When InMobi became India’s first unicorn in 2011, it took everyone – including its founders – by surprise. Naveen Tewari, co-founder and CEO of InMobi, recalls wryly, “We didn’t really know what ‘a unicorn’ meant and so didn’t react initially. We looked it up and it was a horse with a thin horn.”
A $200 million cash infusion from SoftBank Capital in 2011 came after four years of struggle to get local investors to see the potential of a global business built out of India in a little-understood segment – adtech. Tewari says, “Masa looked at the company, our vision and put in money. It obviously changed the landscape for us. It was one of five or six investments which were the foundation for his Vision Fund.”
In the near-decade since the SoftBank investment, InMobi has gone through tumultuous times. Google and Facebook have grabbed a lion’s share of digital ad spend globally. In 2011, InMobi’s principals had ambitiously spoken of a billion-dollar revenue in a three-year time frame – it would only achieve profitability in 2016.
InMobi is now reducing its reliance on adtech, a sector that has faced many existential challenges and a funding drought of late. At a group level, it has split into three companies – the adtech business InMobi Marketing Cloud, consumer-facing content discovery platform Glance and data-driven insights firm TruFactor.
InMobi expects these companies to forge distinct paths and intends running separate IPOs for each of them. Tewari is clear that he doesn’t want to be caught in what he calls “the conglomerate discount.”
Ambitions that are quite a leap from InMobi’s modest beginnings as mKhoj (m-search), a discovery platform for offers from local advertisers delivered via SMS. Tewari says: “Our big bet was on the evolution of content on mobile platforms. Whether it is print, television or radio, proliferation of the medium happens because there is a vast consumption of content, subsidised by advertising.
“For a brief period, when mKhoj existed, we thought it may start off via text messaging. We soon realised there’s no interactivity – nothing getting us the repeats.”
The launch of the iPhone and the early days of the smartphone revolution offered a clearer path to interactivity, but one fraught with investor disinterest. “In the very early days, angel funding was all about backing models that already existed in the US,” Tewari admits.
InMobi did raise some angel funding but there were not too many options to choose from. The company famously ran out of money and briefly survived on the founder’s credit cards. The Indian VCs were unforgiving.
Tewari recalls, “We were laughed out of the room since nobody believed that content consumption on the internet could actually scale up on mobile phones. They didn’t have a vision of where the world was evolving to. Rightly so, by the way. Everyone at the time, including the VCs, was still on feature phones.”
After years in the trenches, InMobi decided to expand its business to overseas markets, prominently the United States and China. The strategy paid off, making it far more attractive to investors. It raised a round of venture capital from Kleiner Perkins and Sherpalo Ventures in 2008 and a Series B round from the same investors in 2010, bringing in $15.1 million. Additional funding came from UC-RNT.
Becoming India’s first unicorn was a mixed blessing. The positives, Tewari recalls, were a clearer roadmap to global rollout and leeway for acquisitions. As for the negatives, he says, “Because we were the first, nobody taught us how to behave. We missed out on first principles – tried to do everything ourselves and made mistakes. We started to go faster because we had more fuel instead of realising we had to run on a different track.”
The initial years were an uphill slog – there was widespread scepticism about an adtech firm from India when most such companies came from Silicon Valley. InMobi spent the decade building an advertising stack – a set of services it offered to marketers, ad agencies and publishers.
Over the years, it added measurability, viewability and brand safety – ensuring that a message appeared only against appropriate content. With the rise of in-housing – marketers taking digital advertising within their companies – it created a software stack to automate many of the processes in serving ads to a relevant audience.
However, InMobi was in for a rude awakening around privacy in 2016. It was slapped with a near million dollar fine by the FTC in the United States for illegally tracking millions of people, including children. InMobi had continued to track and service targeted ads to many consumers who had not opted in, and in some cases, had specifically opted out. The lawsuit was initially for $4 million but reduced to $950,000 “based on the company’s financial condition,” according to a press release from the FTC.
Asked about the case, Tewari says, “When you try to change systems you have built, to incorporate elements that they weren’t built for, there will be errors.
“On the FTC issue, we went to them and said that we had found a loophole because we had previously said there were none. They said, ‘Thanks but we will have to fine you for this,’ which they did.
“But two things happened: we tried to become the most pristine, privacy-centric company. And then went further and built a data business called TruFactor. We are currently among the partners at a global level in committees that lay out the broader template of privacy for the years to come.”
Apart from privacy and brand safety becoming hot button issues, the last decade also saw frenetic acquisitions of adtech firms – both by the duopoly and by advertising holding companies. InMobi was among the few firms to emerge from the decade still independent. Tewari deftly bats away the rumours of an imminent acquisition by Google that peaked in 2015. He says, “There are only a few companies globally that have the scale that we do or as deep an advertising and marketing stack.
“Google, Facebook and Amazon have been stable at about 65 per cent to 70 per cent. They won’t go beyond that because people (in the marketing industry) want to ensure they stay at that level.
“The 30 per cent of the market is a $200 billion industry that will grow to $500 billion this decade. That’s a beautiful place to play in the long haul.”
However, industry sources tell a different story – of a company that grew arrogant due to its early fundraising success and the accompanying media hype. The head of an advertising group known for its aggressive acquisition strategy in Asia met merchant bankers representing InMobi and was left unimpressed.
Speaking off the record, the agency group head disputes Tewari’s estimates of InMobi’s addressable market. He believes the duopoly accounts for as much as 80 per cent of ad spend and that a further 11 per cent is soaked up by organised OTT players, e-commerce and second-tier social networking sites. He says, “That really leaves just 9 per cent for the so-called open internet – and maybe 50,000 companies worldwide fighting over it. Those who build their business model thinking of advertising as a key source of revenue will be in trouble as these ridiculous rates of growth taper down.”
Speaking specifically of InMobi, the agency group head was put off by preliminary conversations around a possible acquisition. He says, “When people start seeing these millions and billions, they think they’ve already become Google.
“I wanted young hungry companies who were rooted. In a deal, the money finds its own level, but considering we were going to be working together and it wasn’t a VC-relationship, I wanted people that I liked. The chemistry would have never worked out.”
InMobi’s global focus was another negative. The agency group head adds, “It struck me as being too diffused – like winning a lottery. I’m not in the business of buying lottery tickets.
“The hard part is competing in a market and showing steady growth. I also only wanted to work with entrepreneurs who would continue to remain vested and committed to the firm even after acquisition and earnout.”
Another grey area for InMobi has been its profitability. The firm says it first turned a profit in 2016 and been profitable ever since, a claim that has been called out by multiple reports in the media, the most recent of which was published this January. Denying the reports that pegged the company running at a loss, Tewari says those figures represent only its India operations and so give an inaccurate picture of InMobi’s finances. He says, “We have 26 such divisions and markets – I only care about the consolidated business.” While unwilling to get into specifics, he points out that China and the US contribute 75 per cent to InMobi’s business.
A former InMobi employee, who spoke to DealStreetAsia on the condition of anonymity, agrees that InMobi has been profitable driven by strong performance in China and other key Asian markets. He, however, cautions that its new divisions – Glance and TruFactor – have a long way to go before they start making money.
In the meantime, its flagship advertising business, while still a consistent revenue performer, is not seeing dramatic growth. The pivot to a more lucrative marketing tech (martech) model is still a long way off, according to the former employee.
“A true marketing cloud needs more elements. This is more of a rebranding of its advertising services. Competition from specialists who are location or video-based is going to impact them. A true marketing cloud would require different sales channels and more partnerships like the one with Microsoft,” he said.
Even some of InMobi’s admirers agree it moved too slowly to exploit the seismic changes of the last decade. The head of an India-based ad tech firm, who prefers to remain anonymous, says, “I used to be in awe of InMobi and have great respect for the founders. But beyond 2015 to 2016, they perhaps didn’t pivot and see how fast things were changing.”
Tewari does not consider these critiques justified. “We responded to the industry by evolving from a performance-based to a programmatic transparent stack. That evolution is unfortunately not well understood by the media since at a superficial level, it looks exactly the same. The changes have been phenomenal,” he says.
“Apart from that, we created new companies – all done not with capital but by truly leveraging technology innovation.”
InMobi’s Marketing Cloud does not require any more external funding according to Tewari who expects it to go in for an IPO “in the next few years.” Mobile ad platform Mobivista, which operates in a similar space but supposedly has a smaller network than InMobi, recently raised $153 million in a stock offering in Hong Kong.
A partnership with Microsoft will provide actionable insights to marketers – a vital element in the pivot from adtech to the more lucrative martech space. Tewari considers the launch of Glance, which raised $45 million from Peter Thiel’s Mithril and TruFactor in 2019, to be a further vindication of InMobi’s strategy.
Ajay Kelkar, the co-founder of India-based digital agency Hansa Cequity, is all for the trifurcation. He says, “Separating these companies is critical. It reflects the fact that it is first-party data where the battle for customer insight will be really fought. InMobi’s core ad tech business is under severe threat from ongoing privacy regulations. And so B2C plus B2B is the strategic way out.”
Other industry observers have a kinder evaluation of InMobi’s performance, particularly its pace of growth. According to independent digital business advisor Ashok Lalla, who has previously worked for Infosys as global head of digital marketing, “There were a couple of contributing factors: the changing digital landscape and the associated challenge of aligning with these changes, while yet being able to scale the business at the same time. InMobi has been an impressive business and it has smartly navigated the changes in the mobile marketing and digital landscape to stay relevant.”
InMobi is counting on trends such as connected TV to increase its traction as channels shift to an advertiser-supported video-on-demand model, with declining terrestrial viewership and rampant cord-cutting.
Co-founder and InMobi Marketing Cloud CEO Abhay Singhal is also betting on the duopoly being dismantled. He says, “The FTC has launched a probe on every acquisition that these large companies have made in the last 15 years – small or big. Even the ones which they previously didn’t have to disclose like acqui-hires. The US has a history of breaking things up in the past and putting extremely high regulatory frameworks on those companies.
“We know how much power is concentrated in the walled gardens. As InMobi and as a consumer, I definitely think these companies should be put under much higher regulation and looked at as different entities. Do I think that it is going to happen in my lifetime? Absolutely. Do I think it’s going to happen in the next four to six years? I don’t think so.”
InMobi’s ultimate test will be if its legacy and pedigree in adtech help it stand its ground against the duopoly and now, triopoly with Amazon throwing its enormous hat in the ring. And if its two new businesses can realise their potential. Kelkar sees the data management space, in particular, already getting extremely crowded and competitive.
While it was India’s first unicorn, it is entirely likely to be the country’s last in the adtech space.
Origins: Formed after Miip failed to gain traction in India. Miip was a shopping-oriented discovery platform, in the form of an animated monkey that appeared on phone screens to give shopping suggestions.
Funding so far: $45 million raised from Peter Thiel’s Mithril Capital
Glance is InMobi’s first B2C product and uses the real estate of a cellphone’s lock screen to aggregate and display content from apps. So far, it has been promoted via partnerships with leading handset manufacturers including Samsung and Xiaomi in India.
InMobi has launched Glance in India and Southeast Asia and is gunning for Latin America later this year. The monetisation model is still being worked out. “People use it for micro-moments when they have a few minutes. We are filling the air gap across a day with moments of information,” said InMobi’s Naveen Tewari.
Tewari believes Glance is solving a serious problem: “People don’t use all the apps in their phones. While there are a million apps, that choice has no meaning because we end up using less than 10.”
He claims it is now the largest news consumption platform in India as well as a venue for short film entertainment. In order to boost this offering, Glance recently acquired video content firm Roposo.
According to Tewari, “We finished last year at close to about 70 million daily active users, overtaking Instagram and Tik-Tok. We are the third-largest platform in India today after starting with just 12 million to 18 million DAU.”
According to InMobi estimates, users are on the platform on an average for over 20 minutes a day.
Origins: Formed after the acquisition of Pinsight Media, the digital agency of Sprint, America’s third-largest telco
Funding so far: Seed and Series A raised internally. Gunning for a Series B raise of $25 million to $30 million in 2020
“Through the last 11 years one big driver for us was to be defensible against Google, Facebook and Amazon,” says Piyush Shah, co-founder, InMobi and CEO of TruFactor.
In its quest for the fourth walled garden, InMobi zeroed in on two large data sources: telcos and OEMs. Shah says, “These enterprises created life-altering mobile experience, but were marginalised by Google and Facebook. They got nothing out of the whole smartphone app ecosystem and were sitting ducks in danger of ending up like dumb pipes.”
While working with OEMs resulted in Glance, InMobi’s experience with telcos in the US and Asia was harnessed to create TruFactor.
Tewari says, “The industrial revolution happened because of abundant electricity. It has long been said that data is the new oil. But that oil has not been reaching the enterprises. We’re playing a role in bridging that gap by being the provider of electricity of data and intelligence which can then be used as the enterprise sees fit.”
The difference is that the data the telcos have on their subscribers is more reliable than even a social media profile, with its scope for exaggeration. Shah says, “That’s why we called it TruFactor. Because it’s truth and facts about consumer behaviour in the physical and the digital world.”
TruFactor began as the InMobi Data Cloud, a conscious attempt to build a data-oriented business distinct from advertising. It got off the ground with the acquisition of Pinsight an agency started by Sprint, the United States’ third largest telco. The insights and data from TruFactor are currently being harnessed across industries like retail, financial services and govtech – city planning and mobility.
Shah says, “We not only understand what users do in their mobile environments but their physical footprint. For instance, we know how many users walk into a new Target. How much time they spend at Whole Foods, or the people who come to Starbucks before or after office hours. We are building all this into an intelligence as a service product.” Such information has multiple applications and InMobi believes it can even be used to design better public transport and city planning.
TruFactor is backed by high levels of privacy: the data comes anonymised from the telco and is further subject to opt-ins at the telco and the handset level.
So far, it is only available in the US, but launches in other markets – prominently India and Southeast Asia are on the anvil for next year.
According to Shah, TruFactor can help unlock the true potential of AI, which has so far been stymied by a lack of high quality data, and the time taken to render it usable. Speaking about its performance, Shah says, “I foresee this to be a $100 million annual recurring revenue business in the next three years. We are already staring at a $20 million ARR this year and we’ve barely scratched the surface. If you track the valuation space, this is far more lucrative than Saas. It could be a unicorn in the next three years.”