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A series of interviews with innovators operating at the intersection of consumer behavior and business transformation: Kristo Ovaska, Co-Founder, Smartly.IO
Bruce Rogers: Tell us about Smartly.io and how the business got started?
Kristo Ovaska: Prior to Smartly.io, my co-founder, Tuomo Riekki, and I started a company called Metrify, where we did lifestyle value predictions for mobile gaming companies. That was back in 2012, and it was an era of big data and big-data analytics. At the time, mobile gaming companies were acquiring users from 60 different mobile ad networks, and they had no visibility, no attribution. It was totally blind. So they wanted to use our lifetime value predictions solution to predict where they should invest their user acquisition money.
Then Facebook did an IPO and needed to make money. Facebook knew that the mobile-gaming companies were the most advanced buyers in the ecosystem and that they had the data these companies needed. I remember the day in early 2013 when, overnight, budgets from the mobile gaming companies from those 60 different mobile app networks moved over to Facebook.
The ad formats and performance on the News Feed were great, and the gaming companies started to pump in money. Consumers had moved from desktop to mobile, and advertising followed from desktop to mobile and to Facebook’s News Feed. Mobile gaming companies were the first ones to discover this change in consumer behavior.
Rogers: Was it like a “Big Bang” moment for the industry?
Ovaska: Yes, and it happened really fast. I don’t think that anyone predicted this dramatic move to social media advertising. The world was already full of social media analytics tools so it was rough times to raise funding. The change was so rapid that not many people were able to react fast enough.
We got really lucky. We opened in Germany exactly at the right time. At the time they had some of the most advanced online advertisers, and we were literally sitting in a customer’s office in Berlin coding the features, keeping the platform alive, supporting our German customers with one-minute responses on all of their issues, rapidly scaling solutions for them. We were just eight people when we were selected as a preferred partner for Rocket Internet. We then scaled rapidly, doubling our size month-over-month for the next six months.
We continued to build out the service and became profitable after that six-month run, and it pushed us to go international to India, APAC and LATAM. Rocket Internet wanted us to serve their biggest customers and ventures in those regions, so that really was how we got started at scale.
Rogers: Did Facebook allow you in under the tent to develop the technology to interface with Facebook? What was that process like?
Ovaska: Our customers have played the biggest role in building the product and service, and Facebook, as a partner, has played a huge role as well. Facebook has been a very partner-centric company, much more than some other big technology companies out there. They invested from the start, allowing partners to innovate on top of their API. Facebook obviously opened their APIs, but they helped a lot in product development, outlined their product roadmaps, what they were building and the problems that customers wanted solved. Facebook has also helped us a lot with marketing and even a lot of the introductions to customers, which was fundamental. We were in Helsinki, middle of nowhere, and a very small company with eight people, but we were able to close big customers in the UK and in the US, because Facebook trusted us so much that they recommended us to customers.
Rogers: Certainly helps to be in the right place at the right time. What can you say about where the business is today and your metrics for growth and success?
Ovaska: We work with big customers like Uber, eBay and Ubisoft. Combined, we manage $1.8 billion in ad spend. We are growing profitably and we are growing fast. We’ve doubled the headcount from 150 to now close to 400 people within the past 18 months. We’ve also expanded our offices in the past year and a half from seven to seventeen.
Rogers: Are you now expanding outside the Facebook ecosystem? How else is the market evolving?
Ovaska: Absolutely. The next phase of social media marketing is to go into video and, more specifically, go into Stories as more people are consuming media in this format. Facebook continues to be focused on this format, and I have strong belief that we’ll see other mobile platforms follow. This change from the News Feed to Stories is a bigger change than from desktop to mobile. This is a major disruption and requires a different approach to creative development. Today, creatives — the videos and pictures – are done in a similar way to what they used to be for TV and print. You didn’t change creative much. The most advanced advertisers are moving to so-called modular creative production now, where you tag every element in the video–different landscape, different people, different text and colors – and then build assumptions on what could work based on previous day’s campaign performance, observing how the different elements and different stories are performing. Now you have an instant feedback loop between ad buying and the creative department to do continuous testing and improve the performance. That’s why we’ve built the tools for both the ad buying team and the creative team, enabling them to be able to build mobile-first, video creatives that work in the Stories world.
Rogers: What are you seeing in terms of what’s working and what’s not and how consumers are changing their behavior around exposure to advertising? It was a big deal when Snap went to Stories. It was certainly an accelerant for their revenue, but is it actually working?
Ovaska: Snap launched their Stories, and then Instagram got inspired by that and implemented the Instagram Stories and, very fast, the world went to 400-500 million Stories users, which is double the Snap users, and that growth continues. I would expect Stories to become part of all Facebook family platforms and believe that the other social media channels will adapt the Stories format, because it’s very innovative and that, I truly believe, is the way people want to consume content in the future.
Rogers: You’ve had some pretty dramatic growth in a very short amount of time. Where do you go from here?
Ovaska: Yes, and this change is very rapid. We’re just getting started with the creative side, so we want to be the best in the world at offering the tools for the creative teams and ad buying teams to have the insights they need to automate the creative production process, not only within Facebook but across different social and visual channels. We recently launched with Pinterest, in alpha. Twitter, Snapchat and YouTube as well are really interested in visual channels where the creatives, like the Stories ad format that we’re producing, could be used. So far, the growth has been pretty much from Facebook, and now we are expanding to the other visual platforms with the creative in mind and with the creative focus.
Rogers: Do you envision eventually creating the tools for digital TV, OTT?
Ovaska: I think it’s a bit too early, but if we look at programmatic TV and where TV is growing, I think, and I truly believe, that the assets and the videos that we are creating could be applied really well to it. I wouldn’t be surprised if our customers would want to use the videos they create with Smartly.io in programmatic TV in the future. For now, the other visual social media platforms are definitely a priority for our customers, but I wouldn’t be surprised if it comes up.
Rogers: Tell us where you grew up and how you came into this industry?
Ovaska : I grew up in Helsinki, and I studied Economics and Finance with a bit of Statistics and Math. My first career was as a researcher and economist, modeling the Russian economy and its impact on GDP growth in Finland. But I’m a builder, so I got bored. I wanted to have an impact, so I started an entrepreneurship association, Aaltoes.com, at my university. That was in 2008 and we actually grew it to be one of the globally-leading entrepreneurship startup associations from a university and built an ecosystem around all of the universities for startups. MIT regarded it as one of the top university ecosystems in entrepreneurship. Then later we built an accelerator, like a local Y Combinator, which fathers big companies from northern or eastern Europe.
That’s how I met my co-founder, Tuomo. We were training the best startup from the region in Silicon Valley. I lived with my family in Palo Alto and Tuomo’s startup ran out of funding and didn’t have a place to stay, so we accommodated them on our couches. I saw that Tuomo was the most talented coder that I’ve seen. His startup ran out of funding and then a couple of months later, Tuomo called and said, “Could we start a product company together?” And I said, “Obviously yes, let’s do it.”
We actually started three companies. We had one company before, which didn’t go anywhere either called FunRank. Then we had Metrify, which was the big-data analytics company, and then we pivoted it to Smartly.io.
Rogers: What’s your strategy around your funding?
Ovaska: I believe the best proof of a product market fit is to get customers to pay for your product. You should always focus on that and then the funding will come if you need it and if you actively solve big problems from the customers. From the start, we focused on solving problems for the customers and made sure that the problems are big enough that customers are actually willing to pay for it. In 2013 we secured €100,000 in funding. Then, in 2014, another €1 million funding. In early 2015 we became profitable, and we’ve been profitable ever since. So that’s all the growth funding that we’ve needed. Two years ago we raised an extra €20 million, but it wasn’t for growth. It was to reward and de-risk the existing shareholders and employees. Everyone at Smartly.io is an owner, roughly 25 percent of the company is owned by the employees.
Rogers: Is there pressure to go public?
Ovaska: The focus has always been and will always be: build the best product and offer the best service for our customers to help them to get better results from online advertising through the ad buys and creative automation. The other priority is to build the best company possible for our people. So we built the company in a way where we can attract and keep the best people and allow them to have a huge impact to our growth but also to their careers. Our thinking is that only happy and engaged people can build the best product and sell it to the customers. This will eventually lead to growth and profitability. We have enough cash in the bank to grow our business; that’s great. If we need additional funding, which we might very well need in the future in order to further accelerate the growth and potentially consolidate the market, then we’ll raise that funding from whatever source makes most sense for us. It might mean to go public at some point. It might be more venture funding. It might be private equity. We’re not closing anything out, but we have no plans to go public at this point.
Rogers: Thank you.
May 17, 2019 at 04:29PM
Forbes – Entrepreneurs