Why we invested in Novum

Jul 3, 2022

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5 mins

We are excited to announce that we have recently joined our colleagues from CV VC and CoinIX for the oversubscribed late-seed round of Novum (formerly AdHash), a privacy-focused blockchain advertising technology platform.

We have been most impressed by the founders’ team and their ingenious solutions to a $400bn industry plagued by constant privacy violations, regulatory uncertainty, gross inefficiencies, and a general lack of trust between market participants.

Online advertising can be a scary thing. We are used to seeing ads for products that we looked up on Amazon or Google coming up on all sorts of unrelated websites for the next two weeks. And sometimes it feels like we only talked about products, and then they show up wherever we browse.

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But let’s go back a step first.

The most significant innovation in online advertising came about in 2005 with real-time bidding advertising (RTB), allowing advertisers and publishers to serve relevant ads to specific users. This happens in milliseconds and at an unprecedented scale.

The technology is based on omnipresent third-party cookies or similar digital fingerprints that allow advertising companies to build detailed behavioral profiles of users across websites and platforms. As Google and Facebook had the most personal information of internet users, they could capture a considerable market share. This technique is called behavioral ad targeting.

But growing awareness about the transparency of internet users and data privacy abuses like the Cambridge Analytica scandal with its role in elections and referendums triggered a backlash from users concerned about their privacy. Moreover, it increased scrutiny from data regulators who established protective mechanisms like GDPR, CCPA, TCF, DPC, etc.

As a result, the industry had to react. Privacy-advocating Apple started blocking third-party cookies in their browser versions already in 2020, and Google announced that it would do the same at the end of 2023 or even earlier.

Novum changes the advertising paradigm from behavioral to contextual.

Before behavioral targeting, contextual advertising was how brands would make their ads relevant. It focused entirely on the connection between the ad and the surrounding article. Publications back then were the gateway to the consumer.

While it may seem that behavioral targeting is more effective, there is plenty of empirical evidence defending contextual targeting as equally, and in some cases more effective than behavioral targeting. This is primarily due to two things — third-party data can be both wildly inaccurate and very expensive.

According to research conducted by Nielsen, the on-target percentage for most targeting criteria rarely exceeds 50%, and in some instances, can often fall below 20%.

Novum is taking contextual targeting to the next level. The company looks beyond the webpage, supplementing text-based and image-based contextual intelligence with real-world contexts, such as changes in stock prices, weather, sports events, and other real-world signals influencing consumer behavior. This allows us to understand the full context of advertisers’ audiences and to deliver targeting that is privacy-focused, accurate, and can deliver at scale.

Using Blockchain technology to create trust and transparency .

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But Novum's innovation goes much further than just eliminating data-privacy concerns. It addresses many of the critical problems of online advertising, like advertising fraud and a maze of intermediaries with questionable value add that can siphon over 70% of the ad budget.

Ad fraud ranges from complex technical tricks to purely disruptive user experience. A study from 2018 estimated that it costs advertisers and publishers approximately $19bn, and that number is probably closer to $30bn in 2021, given the continuous growth of online advertising since then.

For all participants to work in a trusted environment, there needs to be a standardized method of administering ad identifiers on an industry level, not just a platform level. While there are many ways to generate a unique ad identifier, the critical distinction is to make it universally verifiable and tamper-proof. This is where Novum's trustless protocol for digital advertising comes in. Key components are stored on a blockchain and use a unique combination of cryptography and distributed databases.

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Novum's works without relying on personal data and cookies. Instead, it targets people by reading contextual signals to achieve relevance while respecting privacy. As a result, users are given complete visibility into who is targeting them and why as well as full control over the ads they don’t want to see.

Novum intends to solve the great advertising dilemma and create a world where advertising sells products to people without turning people into products.

The Novum's team is as good as it gets. Novum's founders’ team has many years of experience in the AdTech space and has built up two advertising platforms since 2014.

CEO Martin Stoev, COO Adriana Taseva, CTO Damyan Stanchev, CFO Nishchal Basnyat, and colleagues have intimate knowledge of the advertising world and are not afraid of the big players. In 2017 they brought a class-action suit against Google that resulted in a payback of $ 75m to advertisers.

Novum is located in the USA, Switzerland, with a development team working out of Sofia, Bulgaria.

We are thrilled to support the Novum team on their journey to make a big dent in the online advertising world.

Visit novumpath.com to learn more.

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