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Netflix’s Pivot to Ads Boosts An Already Hot Smart TV Market

Netflix’s Pivot to Ads Boosts An Already Hot Smart TV Market

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Jason Fairchild’s bet on the future of internet-connected TV ads is looking smart this week—and not only because his startup just raised $20 million in new funding.

Fairchild is the co-founder and CEO of Pasadena-based tvScientific, one of a growing list of adtech firms trying to capitalize on the red-hot advertising market for connected TVs, also known as smart TVs. These are TV sets featuring built-in streaming apps that allow viewers to directly access services like Netflix and Hulu. They’ve become increasingly ubiquitous; if you’ve bought a new television lately and opted for one of the newest models, chances are that you have a smart TV of your own.

Spending on smart TV ads has rapidly risen in recent years, jumping 60% in 2021 alone, according to research from Insider Intelligence. This past week brought news that should only further bolster the market: Netflix is poised to finally offer an ad-supported streaming tier, in response to the streaming platform losing subscribers for the first time in a decade last quarter.

Whenever Netflix starts airing commercials, it’ll join an expanding roster of streaming services opting to sell cheaper subscriptions with ads, including Hulu, HBO Max and Peacock. As consumers continue to cut the cord on traditional cable TV in favor of online streaming, they’re increasingly opting for these less expensive plans. Fairchild believes that eventually, up to half of streaming subscribers may end up on ad-supported plans.

“The big argument was [that] people don't want to see ads on streaming services and that is, I think, somewhat true,” Fairchild told me. “But consumers also get subscription fatigue—meaning they can have one or maybe two services where there's no ads, but the rest of them need to have an ad-supported [tier]... And we've seen that storyline play out with the increase in the number of ad-supported services.”

That’s where tvScientific comes in. The company offers ad-buying, measurement and optimization services for connected TVs all in one package, charging a 15% fee based on a client’s ad spend. The startup’s platform connects with 95% of ad-supported streaming apps, and allows advertisers to measure their success by matching exposure to ads with visits to brands’ websites and other desired outcomes. Founded in August 2020, tvScientific is trying to lure marketers who already buy a lot of ads on Facebook and Google and bridge them to connected TVs, Fairchild said.

“They can advertise to over 100 million households and measure the impact of the TV advertising in a very digital first way, just like they do on Google and Facebook,” he said.

Leading the startup’s $20 million Series A round was Silicon Valley VC firm Norwest Venture Partners, which was joined by NBCUniversal and Hearst Ventures. The new capital brings tvScientific’s total amount raised to $23 million.

The Pasadena startup is not the only smart TV-focused adtech firm to have recently landed a haul from investors: In February, MNTN, which has a major presence in Culver City, raised a $119 million Series D led by institutional giants BlackRock and Fidelity.

With Netflix, which has 222 million global subscribers, soon joining the ad-supported streaming fray, it’s likely we’ll only see more firms like tvScientific and MNTN making a name for themselves—and luring plenty of VC dollars along the way. — Christian Hetrick

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On this episode of Office Hours, Uma Subramanian, now the CEO of Aero Technologies, talks about her unique path in aviation and her plans to build and grow a luxury aviation company.

This week in dot.LA’s “Moves”: ImmPACT Bio hired a new COO, March Capital has a new partner and Activision Blizzard added two female board members.

This week in “Raises”: Travel experience company Pollen landed a big Series C round. Meanwhile, Jeffery Katzenberg’s VC firm is raising for its second fund.

 - Rivian is expanding its Illinois manufacturing plant.- Amazon announces the first five startups receiving its industrial innovation fund.- How Los Angeles uses tech to make urban planting thrive. - TikTok rolls out interactive ads to drive engagement. - Former President Obama warns that social media poses a threat to democracy.----How Are We Doing? We're working to make the newsletter more informative, with deeper analysis and more news about L.A.'s tech and startup scene. Let us know what you think in our survey, or email us!