Start-ups biggest spenders on Facebook ads in Israel

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Heavy investment on social media ads by start-ups makes Israel a unique market.

Assuming no dramatic changes take place before the end of this year, Facebook will reach two important milestones on its path from being a social network for friends and family, to becoming a profitable business. According to eMarketer research published last week, this year, Facebook is expected to gain more than 2% of the US digital advertising market share for the first time, and to get even closer to the dominant market player, Google.

eMarketer research from last month further emphasized the direction Facebook is headed in and claimed that, on a global level, for the first time, Facebook’s revenue is expected to total more than $10 billion.

But, while around the world the leading advertisers are traditional companies, like Samsung, or Proctor & Gamble, in Israel, the situation is entirely different. Here, you will not see names like Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ), Super-Pharm, Osem Investments Ltd. (controlled by Nestl? SA (SWX:NESN)) (TASE: OSEM), or Strauss Group Ltd. (TASE:STRS) at the top of the list. Israel’s biggest Facebook advertisers come from an entirely different direction: the domestic start-up industry.

What already long ago became Israel’s ID card in the business world is now the social network’s biggest income engine in Israel. The decision made at the end of 2013, which was implemented only in recent months, by which Facebook would open a sales office in Israel - was not made because of the relatively good weather, or the Mediterranean atmosphere, but because of the budgets that Israel start-ups pour into Facebook.

“This start-up segment is what might make Israel a much more special market for Facebook, compared to other countries,” explained Facebook Israel CEO Adi Sofer Teeni last month in her first press interview.

So who are Israel’s top advertisers? Companies like Plarium, Playtika, and its subsidiary Pacific Interactive are on the list, alongside app makers like Get Taxi, Moovit, and Facetune, as well as Wix.com Ltd. (Nasdaq: WIX), and Conduit’s Como. The list of biggest companies also includes eToro, which is developing a social network for investors. The companies and Facebook declined to disclose the advertising budgets.

”Always on” mode

Facebook Israel client manager Elad Brindt Shavit explains that the fact that start-ups are at the top of the list stems from the potential of the target market. “An Israeli advertiser has 8 million potential consumers, while start-ups have a few billion worldwide. They target their products to a global audience, and, therefore, they pay more money to reach them,” he says.

Other than the target market, Brindt Shavit points to two significant differences between start-up advertising strategies on Facebook and traditional advertisers.

The first difference, according to Brindt Shavit, is the fact that, at least at the beginning of the road, fewer users are familiar with the start-up’s brand, compared with a traditional brand. “Start-ups basically have two things they want to achieve: sales and users on the one hand, and branding on the other. They do great work in terms of segmentation and matching the message to the audience, but they still need to deal with the fact that, in terms of brand, they are not familiar enough. They are still not Nike, or Coca Cola, but they understand this, and they begin investing in that direction. That means sitting down and trying to phrase the message and the tone of the brand, not just a quick, one-time result. At the end of the day, we see that start-ups begin to think in strategic, long-term, image terms, and not just results.”

The second difference is in advertising strategy: “Brands in Israel work in waves. They run a campaign, blast the media all over the place, and then the stop everything. On the other hand, most start-ups operate continuously - in an “Always on” mode. If you’ve exhausted a particular market in Brazil, or if Brazil is very expensive because of the World Cup soccer games, then you switch to Mexico,” says Brindt Shavit.

Playtika VP Marketing and Monetization Ofer Kinberg, whose company invests tens of millions of dollars annually in Facebook advertising, explains that gaming companies lead in Facebook advertising, among other reasons, because their products run on the same platform. “Our social games are based on competing with your friends, so they have added relevance on Facebook. A company like Teva has less interest than we do to use Facebook as an advertising platform. So we advertise in a place that our customers already are, and, in one click, they go to our games.”

Get Taxi Global Digital Marketing Manager Inna Yuchvits explains that the platform creates a more relevant platform for start-ups than traditional advertisers: “A lot of the big companies’ budgets are in offline, like TV, billboards, and print, while, for start-ups, there is not much value to be gained from offline advertising, because our activity is on the smartphone. Therefore, it makes more sense for us to advertise on a Facebook app and to transfer users from there to download our app. The audience there is also more digital, and lives by smartphone.”

Thus, Get Taxi’s primary advertising vehicle on Facebook is Mobile App Install Ads, which makes it possible to install an app at the click of a button. “There are not many solutions that offer the quality that this one does, even in terms of the screen size that such an ad occupies, and in terms of Facebook’s ability to target relevant users for us,” explains Yuchvits.

In house advertising

Another interesting development in the start-ups’ taking the places of big brands at the top of Facebook’s advertising charts is the fact that they are also distancing themselves from traditional advertising firms. Furthermore, in most cases, like those of Get Taxi and Conduit, they manage their social network advertising in-house.

At Plarium, for example, there is a team of more than 20 workers dedicated to digital advertising - the size of a small advertising firm. “They are doing the work of the advertising world of the future,” says Brindt Shavit.

“We know our product and our customers better than any advertising firm we could hire,” says photo app Facetune developer Lightricks co-founder and CMO Nir Pochter, explaining the reason to go for in-house advertising.

According to Pochter, “If you work alone, you can try things, and if it doesn’t work, you can change it. Advertising agencies approached us in the past and tried to convince us to switch, but no one made an offer good enough for us to give up the way we’ve been working until now. At the end of the day, it is pretty simple to advertise on Facebook - the cost is relatively low, you need a banner of the right size, 90-charaters of creative, and you start thing thinking about targeting and optimization.”

The success of Lightricks ad campaigns for Facetune, which allows for Photoshop-style editing of portrait photos, became a successful test case for Facebook long ago, which Facebook promoted at its events. “We established the company with no outside investors - we didn’t have a lot of money for advertising then. We started trying all sorts of advertising platforms, and we invested a little in each one, but we very quickly saw that Facebook was providing the best profit for us,” explains Pochter.

The success of the Facebook advertising bumped Facetune from 283 in Apple’s US App Store to second place within five days. From there, the app reached first place in more than 100 countries. “A lot of this, of course, was thanks to advertising on Facebook, and our ability to bring new users for a relatively low budget,” says Pochter.

Pochter explained that the main advertising tool was app install messages, and that today, the company continues to spend thousands of dollars a day on advertising. “We are always trying more advertising platforms. But out of our entire advertising budget, 95% goes to Facebook,” he says. “Maybe there are other avenues through which it is easier to reach users for free, but for those who have paid apps, Facebook advertising has value. From the moment we began advertising, the ROI was positive, and, today, we are a profitable company.

Early adopters of advertising innovation

One of the advantages of Facebook that start-ups love is the ability to implement better personalization than other tools that exist in the market, explains Conduit mobile director Harel Tayeb. “I can reach the people most relevant to me. This gives me reach that is not available through any other means.”

I wouldn’t want to appear before a million people when I am only relevant to 1% of them. I would rather appear before 500 people, but for all of them to be relevant for my product,” he explains. Como’s mobile operations helps small and medium businesses develop mobile apps, and Tayeb explains that, because of this, advertising on Facebook, which is 50% of the company’s total advertising budget - can also be a part of the businesses “food chain.”

Start-ups are not only the leading Israeli advertisers on Facebook, but they are also the first in line to adopt new advertising tools.

“Because they are advanced, they push our features to the limits, and participate in alpha and beta tests,” says Brindt Shavit. “I would guess that, in terms of new product adoption rates, Israeli start-ups are at the top of the list.”

Tayeb agrees, and says, “We are willing to try almost any tool possible on Facebook. We are willing to try, and see the impact. It is challenging, but, on the other hand, it has greater value. Start-ups are not afraid to try new things.”

Israeli start-ups are also adopting Twitter

Facebook is not the only one seeking to enjoy the Israeli start-ups’ advertising budgets. Competing social network Twitter very recently began operating in the Israel advertising arena as well, with a focus on the Israeli technology industry, as Twitter EMEA small and medium business director Barry Collins explained two months ago.

One of the first adopters of new advertising tool was Get Taxi. “We were the first to reach an Israeli advertising segment via Twitter, after our other offices around the world have been working with Twitter for a long time already, in places where the social network is more dominant, like London and New York,” explains Inna Yuchvits.

“Although Israel is an audience of just a few hundred-thousand Twitter users, there is a sense of family, and I can say that the community received us with open arms and, for the time being, the results are satisfactory,” she concludes.

Published by Globes [online], Israel business news - www.globes-online.com - on July 9, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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