As a garden-variety user, you might hate the increasing number of advertisements popping up on your Facebook feed. You may complain about them, perhaps quite loudly—even though that’s the price of an otherwise free service.
But that doesn’t mean those ads aren’t working. Just ask Nanigans, a Boston-based ad technology startup.
The company, which helps advertisers reach Facebook users with an algorithm that predicts who will spend the most money over time, has been at the forefront of the social network’s constantly evolving advertising strategies.
That’s allowed Nanigans to grow pretty quickly on very little private venture financing—it now has more than 100 employees in four offices, including a new location in London. Nanigans also has served more than 200 customers, and manages “nine figures in annual ad spend,” says Dan Slagen, the company’s senior vice president of marketing.
Slagen adds that Nanigans has seen its own revenue grow sixfold since its last investment round in August 2011, with about a third of the revenue coming from a relatively fresh focus on mobile. That’s not astronomical growth, as advertisers are still getting a feel for new types of online advertising offered through Facebook. But, combined with around $3 million in private financing, it’s been enough to help bankroll the company’s expansion.
This week, Nanigans added to that total with another $5.8 million in venture financing, led by original investor Avalon Ventures.
The news comes as Nanigans wraps up a pretty busy month in the world of Facebook advertising, and just ahead of Facebook’s latest quarterly earnings report, where the company’s ability to grow its ad revenues without alienating users will be on full display.
In late March, Facebook announced a pair of initiatives that are aimed directly at pulling that off, by selling more sophisticated types of advertising in the news feed—the part of Facebook where users spend most of their time catching up with friends and family.
First, the social network said it would start selling “retargeted” ads in the news feed. Like traditional Web display ads, these promotional posts are aimed at people based on the digital tracks they leave behind when visiting other websites. Nanigans was named an early test partner for this initiative.
Putting that type of advertising into the news feed, rather than in the smaller gutter of ads that run on the right side of a Facebook page, resulted in click-through rates that were 40 times higher in some cases, says Marc Grabowski, Nanigans’ chief operating officer.
By adopting those procedures, which already were used by advertisers on the broader Web, Facebook is increasing its pool of potential customers.
“We actually can see advertisers coming on board for the news feed that historically weren’t really buying any of those placements” elsewhere on Facebook, Grabowski says. “It’s going to be big for e-commerce and retail, no question about that.”
The second big change announced last month was that Facebook would start offering advertisers a more detailed way to slice and dice the ads that hit this valuable news feed territory. Previously, advertisers had to hammer everyone who followed their page with the same posts, rather than sending different versions to different people.
But this newer version, known as “unpublished page posts,” could be sent to specific groups of users—which meant that advertisers could test out different options, only go after specific sets of consumers, and so forth.
This latter change was “an absolute game-changer, for Facebook and for us,” Grabowski says. “That added 20 percent to our business overnight.”
What will this all mean for Facebook’s bottom line? We’ll have to wait and see. But at least for Nanigans, the things are looking good so far.
