NYC presents more opportunities than challenges for foreign ad firms

With digital ad spending reaching nearly $160 billion this year, and expected to surpass the spend on television advertising next year, the Big Apple overflows with adtech startups. Many of these startups are coming to New York from abroad, specifically Europe and Latin America.

“Silicon Valley has more startups and more money,” Judith Messina points out in Ad Age, “but New York City is the predominant force in ad tech.”

Despite the challenges of setting up shop in such a huge and saturated market, especially with a different language and as a culture not known for cutting-edge technology, these foreign startups believe that the opportunities NYC presents are greater than its challenges.

“You have to be there (in NYC),” said Jerem Febvre, COO of Sublime Skinz, a French-based adtech company. Sublime started in 2012 in Paris and works with more than 3,000 websites worldwide. Sublime Skinz sells “ad units,” the technology behind the advertisements, to companies, rather than publishers. Nestle and Netflix are among their clients. After finding success in Europe and expanding into London in the United Kingdom, the company set its eyes on the United States.

“The true test was succeeding in the U.S.” said Febvre. “It doesn’t matter whether you are the biggest in Europe or elsewhere,” Febvre said, noting that the U.S. trumped all other geographies. “The biggest market is the U.S.” — particularly when it comes to advertising.

Setting up operations in “the biggest market” came with challenges. The first was where to base the company’s U.S. operations. New York is the media capital, and where most advertisers are headquartered. It’s where Sublime eventually set up its headquarters. But like many startups looking to make it in America, Sublime Skinz didn’t take a direct route to the Big Apple. Instead, the company first made a pit stop in Silicon Valley, where an incubator, ubi-i/o, helped the company take their initial steps to get traction in the U.S.

“It helped us understand how people do business here,” said Febvre, referring to the United States. “It’s much different than… France.” Among the biggest differences Febvre noted was how Sublime Skinz approached and dealt with clients. “Here in the U.S. the focus is much more on results and performance,” said Febvre.

Hiring proved to be a challenge. Building a team when you’re not an American company, Febvre noted, is difficult. France is not known for breakthrough technology. “Even if you have a track record in Europe, if you haven’t worked in the U.S. people don’t know you and as a result they don’t care about you.”

No longer can media depend on glossy photos and catchy tunes to drive sales.

Getting a U.S. audience to care is something that Adsmovil, a company focused on mobile advertising for Hispanic audiences, has mastered. Launched in Colombia in 2010, Adsmovil also made its foray into the U.S. in San Francisco. “That was definitely a mistake,” said Adsmovil founder and CEO Alberto Pardo. “New York is the right location for an ad and media company.”

Before expanding into the U.S., Pardo took Adsmovil to Spain, Mexico and Argentina. “Colombia is a small market,” he said. If he wanted to build a truly globally competitive company, he needed to expand his customer base. The United States became a target market after the Cisneros Group, a media and entertainment company, approached Adsmovil for a project in the U.S. in 2012. “That is when we started to focus on the U.S. market in a serious way,” Pardo said.

Pardo’s focus led him to discover that the mobile ad market targeting Hispanics in particular was untapped. In 2012, the 52 million Hispanics living in the U.S. made up 17 percent of the U.S. population. According to the Association of Hispanic Advertising Agencies, the top 500 advertisers spent $4.3 billion in 2010 on the Hispanic market in the U.S. That number went up to $7.1 billion in 2014. “We saw this as a huge opportunity,” said Pardo.

To capitalize on the tremendous growth of the Hispanic market, Pardo honed in on millennials. “It’s a mistake to approaches Hispanics in America as everyone else in the country,” he said. “Our approach is that Latinos are different.” At the same time, however, Pardo noted that he also had to adapt to the U.S. market, which he noted is “big” and “competitive.”

“The quality [of businesses] in the U.S. is extremely high,” Pardo said, noting that if you are a foreign-based company eager to penetrate the U.S. market you have to step up your game in terms of talent and output. That requires having a clear strategy. “In the U.S. you are competing with Google and Facebook.”

If that’s the case, then Adsmovil is definitely still in the game. Sixty-five percent of the company’s sales are from the United States.

Smart AdServer is another company that is making its mark in the United States. The adtech company was launched in France in 2001 by the aufeminin group, a digital media group owned by German-based Axel Springer. The company provides tools for publishers, with software that can create, track and test advertisements. It operates in 10 countries and has 450 clients, including top global publishers like Le Figaro and Le Monde.

Among the industries the Internet has irrevocably altered is advertising. No longer can media depend on glossy photos and catchy tunes to drive sales. The web has lowered costs and, worse, made it more difficult for brands to reach audiences. Focused on content, Internet users increasingly are circumventing ads — consciously skipping them or installing ad-blocking software.

recent report published by PageFair noted that ad blocking cost publishers nearly $22 billion in 2015. In the U.S., ad blocking grew by 48 percent to reach 45 million active users.

“Our goal has always been to allow publishers to have sustainable advertising,” said Romain Job, Smart AdServer’s representative in New York City. In 2014, Smart AdServer opened an office in New York in order to acquire more customers. (Full operations commenced in April 2015). “Our technology is publisher driven,” said Job, noting that the tools the company provides allows publishers — who may or may not be tech savvy — to design and work with brands on size and content of an ad.

“Over the past several years there has basically been a huge wave within the advertising world to let robots (that is automation) drive advertising,” said Job. Smart AdServer’s tools allow publishers to create non-standard ads — ads of different sizes that are more likely to catch a reader’s eye. It also allows a publication to determine the best campaign to use, target the right brands and come up with pricing. Its software is also easy to use. Job told me that this ease-of-use was particularly important for Smart AdServer to master. Technological understanding isn’t the main focus for a publisher — content is.

“Advertising has become much more complex than it was 15 years ago,” said Job. “There is video. There is audio. And it’s all very complicated for someone to know how to use it and make it work in advertising in order to deliver ads to the right person.”

For now, Sublime Skinz, Adsmovil and Smart AdServer believe that “complicated” gives each an opportunity to make it in the U.S. “There’s an opportunity to shake the market a little bit for the benefit of clients,” said Job.