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B-School Professor Disrupts Advertising With $100M Technology Start-Up

Teads is marrying new technology to the video advertising industry. The start-up has generated $100 million in revenue and is poised to float on the Nasdaq in 2015.

Wed Feb 4 2015

On a long stretch of street in the southern reaches of Paris is the head office of Teads, a start-up with ambitions to marry new technology with the video advertising market.

The global advertising industry is ripe for disruption by innovation in digital technologies. The past decade has seen a myriad of tech invested in ads, says Andrea Febbraio, the business school professor who co-founded the original venture, Ebuzzing. His sharp ensemble of black skinny jeans, a dark blazer and oversized pink collar contrast with the no-frills conference hall in London’s Mayfair.

“We want to be the next one billion dollar company,” says Andrea, who is addressing a crowd of entrepreneurs and venture capitalists brought together by Ariadne Capital, the investment group.

The old business of advertising was based on personal relationships and handsome sales reps living out of suitcases, he says. “This is over.”

The ambitious Italian is on course to achieve his mooted valuation. “Last year, we celebrate[d] $100 million [in revenue],” he says. He is looking at an IPO on the tech-heavy Nasdaq. “Hopefully at the end of this year.”

Having cut his teeth during the Dotcom boom at internet platforms and digital media agencies, including at a subsidiary of Europe-listed publishing empire Mondadori, the economics graduate donned a lecturer’s hat at a grouping of top business schools, in 2010.

It was the same year that he co-founded Ebuzzing, which would merge with another European advertising agency to become Teads in 2014.

“This is adtech,” says Andrea. The flood of investment into this niche sector has created opportunities for start-up ventures to flourish. But there were a “thousand companies trying to do the same stuff” as Teads. The market was over-packed, he says.

The bombastic professor had to innovate. “We saw the opportunity of video, because we knew that video advertising would grow from television to online,” he says. “There was [just] a question of how to catch it.”

The company came up with a solution to help brands, many of which already had engaging television content, take their videos viral. “Content is king and distribution is queen,” says Andrea. One of its early successes was with Evian, a brand of mineral water owned by Danone, the French listed food-products group.

“This has been seen by 96 million people,” he says, enthusing at an advert being projected onto a screen behind him. Today, Teads has run campaigns for well-known companies ranging from consumer goods groups L'Oréal and Nestlé to media giants like Sky and 21st Century Fox.

The company has 350 employees across 25 offices globally, and generated revenue of close to $95.6 million in 2014, up 65% on 2013. In January this year it raised $30 million in funding, split between equity investment and debt from investment group Gimv and a consortium of banks including HSBC, among other backers.

Getting Teads off the ground was a hard grind. “You have no idea how complicated it is to make a company go from zero, literally zero, to one hundred million dollars,” says Andrea.

A self-styled geek, he recalls how much he has personally invested in the venture. “At the start I had really long hair, and now look at me,” he says, tilting his bald head forward. But for a techie, this was his dream come true. “I was a geek at core, but then I discovered it was actually possible to be in a way more glamorous environment – advertising.”

By now the nascent adtech market is coming along nicely. Video advertising is the fastest growing sector of the global advertising industry. Magnaglobal, a strategic global media consultancy, forecasts that total spending will rise to $11.4 billion in 2016.

Social media has opened up new opportunity. Facebook’s user base has overtaken China’s population, Google-owned YouTube reaches more than one billion viewers each month and Twitter has more than 280 million active monthly users.

Listed media companies have begun to take notice. Europe’s biggest broadcasting group, RTL, paid $144 million for a majority stake in digital advertising marketplace SpotXchange in July last year. WPP, the world’s largest advertising group, purchased a 15% stake in AppNexus, an advertising tech business that was in 2014 valued at $1.2 billion.

Teads has used acquisitions to accelerate growth, with a buying spree that saw the start-up purchase nine other businesses “in search of the best technology”, says Andrea. “We understood there was someone out there who had an idea similar to us, but way better, and we partner[ed].”

One of the most profitable partnerships to date has been collaboration with Affectiva, a tech start-up with roots in the Massachusetts Institute of Technology, a leading university based in the US.

Affectiva uses algorithms to detect facial expressions and head gestures obtained from webcams or mobile cameras, used to assess the emotional experience and engagement of viewers. Andrea says the venture is “shaping the future of video advertising”.

Teads has also found fortune in the publishing business, with clients which include The Economist. The start-up’s tech, called inRead™, allows video ads to appear between paragraphs of online articles, stopping if the reader cannot see it and resuming when it comes back into view. “[It] propelled our revenue from $20 to $100 million,” says Andrea.

But smartphones may offer more opportunity for innovation. Mobile is one source of advertising’s strength, with mobile ad spending set to more than double to $37.5 billion in 2016, up from $17.7 billion in 2014, according to data from eMarketer. “The two pillars of adtech are video and mobile,” says Andrea.

The “attribution problem” is holding that segment of the market back, however, with advertisers unable to verify users across platforms – mobile, television and tablet, he says. “As soon as this fixed, the money is going to fly in… There is a race for which one [company] is going to fix that.”

A passionate speaker, Andrea can ramble on about technology for ever, he says. “This is my drug.”

The entrepreneur still finds time to teach executive MBA and other students, maintaining a senior lecturer’s position at LUISS Business School, and a lecturer’s post at SDA Bocconi School of Management, both based in Italy.  

Ambitious growth lies ahead for the company. With an IPO likely later this year, Teads will use its latest round of funding to speed up the growth of its US operations, as well as to expand into new markets including Brazil, Russia, South Korea and Japan.

But, suggests Andrea, this is just the beginning. “You have to take this, as we say in Italy, as an aperitif – a starter.”