Hootsuite, the startup and platform that lets marketers manage a company’s interactions across a range of social media networks, is getting into the business of paid content. Today, it is announcing that it has acquired AdEspresso, a company that has built a set of tools to create, A-B test, and post advertisements on Facebook and Instagram. It will sit in a relaunched version of Hootsuite Ads, first introduced in 2015, but the primary aim will be to use it to augment and boost views for other social media posts that marketers are creating.
This is part of a much bigger (and sometimes controversial) trend: content these days is appearing on social networks both organically, but also in the form of promoted, paid ads in order to get more visibility.
“Owned and earned content are not going away but the augmentation with paid is critical to success,” Ryan Holmes, the founder and CEO of Hootsuite, said in an interview. “The trend with the algorithmic ranking of content and what you see in your stream means it’s not the same world it was five years ago. Every social network and stream has filtration, so for brands to get their message across they need to have that paid component.”
Financial terms of the deal are not being disclosed; all Hootsuite’s CEO Ryan Holmes said about it in an interview this week is that the deal is in cash and shares and that “everyone is happy.”
AdEspresso, originally spun out of an ad agency in Italy in 2013 by Carlo Forghieri, Armando Biondi and Massimo Chieruzzi, and now based in San Francisco, had raised just over $3 million from a range of investors that included 500 Startups and VTF (the Vegas Tech Fund). It has about 5,000 customers using the product, Holmes said.
Hootsuite — which has 15 million people using its product with “hundreds of thousands” of those paying for a premium tier — raised just under $250 million in funding, and while its shares were marked down some time ago by at least one investor, Fidelity, Holmes confirmed to me today that the company today has a valuation of “over $1 billion.” Hootsuite has been cash-flow positive since Q3 last year and didn’t need to tap outside investment to finance this deal.
AdEspresso first got its start building tools for small and medium businesses to take better advantage and better optimise its presence on Facebook’s advertising platform — a business that has taken off and made it one of the faster growing of Facebook’s marketing partners.
While Hootsuite will be rolling it into its existing advertising business — where it will continue as a self-service ad management product — Holmes also sees the key opportunity to be how users will be able to use it to expand what they are already trying to achieve using the Hootsuite platform.
“Owned and earned is not going anywhere but we see an increase in the amount of advertising that is being created alongside them,” Holmes repeated more than once during our discussion. “Hootsuite is known for helping to schedule owned and earned content, and the engagement component around that, but what is happening as a broader trend is that brands need to layer in the paid piece. That’s why we decided that we needed this as part of that platform.”
When I asked Holmes about the fact that this has been used as a vehicle to sometimes spread “fake news” to unwitting viewers, he agreed that this is a huge and terrible problem — but he also put some of the pressure on trying to suss this out on the bigger platforms.
“I don’t want to pass the buck on this one, but this is the responsibility of our partners like Facebook and others to manage,” he said. “I am a huge supporter of cracking down on fake news. This is a great opportunity for journalism to show its value right now. Google has for years dealt with this idea of trying to get top results to weed out the spam and fake news, and now the social networks will have to invest in doing the same for the benefit of them, us and humanity. If the social networks solve this at a global scale it will solve it at the microscale from our perspective.”
While Holmes did not go into the details of how revenues break down on AdEspresso, this also helps lay more groundwork for the company in how it continues to diversify its business. Today, Hootsuite’s freemium model is heavily weighted to “free”: of the 15 million users it has, paying users number in the hundreds of thousands. Adding in more paid advertising options gives it an option of monetizing those free users without trying to woo them to paid tiers for the wider service.