Gigya: Israel’s Next $1 Billion Startup?

The Internet company, which raised $35m this week, counts Forbes, Toyota and Tommy Hilfiger among its customers.

Ofer Vaknin

Until the beginning of this year, the offices of Nochi Dankner’s IDB group were on the 43rd floor of the Azrieli Center’s triangular tower in Tel Aviv. But once control of Israel’s largest conglomerate passed on to Eduardo Elsztain and Moti Ben-Moshe, an Israeli high-tech company took over the floor.

There are those who will find the changing of the guard symbolic and representative of the new reality of the Israeli economy: The startup, Gigya, is creating value and growing rapidly at the expense of value-destroying tycoons, who are on the way down.

Gigya announced on Tuesday it had completed a fund-raising round of $35 million, led by Intel Capital, the investment arm of the United States semiconductor giant, which generally does not invest in Internet companies. The latest fund-raising round, which brings to $104 million the total capital raised by Gigya, values the company at about $300 million, market sources estimate. Common Fund Capital and Vintage Investment Partners also participated in this fund-raising round.

The company, which provides a customer-identity management platform for large Internet sites, plans to hire 100 new employees in the coming year – two thirds of them in Israel – boosting its payroll by close to a third. If the trends continue, they may well take over the 44th and 45th floors soon of the triangular tower, which still belongs to IDB.

One of Israel’s most promising high-tech firms, Gigya conducted each of its fund-raising rounds at a higher valuation than the previous round. The company could soon join the club of startups valued at over $1 billion, and already counts over 750 large businesses as customers including media, retail sites and a number of well-known brands such as Fox, Forbes, Verizon, NBC, Dell, Toyota, Ford, Red Bull and Tommy Hilfiger, as well as eight of the 10 largest media companies in the U.S.

Gigya, which is privately held, says it hopes to go public on Wall Street in about another year and a half. The company’s services are used by billions of users every month.

Gigya offers a cloud-based platform for social-networking infrastructure technology on websites. Its customer-identity management technology handles user logins and registration, and provides tools, plug-ins and programming interfaces that collect users’ personal data from a number of social networking online services. It allows the websites to identify their customers across devices and platforms, and consolidates the data into customer profiles to provide better service, products and experiences.

The company, which has annual revenues in the tens of millions of dollars range, prefers for now to show growth rather than profits.

Starting at Hotbar

The three founders of Gigya – Chief Technology Officer Eran Kutner, President Rooly Eliezerov and Chief Strategy Oficer Eyal Magen – all worked 10 years ago as vice presidents at the Israeli Internet company Hotbar, a pioneer of the Internet toolbar and download industry.

Eight years ago, the three decided to start their own company and correctly identified two up-and-coming trends they would exploit: the growth of social networking sites, even before the Facebook revolution; and the development of the Internet ecosystem that would feed the rise of the social networks. They decided to become the company that would link thousands of business sites to social-networking sites.

With the growth of Facebook, Twitter, LinkedIn and other niche players in the following years, Gigya realized the potential for harvesting the customer information on the social-networking platforms for its customers’ websites. Gigya’s tools can combine this information, including demographic data and areas of interest, or the level of influence on social groups for the benefit of its customers.

To ramp up the company to the proportions of a global firm, Gigya hired an American CEO, Patrick Salyer, in 2011 and moved its headquarters to Mountain View, California. Nevertheless, the three founders these days work out of Tel Aviv, one of seven offices the company has around the world.

As far as users are concerned, they log in to the sites of Gigya’s customers as normal, without knowing they are connecting to Gigya’s systems, too. Gigya’s products then combine the data on the customer from social-networking and other sites together with the data from the business site the user has entered.

“In the past three years we have managed the users for sites in an innovative fashion, in other words with the help of social networks,” says Eliezerov. “The sites can use the information to provide either better services or more appropriate content.”

Gigya’s tools allow, for example, adapting site content to a user’s preferences, or in dealing with a customer who uses customer services. They can also offer products better adapted to specific customers. Dutch airline KLM uses Gigya’s platform, combining information from social media to enable passengers to choose seats on a flight that puts them next to people who work in the same industry or have similar interests. Another example is the NBA website, which now knows the birthday of each user and which team he or she supports – information that can be used, for instance, to send a customer a birthday email with an offer of a team jersey at a big discount.

Anonymity is over

“The days of anonymity on the Internet are over. That’s a good thing,” says Salyer. “Consumers have made it clear that customization and personalization are here to stay. To get there, businesses need to understand the wants and needs of their customers, and that starts with identity. But many approaches to collecting and managing customer information violate user privacy and data regulations, and are neither accurate nor useful.

“Moreover, legacy approaches aren’t up to the technical task: They can’t handle the unstructured data generated from mobile and social applications. We designed our customer identity platform from the ground up to manage the complexities of the modern consumer’s identity, including issues around social, mobile, privacy and security. Our alliance with Intel enables us to continue to innovate and make the web more customized for everyone.”

The in-depth information on customers allows media companies to focus advertising aimed at them with greater precision, which in turn means they can charge higher rates for ads. Gigya exploits the ability to log on to business sites using social-media sites’ user credentials, making the login process easier and faster.

One of the interesting measures that Gigya produces about users is their “level of influence,” based on the number of likes and the responses they elicit on social networks. In this way, the companies and brands can adapt their services for users and give preference to those with greatest influence – those who can cause them the most damage if they are not pleased, or who can benefit them the most if they are.

“We’re capable of identifying the customer who turns to the customer telephone service center and adapt the compensation they will get to their level of influence on the network. If they have, for example, 50,000 followers on Twitter, then the company wants them to be happy and may decide to upgrade their terms,” said Eliezerov.

Gigya holds huge amounts of data on users, which saddles it with the challenge of protecting their privacy. The information belongs to its customers and the company does not pass on any information about a user when they move between websites of different customers.

“When I describe the product to people, they think it’s like ‘Big Brother,’” says Eliezerov. “But we don’t let information on a user and his search history move from hand to hand. We don’t offer to collect information on the user without his being aware of it, but create a relationship with him. We will ask him to provide information voluntarily and explain to him when we will use it.”

The process of collecting information on a user starts gradually at the time he or she registered at a site, collecting and aggregating more and more data each time the user returns. For example, a user will be asked about their interests so he or she can be sent an appropriate newsletter.

Gigya’s business model is software as a service. It sells a subscription service to customers, who pay according to the number of users and how much they use Gigya’s services, which usually adds up to a couple of hundred thousands of dollars a year.

Even though Gigya is an Internet company, its 150-strong sales force is a well-oiled machine worthy of traditional, old-school companies.