There was a big move in the Japanese ad-tech market yesterday. Mediba, an ad-focused subsidiary of Japan’s second largest telco KDDI, announced its takeover of ad-tech startup ScaleOut. The purchase price was not disclosed but it’s reportedly worth more than 1 billion yen (10 million dollars). Some of our readers may recall that Mediba acquired smartphone-focused ad network startup Nobot back in August of 2011.
ScaleOut’s CEO Daisuke Yamazaki previously worked with Yahoo Japan where he launched behavioral targeting and rich media ads. Yuzuru Honda, the founding CEO of competing ad-tech startup FreakOut is also known for having sold content-matching ad platform Brainer to Yahoo Japan. Yahoo Japan seems to have produced many men of talent in the space.
There were very few platforms that could provide 10 billion monthly impressions when we launched our company
When Mr. Yamazaki launched ScaleOut back in 2006, the market was not as mature as it is today. He explains:
There were very few platforms that could provide 10 billion monthly impressions when we launched our company. Since the market has no concept about RTB (real-time bidding) advertising, we developed an ad distribution platform which can steadily provide ad impressions for media companies.
Subsequently we launched a RTB-enabled DSP (demand-site platform) service since the market trend was being shifting to RTB advertising. In terms of focusing our resources on our core business, we wondered if we should stop receiving outsourced business. Based on discussions with with Mr. Hiroyuki Watanabe , we made up our mind to concentrate on providing DSP services.
Scale Out was founded back in 2006, and launched DSP services back in 2012. That means they have been working on it for about five years. In terms of focusing on DSP services, B Dash Ventures helped them make the significant decisions. Yamazaki added:
Our system development didn’t proceed as expected, and we had some money problems. But Watanabe helped us a lot both mentally and financially. Up until we invited CMO Sugawara to our board, everything around our business was decided based on discussion with me and Watanabe.
Watanabe knows the ad-tech startup industry since he also helped other startups in this space, such as Nobot. Mr. Watanabe explained:
Prior to investing in the startup, I shared my perspective on the future of the Japanese ad business and ad-tech industry. Based on that, Mr. Yamazaki and I completed the startup’s management policy and business plan together. To bring more talent to the board, we invited Mr. Sugawara as a supervisor for sales and marketing.
Why has ScaleOut partnered with Mediba? Yamazaki raised the recent smartphone shift as a reason. He explained:
To date, online advertising has been targeting PC users, and smartphone ads have no big share in the market. A smartphone ad is typically placed in a limited space but shares much space on the screen. For users, you typically check information resources briefly with a smartphone, and maybe dig deeper on a PC.
If we can provide clients with solutions that allow them to see user behaviors across multiple platforms, that would be a significant differentiation point. For clients, in terms of drawing user attention, smartphones will definitely work better than PCs. We learned this after we’ve switched to DSP services, and also learned this meets the KDDI-Mediba ‘3M’ strategy . That’s one of major reasons why we’ve partnered with Mediba.
To date, online advertising has been targeting PC users, and smartphone ads have no big share in the market.
We should also mention the company’s own technology called Data Management Platform, DMP for short. The startup formed a team focused on data analytics, and will launch an ad service using much accumulated user behavioral data. Yamazaki added:
I assume most ad networks will change ad distribution in the future. They will typically pick the best choice of available ads using behavioral data analytics. If we can launch a platform for ad distribution across multiple browsing devices, we can distribute the best ad optimization to every single user. Google is the biggest holder of big data accumulation, but KDDI-Mediba dominates the Japanese market in this space.
Ads may be noisy for users sometimes. And in order to provide users with ads that serve as useful information or recommendations, we need to evolve in partnership with KDDI-mediba.
Based on the analysis of enormous user data using the company’s DMP technology, their clients can distribute the best optimization of ads to their users through the platform.
Adtech startups don’t typically expose much about what they provide, but we’re glad to have a glimpse into that ScaleOut has in store. Let’s wait and see how this particular acquisition will impact the Japanese ad industry.