When Nikhil Sethi started his company, Adaptly, last summer, he set up shop in the cafe and warehouse culture of San Francisco, where coders and venture dollars are supposedly easy to find. It's also where a lot of success happens, and however irrational the idea that proximity breeds profit, it's just nice to be close to everyone else in the industry.
But very quickly Mr. Sethi found himself flying to New York as much as twice a week, "to Madison Avenue," as he put it, which is when he realized he had to move.
"We just needed to be around the advertising community," he said. "We were spending an inordinate amount of time here."
That move netted Adaptly an ever-lengthening roster of ad clients as well as key venture money. The company just closed a $2 million Series A round from a cadre of top-tier investors, including First Round Capital, Kirschenbaum Bond Senecal & Partners, Charles River Ventures and Huffington Post founding executive Kenneth Lerer's fund, Lerer Ventures. Angel investors also include Invite Media founder Nathaniel Turner (his company was acquired by Google), Interclick CEO Michael Katz and Gary Vaynerchuk. With the initial seed investment, the company's total funding amounts to $2.7 million.
Adaptly is a clever buying platform where advertisers and ad agencies can buy a range of social sites -- Facebook, Twitter, LinkedIn, Myspace, StumbleUpon, plus a host of others -- with a single purchase. It's a smart tool akin to Invite Media's "demand-side platform," but instead of single-source buying on ad exchanges, Adaptly simplifies ad buying across social media.
"Their tech is really awesome, and when you look at the amount of time people are spending on social platforms, you can see there's a huge opportunity," said Jonah Peretti, one of the founders of the Huffington Post who advised Kenneth Lerer on the investment. "There's a major shift going on in social advertising," he continued. "There's lots of clients doing large-scale campaigns on Facebook and Twitter and other social sites. I think there will be people copying Adaptly, but they definitely have a head start."
Social advertising largely means Facebook for now, and while the company offers a self-serve ad-buying tool (much like Google), it's inadequate for big advertisers spending large amounts of money. That's where a host of third-party companies such as Blinq and Efficient Frontier have come in to fill the void by offering souped-up software that allows advertisers to buy in bulk. But unlike those startups, Adaptly sets itself apart with tools that not only reach Facebook and Twitter but a range of other, lesser-known social sites such as StumbleUpon, or sites such as LinkedIn that have only recently dived into advertising.
"They were very aware of all the other longer-tail networks outside of Facebook, said Jamal Henderson, brand manager for PepsiCo's Brisk Ice Tea. "That's the reason why Adaptly's is so smart -- they're going to put your brand in front of people who are on the next Facebook."
Mr. Sethi pointed out that the social sites that meet Adaptly's requirements have to be first-party networks, meaning its users have to explicitly sign up and offer their data. "We don't bother with cookies and analyzing third-party data," he explained. "Social media is the next level of display."
At the same time, he pointed out that buying on Facebook has become massively expensive because advertisers and agencies are still trying to figure out how to best spend their money to reach consumers in a place where they're less receptive to traditional marketing. "You have to come up with new metrics for social," he said. "It's not just about clicks and impressions."
Advertisers currently spending large amounts on Facebook on display ads are, on balance, shelling out as much as $5 to $8 for every collected "fan." Adaptly said it lowers that cost by targeting smaller groups more strategically and also by changing the messaging within each display ad on Facebook, as well as on other sites.
Mr. Sethi, who started Adaptly as a class project in his senior year at Northwestern, is looking to level the social-media buying field. "We're just trying to democratize it so it's easy and straightforward," he said. "Until we came long, you couldn't easily buy all these guys at once."