Tech entrepreneur Kevin Dorren faced a conundrum. In late 2011, he was building Diet Chef, his Edinburgh-based customised food delivery brand, using advertising on free-to-air television channels.
Every time the adverts appeared, the orders would increase, which was great news. But how, why and where the ads were working intrigued him.
He asked friend and former business partner, Calum Smeaton, to give it some thought. And so began the pathway to the creation of TVSquared.
“Kevin was spending all this money on television advertising - and it was working - the revenue was going through the roof, but he wanted to dig deeper to work out how to optimise his television spend,” recallsed Smeaton.
Smeaton began a new quest which ultimately led to the sale of TVSquared to New York-based Innovid in early February 2022. The brand, built in Scotland, will continue as TVSquared by Innovid, with its software engineering roots in Edinburgh.
“Kevin was frustrated because, with his digital spend on Google, he received these amazing analytics, but for television, he got nothing – he felt he was flying blind.”
Indeed, television analytics were light-years behind, relying on estimates and calculations of audience share. But, increasingly, large brands wanted a unified view of their advertising across conventional television.
Smeaton said: “That sounded like a great problem to solve, so I contacted some engineering and data science colleagues whom I’d worked with and we started looking at this.
“Andrew de Quincey was my first phone call, then Hew Bruce-Gardyne, Blair Robertson and Alan Jackson – we just started working in parallel on Kevin’s problem.”
Digital tyre business Blackcircles.com, created by Michael Welch, was another company enjoying strong sales and using local television advertising to build the brand. But how?
As Smeaton explored this further, visiting a company called Secret Sales, it was always the same enigma: they knew advertising worked, but didn’t know how.
What TV programmes, networks, genres, times and days were the most effective for their ads not only to be seen, but to drive direct response, such as online sales, app downloads and website traffic. Furthermore, everywhere he went people, such as Welch told him if you can solve this issue, they would buy it.
“There were out-of-date concepts baked into the industry, such as you can’t optimise television advertising because you buy it up-front, yet brands wanted to spend $10m and wanted to know the return on that investment and how they could measure it – and, if it worked, they would spend more,” said Smeaton.
The first prototype was working in April 2012, and during the summer the company was bootstrapped with funding from Dorren, Smeaton and Andrew Veitch, in a one-roomed serviced office in St. Combe Street.
An early customer, in December 2012, was Chris van der Kuyl, who would become a significant backer of TVSquared.
“We were all part-time engineers with other jobs and the first full-time employee was January 2013,“ Smeaton remembers. “And throughout 2013, more started to join full-time.
“It helped that we weren’t from the TV industry, because we all thought television was dead. If you had read anything in business tech magazines at that point, you would have seen the predictions that traditional television was dying and streaming, such as the iPlayer, was the future.”
In 2013, TVSquared had a handful of customers, and took part in the second round of Scottish EDGE awards in March, receiving £50,000, with £15,000 for market research.
“With that, I bought an around-the-world ticket and went to speak to as many people as I could,” he said.
Using his contacts, and lessons learned from his previous incarnations, Smeaton went to see Landmark Ventures, a New York investment bank and specialist advisory firm, who he had worked with at Sumerian Networks.
“Landmark had some amazing connections in getting products into the US, so I went to meet Anthony Julio, the chief technology officer, who listened to the proposition and agreed to help.”
A breakthrough came in America’s long-form infomercials sector, which has channels devoted to selling all kinds of lotions and potions to the US public. The issue was that the responses, previously through telephone engagement, were now coming via websites, so there was little way of measuring the success of new campaigns.
“We signed up Landmark to help us and we then landed a big deal with Nutrisystem, a health food and diet business,“ said Smeaton. “At this stage, our biggest deal was about a couple of thousand a month in the UK, and we signed a deal for 10 times that a month.
“Landmark knew they had a hit on their hand, so I phoned up Jo Kinsella [a former colleague working in New York] and said 'I think we can afford you to join!'“.
Another vital building block was having a customer brand that Americans were familiar with. TVSquared had started working with FanDuel, the Edinburgh firm accelerating its sports gaming business in the US.
“The issue was that in the US, nobody cares about UK brands,“ said Smeaton. “I went to see Nigel and Lesley Eccles, who had been building FanDuel, to break this chicken and egg situation.
“We helped them and, by the time we went to Nutrisystem, everyone had heard of FanDuel.”
This led to a trial with Guthy-Renker, a powerhouse in direct marketing, and an initial deal working on a stable of eight brands, which then encouraged Smeaton to base himself in Marina del Rey in Los Angeles. He moved to America for two years to cement such relationships.
“When we told people we’d won Guthy-Renker, people in the industry told us we had landed a whale, but we won it because we were committed to going to LA,” he said.
With Smeaton and Kinsella now covering the massive US market, the fledgling team was grown in New York.
A chat during a ski holiday with van Der Kuyl, whose 4J Studios was doing well with the Playstation and Xbox versions of Minecraft, resulted in investment from him and his colleague Paddy Burns.
Then the current chairman of Expedia and former chief executive of Tribune media, Peter Kern, came in as an angel investor. After that it was Sir Tom Hunter and his West Coast Capital vehicle in early 2016, becoming the largest stakeholder.
TVSquared raised over £35m over the course of its growth.
“We brought in backers whom we’d know throughout our careers, and Peter was the only person who we didn’t know directly, but he gave us the vital US connections and industry knowledge,” said Smeaton.
Zvika Netter, chief executive and co-founder of Innovid, takes up the story.
Innovid was founded in the digital world with the assumption that, at some point, all video and television would be broadcast over the internet. Netter built the technology in the US under that premise.
“This was 15 years ago when we founded the company, we believed all TV was going to be broadcast through IP [internet protocol], so what were the technology tools that would be needed for this future?
“We built the technology, quite successfully, and then concluded that we needed to include measurement,” he said, speaking from Manhattan.
This strategic decision was made two and half years ago, just as the pandemic was gripping the globe. More than 40% of the top 200 TV brand advertisers in the US - such as Anheuser-Busch InBev, Kellogg’s, Mercedes-Benz and Volvo - used its ad delivery software.
“Measurement is a strategy, so it was no coincidence that we gravitated towards TVSquared, we had heard about them and Jo Kinsella is a thought leader around measurement in this space in the US,” says Netter, an Israeli-born American who has just turned 50 and moved to the US 13 years ago.
“We hired a team and we built a product but our customers voiced that they needed a more complete view of broadcast television, which included linear, cable and satellite.
“We were missing this kind of broadcasting, so we consciously started looking, then we decided strategically it would take forever to build this, so that was off the table.
“We could have secured a partnership, but we felt it was too delicate to rely on a third-party and we wanted to go big on this kind of offering.”
For Innovid, the ideal option was to acquire a company. Netter says there were several contenders, but TVSquared emerged from its due diligence process, and an initial approach was made in late August 2021.
“We decided that TVSquared was the best for us, then the whole process took about a year,” he says.
For Smeaton, it was a delicate logistics game as to when and how to make the next step and consider a decision on a possible exit. His rocky experiences taking Orbital Technologies to market during the dot-com boom meant he ruled out an IPO.
“We were neither too small nor too big – that’s not a bad thing.
“With the revenue we were turning over, we were looking at enormous cheque sizes to make the next step up, which pushes out your exit horizons.
“A lot of Scottish entrepreneurs who had been in the network, helped fund it to this level where we decided to make a decision,” Smeaton added.
In parallel, Netter and his team were preparing for a stock market listing to raise finance, all from his Brooklyn Heights bedroom. The IPO plan was to raise $160m, with two thirds of this cash financing the TVSquared deal.
“We made a decision to acquire a significant-sized company, and made the decision to go on the public market on the New York Stock Exchange, so I had to take the company public, at short notice, and move on to the acquisition of TVSquared.”
On 1 December, with the Omicron variant about to explode, a new Innovid public board with new executives was being brought on, but the deal was still confidential. A term sheet was signed to complete the deal in two months, with the board hearing that the $100m of new cash was going in TVSquared.
“This was while the stock market was tanking,“ said Netter. “It was very intensive, but this was the answer to my new board, to investors and analysts, and it was a very strategic move for us.
“This was not an add-on, but a move and advancement that we’ve been working on for many years, it was a big part of us going public,” he said.
TVSquared hired corporate advisers LUMA Partners, while the legal advisers were Shepherd and Wedderburn in the UK and Wilson Sonsini Goodrich & Rosati in the US. On legal side, for Innovid, it was Latham, DLA, with Furth, Wilensky, Mizrachi, Knaani.
Smeaton was also assisted by Colin McLellan, TVSquared’s new chief financial officer, who had worked on Skyscanner’s sale to Chinese travel agent Ctrip in 2016, and non-executive director Paul Davidson, from West Coast Capital.
In early December the first term sheets arrived and the new partners “danced around” on valuation and pricing, with detailed diligence being undertaken, before the final purchase agreement was signed in late December, for completion in early 2022.
Early January was tough, as wider market conditions were changing. On 3 March 2022, Innovid finally completed the acquisition, which was confirmed as $100m in cash and 12.5m in Innovid stock. The share price, which had been dipping, has increased dramatically since the sale.
On announcement of the deal, Jo Kinsella, president of TVSquared by Innovid, told The Wall Street Journal: “Through Covid, the proliferation of CTV has just made the industry wake up and say 'you know what, we need new cross-platform measurement currencies, and we need this to be global, and we need it to be independent'.”
It meant that the traditional forms of measurement, such as Nielsen’s national and local TV ratings were now being challenged by the newcomers, which offered much more granular data.
“Together, TVSquared and Innovid are at the centre of TV’s transformation, meeting the market’s needs for a converged TV measurement alternative,” she said.
Concluding a deal during lockdown was fraught with issues, although another irony was that TV commercials coupled with online home delivery brands became the success story of the pandemic, using advertising for maximum impact.
“When you are doing an acquisition, it is all about people, the success or failure of a merger is 100% dependent on the team, the culture and the leadership – and that’s extremely difficult to do via Zoom,” said Netter.
Between the various lockdowns, Netter and several of his team met Kinsella and then Smeaton in New York. They shared the same technology background and had a lot of common ground.
During the diligence, Netter was anxious to meet the team in Edinburgh, but instead dispatched his global head of engineering Yuval Pemper, dubbed by Netter as “the other CEO”, on a secret mission to Scotland.
“We could not do this deal without meeting the engineering team in Edinburgh, as a key element in our deal was to keep the product and Scottish engineering team on board – without them, you have nothing.”
They couldn’t meet in the Edinburgh office, so the mask-wearing team gathered in a private location. Pemper hit it off well with Robertson, TVSquared's CIO Tom Duke, and De Quincey, and has now spent time in the capital on the integration.
It was only early March, after the deal was concluded, that Netter, at last, was able to make his first trip to Scotland, along with his 19-year-old son, Omer.
They visited Stirling and went clay-pigeon shooting, took the train to Glasgow, and Netter met with key investors, including Davidson and van der Kuyl, then TVSquared’s chairman, although he is still keen to meet Sir Tom.
Netter is also taking about a technology partnership with Scottish universities to develop a pipeline of software talent.
“The team in Edinburgh is phenomenal,“ he said. “We speak a common language and have immense respect for each other.
“Innovid started out as an engineering company and now has four centres of excellence, we were about 80 people for nine years, but now we have close to 100 in the US, also in Tel Aviv, and we acquired a company in Buenos Aires, where we have another 100 staff.
“We are a global company with a team in China, Sydney and Singapore, and Edinburgh will become one of our centres of excellence - now we have 600 people - by design, we’re a multi-cultural, global business.”
Netter defines Innovid, co-founded with serial entrepreneur Tal Chalozin and software tech veteran Zack Zigdon, as an engineering technology company, trying to solve a problems, building a scalable products and then working on sales and marketing.
“It might sound a bit cheesy, but we place a massive focus on our own teams, along with diversity and collaboration,“ said Netter. “TVSquared fits beautifully into this.
“What I loved, and this comes from Calum, is that we are product and tech orientated, and TVSquared is exactly that, with his leadership and his background.”
Smeaton, who has now stepped back from day-to-day involvement, agrees that the culture is vital. “From the outset, I felt we had a really important part of a bigger picture.
“The strategy was: how do we do one thing, and do it really well, but ensure that this one thing is part of the overall puzzle.
“We have achieved that and I’m very proud of this and the incredible team.”
No longer chief executive, Smeaton has taken on a strategy role in support of the integration with Innovid, while Kinsella and chief technology officer Blair Robertson lead the measurement business, reporting into Netter.
So TVSquared did eventually solve Dorren’s problem, and will now play a critical part in the transformation of analytics across the global TV industry.
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