DataXu Scoops Up $27M More, Turns Corner on Big-Data Ad Software

2/7/13Follow @gthuang

It’s always good to catch up with Mike Baker. It’s not always good to wait a year or more between catch-ups, though.

Baker is the CEO of Boston-based DataXu. And if you don’t watch closely, suddenly you realize his company has grown to 220 people, with offices in New York, San Francisco, Chicago, Detroit, Brazil, London, and other European cities.

DataXu has just closed $27 million in new funding led by new investor Thomvest Ventures, headed by Peter Thomson of Thomson Reuters. Previous investors Atlas Venture, Flybridge Capital Partners, and Menlo Ventures all participated as well, and the new round brings DataXu’s total funding to $65 million. (The startup joins the ranks of the dozen or so independent tech companies in Boston that have raised $50 million or more in venture funding—a list badly in need of updating.)

In case you’re even more out of the loop than me, DataXu makes software that helps advertisers manage multiple ad exchanges and optimize their campaigns. The company was started in 2007, based on aerospace engineering algorithms developed at MIT. In recent years, DataXu has made its name by giving digital advertisers tools for deciding exactly when and where they should place ads across the Web, mobile, and other devices.

The idea all along has been to bring data science to the increasingly complex world of digital marketing and advertising—in other words, it’s another big-data-before-there-was-big-data play. But, if anything, DataXu was a little too early. It has been slogging to get brands, marketers, and agencies to adopt its sophisticated software.

Now times seem to be changing. “The market is starting to get it,” says Baker (pictured at left). “2012 for us was an inflection point where people actually started to look to buy software.” He’s talking about enterprise marketers buying DataXu’s platform instead of just buying campaigns. In pursuit of marketing’s Holy Grail—understanding customers better and engaging with them more effectively—it seems data-driven software finally has a good name.

That has paid off in the form of an eightfold increase in software-platform sales for DataXu in the past year, such that software-as-a-service is now the majority of the company’s revenue. Baker declined to give any absolute numbers, but said that overall revenue has been roughly doubling year over year.

The adoption pattern is no surprise to Baker, who previously worked at Nokia, Enpocket, and GrandBanks Capital. “With an early, disruptive technology, people sample it and get their heads around it,” he says. “Adoption isn’t gradual, it happens all at once.”

If that time is now, DataXu is well positioned for a big expansion—though it does have plenty of competitors in marketing optimization (most of which I’ve never heard of), and Internet giants like Google, Facebook, and Yahoo still dominate the ad scene.

DataXu needs to continue to sell its software to big companies, and hook its products—nine separate ones at this point, Baker says—into business-intelligence tools in a way that’s seamless and easy for business users. It also needs to keep a close eye on trends in video and mobile ads.

One big challenge is managing the company’s growth as it ramps up in international markets. To that end, DataXu has hired experienced execs from places like Salesforce.com and Parametric Technology (PTC). Baker says his team is “spending a lot of time on culture and purpose, as a company and as a brand.”

“We’re taking a step back and saying this is not just about growing and shareholder value,” he says. “It’s the brand purpose—to bring data science to the art of marketing.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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