Israelis taking over online advertising

In recent years, digital advertising in Israel has quietly grown to $500M a year industry

The growing prevalence of the Internet in all areas of life is changing the map of advertising as well, with advertisers and agencies allocating more and more funds to digital advertising.

Archives Photo: Gilad Kavalerchik

Archives Photo: Gilad Kavalerchik

This trend has seen Israel quietly turning into a hub for digital advertising optimization. Between 2007 and 2011 the industry doubled its revenues, according to Yankee Group, a research and advisory firm. Although TV advertising still draws larger budges than its digital counterpart, the gap is expected to narrow in the next few years, according to digital marketing consulting firm eMarketer.

The Israeli startup industry has spotted the trend and is taking online advertising by storm. Companies likes Kenshoo, Matomy, Midiamind and Outbrain have all developed products aimed at digital campaign optimization and are spearheading a slew of recently founded Israeli technology companies focused on digital advertising.

According to IVC Research Center, Israel boasts 139 digital advertising companies at this time, of which 67 are in their seed stage; 20 are in their R&D stage; 45 are generating initial revenues and 6 are in their growth stage. The aggregate value of these companies in 2011 was one billion dollars and their aggregate revenue was a half a billion dollars, according to Oren Baron, a senior partner at Ernst & Young Israel.

 

2 prominent trends

The accelerated growth in digital advertising is characterized by growing specialization in an industry that is branching out into sub-sectors affording new companies a chance to get their foot in the door.

“Israeli companies know how to spot entry points along the advertising chain,” says head of TheTime startup incubator, Uri Weinheber.

“There are two prominent trends in the market: Campaign personalization and an exponential increase in advertising possibilities, which include mobile phone and tablet applications that have become advertising realty of sorts, and the social networks that are now a main advertising target,” he says. “In both trends, Israeli companies are able to generate top notch added value.”

The first digital advertising technology companies in Israel were founded in 2000 and like other areas of web technology, derive their expertise from experience gained in the local online gambling industry and from the knowledge gained in the IDF’s technology units.

Genesis VC find partner Eden Shochat explains his take on Israel’s success in the field: “The fundamental elements of advertising, namely campaign optimization, are analytics and algorithms that enable the creation of private content with a competitive edge.”

“At the end of the day, everyone is vying for a limited number of pixels, or ad space, which has to generate the best returns. Israelis know how to analyze volumes of data and create opportunities for advertisers,” he says.

 

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By Meir Orbach, Calcalist

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