Datalogix Raises $25M To Pump Juicy Offline Purchase Data Into Google And Facebook

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Datalogix’s offline purchase data is the not-so-secret weapon giant publishers use to target their ads and measure whether they boost consumer spending. Businesses like Facebook are becoming dependent on this ROI data, allowing Datalogix to raise a $25 million Series B. Since it’s based in Denver you don’t hear a lot about Datalogix, but the 250 employee startup is crucial to the future of advertising.

Here’s why I would have fought tooth and nail to get in on this round if I were an investor. Huge brands in retail, consumer packaged goods, automotive and more that earn their money offline are pouring money into online ads on publisher’s sites like Google, Facebook and Yahoo. They’d shift even more of their spend away from print and TV if they could be assured they were getting return on investment on their ads. And publishers could charge them more if they could prove they provide ROI, but none of them know what people are buying in the meatspace.

Datalogix PartnersEnter Datalogix. The company collects enormous amounts of offline purchase data straight from stores with customer loyalty cards like grocers, and partners with data brokers to get even more. Datalogix says its treasure trove includes data on almost every household in the U.S. and $1 trillion in consumer spending. The company packages up the data about what you buy into anonymous profiles, and sells access to big publishers, including Google, Facebook and Yahoo, as well as scores of ad exchanges. This lets them target ads based on what you buy offline, and then see how much more of a product you bought after seeing an ad for it. Publishers can then calculate how much more money its advertisers earned than spent, and use this ROI data to convince them to buy more ads.

So for example, let’s say you use your Safeway Card to get a discount on Clorox bleach at the supermarket. Datalogix tells Facebook you’re a bleach-buyer (anonymously by hashing you personally identifiable information). Facebook helps competing bleach company Tide target you with ads because it knows you’re a potential customer. Then Datalogix tells Facebook you started buying $5 worth of Tide bleach per month. Facebook calculates that $1 of Tide ad spend per month on people like you generated $5 in sales, or $4 in ROI. Finally, Facebook tells Tide it can get it a 4x ROI, and Tide shifts more of its ad spend from print ads to Facebook.

facebook-custom-audiences-resultsBasically, Datalogix’s data is pure gold to the world’s biggest online ad channels. It lets them prove their value and pull in way more ad spend, so it’s no wonder they’re willing to pay for it. Datalogix CFO Tim Connors tells me its business has tripled over the last three years, and is up 50 percent in the last year. It has 250 employees now, up from 170 a year ago, and signed a flagship partnership with Facebook to build custom ad audiences for it and help it measure ad ROI.

Offline purchase data is only going to be worth more as time progresses and mediums like TV and print die out. But Datalogix needs to fend off competitors like fellow Facebook partners EpsilonAcxiom, and BlueKai. So it made perfect sense to raise a big $25 million round of funding led by Institutional Venture Partners, who specializes in the advertising and media space. Bringing it up to $40 million in  total funding, the round was joined by existing investors General Catalyst,  Costanoa Venture Capital, and Sequel Venture Partners who previously put in $15 million in 2009.

Connors tells me the money will “fund growth — a combination of continuing to build out our tech platform and teams focused on customers, as well as to continue geographic expansion. We opened an office in London this year and are beginning to look at opportunities outside the US.”

Some people don’t want their offline purchase data targeted or measured, and find data providers like Datalogix a bit scary. I asked Connors point-blank whether people have any reason to be afraid of Datalogix, and he chortled, “We don’t think so. Philosophically we think if people are seeing ads that are more relevant to them they’re going to be more receptive. We believe very much in choice and transparency. People who choose not to have their data used for targeting or measurement? That’s completely their decision and we’re fine with that. We provide ways for people to opt out easily,” though some think the opt-out process is actually quite complicated by design.

In the long-run, offline purchase data could make online eyeball owners a lot richer. Not only will it make sure ads reach the right people, it will unlock the hidden value of the ads that businesses are already running. Connors concludes: “We’re helping the advertisers deliver more relevant ads, not just random things. It’s less intrusive if you’re seeing ads for things you’re interested in. It’s a better experience. A lot of publishers deliver their services and content for free, and users are able to get them for free because they’re funded with advertising.

So if you’re thinking to yourself, “whatever, I hate ads” or “I don’t even see them. AdBlock Plus FTW,” remember that ads are the necessary lifeblood of the free consumer Internet, and Datalogix is pumping that blood.