Internet users in our commercials is 5% to 8%, which is considered high,” Netter says. “Innovid says that it’s not only possible to release an ad but also to cause 5% to 8% of the views to lean forward and click on it.”

Innovid’s creative director, Shai Ryter, says advertisers can know which viewers show interest in a particular commercial, making them potential customers.

Still image from an Innovid ad. February 2015.

If, for example, an ad viewer shows interest in a car’s safety features, that ad can be followed with one highlighting the brand’s safety advantages.

Last year, Innovid ran 6,000 interactive video campaigns; it projects 10,000 new campaigns this year.

Its clients include Procter & Gamble, Coca-Cola, Disney, Best Buy, Federal Express and T-Mobile, along with car brands such as Hyundai, Chrysler, Ford, Lexus, Mazda and Nissan, plus movie producers promoting their latest films.

Innovid derives 70% of its revenue from the U.S. market and the rest from Europe and Australia. Innovid is an exclusive Facebook partner for advertising on the social network beyond its video platform.

“Their asset is information. They need technology that will present commercials beyond Facebook, based on their information,” Netter says.

Innovid has no Israeli clients, although foreign advertisers can make their commercials available here. Innovid’s ad technology can be seen not only on YouTube but also on digital-video broadcasts on NBC, CBS and Britain’s Sky TV.

Netter notes that $70 billion a year is spent on television advertising but that ad budgets are shifting to digital media at a faster clip.

He says it might take another year or two for digital to claim a substantial piece of these budgets but it will happen. Digital-ad spending in the U.S. is $7 billion a year, he estimates.

In 2010, Innovid snagged a prize as a technology pioneer from the World Economic Forum. (That’s the same year that Twitter got similar recognition.)

A year before that, Time magazine recognized Innvoid as one of the “tech pioneers who will change your life.” In particular, Time said Netter would be expected to change the world of television.

For six months, Netter and another co-founder of Innovid, Tal Chalozin, experimented with ideas, including videos, and quickly saw a commercial opportunity.

“Writing algorithms is nice, but getting to a situation in which you’re in people’s homes and they are changing their behavior [because of you], that’s exciting,” Netter says.

For the past five years, Netter has run Innovid’s New York headquarters, and Chalozin has joined him there. Their third co-founder is Zack Zigdon, who directs its sales outside the U.S. from a London office.

Dramatic changes in TV

TV has changed dramatically in recent years, involving a transition from a fixed schedule of broadcasts to providing all kinds of video content via the Internet over a range of platforms whenever viewers want to see it.

In addition, content production has shifted from the exclusive province of the stations and traditional studios to entities like Netflix, which is behind the highly acclaimed “House of Cards” series.

And even the way viewers connect with content has changed. Viewers no longer need to be connected to a cable or satellite-television provider. Instead they can just connect to a converter at relatively little cost and then pay for the content itself.

Netter makes it a practice to track new players in the TV sector, including, for example, Israeli cellular-service provider Cellcom’s new TV service. The players in the U.S. are Amazon, Apple and Google, with its Android TV platform and YouTube, which has become the world’s largest television station, he says.

“In the last half year, the entire Facebook feed has filled up with video that Facebook has given priority to,” he says.

When Facebook’s Mark Zuckerberg reported his company’s most recent quarterly results, he noted that the company views this as one of the most strategically important sectors for the company, Netter says. Samsung has also invested heavily in the field.

Not everyone is on board with the trend; cable companies are trying to put a halt to it.

Netter retorts: “I wish them success. They have a lot of money and they’re not suckers.”

He notes that some cable companies are virtual firms that lease infrastructure from others, as Golan Telecom did in the Israeli cellular-service sector.

“Everyone is looking at the mountain of money and wants to get into [people’s] living rooms, but it’s already not just the living room but rather any screen,” Netter says.

Despite the changes in viewing habits - particularly in wealthy Western countries, where consumers spend much time with mobile devices instead of TV screens - advertisers are still biased toward traditional television.

Now, however, advertisers need access to video content, which provides effective message delivery, even on the new platforms. Innovid has hopes of filling this void, as advertisers gravitate further to the Internet.

“In television, you used to produce a 30-second cassette and send it to channels and broadcast entities,” Netter says. “In the digital world, all of the devices in the room can play videos. There is a range of devices, operating systems, formats and various sizes of screens: smartphones, tablets, Android, iOS, everything Internet-based.”

The changes provide major opportunities for advertisers, who can now tailor their commercials to specific viewers. Innovid is working closely with advertising agencies and brands on their ad designs and even runs a studio that provides ideas to advertisers.

“What’s unique here is the combination of advanced technology, which has to be used to deal with the mountain of information,” adapting commercials to every kind of device and also dealing with the creative side, says Yuval Pemper, Innovid’s VP R&D.

About half the company’s staffers in Israel are engineers, while the rest are part of the creative team.