Over the past few quarters, we’ve been thinking more about the online advertising investments that we’ve made over the last three years, which include AdMeld, Lijit, Trada, Medialets, Mandelbrot Project, Triggit and Integrate. While this is about 20% of our active portfolio, we’ve never considered AdTech a theme. Instead, we have included these companies in our Glue theme since each company is an intermediary technology – although in each case applied to AdTech.

While this underlying “glue” to our AdTech investing has served us well, we’ve decided to formalize this and introduce a new theme (or really sub-theme) that we are calling Adhesive, which for us is the guiding set of principles behind our investments in online advertising. To be clear, we’re not breaking out online advertising as a theme of its own – we still think of it as a subset of our Glue investing. Like all of our themes, Adhesive isn’t meant to be a rigid description of our investment in a discipline, but rather a guide to our thinking and a set of overarching concepts that drive our investment in a particular area.

The landscape of online advertising is a confusing one. Many people have seen the well traveled “Display Advertising Technology Landscape” slide prepared by Terry Kawaja (originally of SGA Savvian and now his own firm, Luma Partners) that is essentially a mess of company logos, somewhat loosely arranged by the broad categories which most easily label what each is doing. You’ll notice a handful of Foundry companies on the slide below, along with all of the major online agencies and platforms as well as hundreds of other companies that you’ve probably never heard of. Online advertising is a cluttered landscape and, from an investment perspective, picking out those companies that we believe have real potential vs. those that are simply interesting (or not so interesting) point solutions can be a challenge.

There are several key attributes we look for in our search for great Adhesive companies. They are:

• Scale. Scale is key to many of the companies we invest in across the portfolio, but scale in Adhesive is at once more massive and more important. As such it is one of the first filters we apply when looking at potential advertising investments. In a business that makes money pennies at a time, you need to have the ability to quickly generate a lot of pennies.
• Inertia. Related to scale is the ability of a company to quickly gain uptake in the online advertising ecosystem. The ability of Adhesive companies to insert themselves into the data stream, which existing marketplace players will enable and encourage this, and exactly who the ultimate beneficiaries are (not to mention who is being disintermediated) are key components to a company’s ability to gain rapid market share and scale.
• Margin Dynamics. Everyone who plays in and around AdTech understands the concept of gross vs net revenue. And while many Adhesive businesses trade margin for scale, we pay close attention to the ultimate margin dynamics of the businesses in AdTech in which we look to invest. We’re particularly sensitive to customer concentration issues related to margin – aggregating demand from a small number of sources, for example, which may lead to significant margin pressure.
• Performance. While a large amount of online advertising continues to be purchased on an impression basis, we believe that ultimately the success of advertising campaigns – and as a result the technologies that are implemented to enable those campaigns – is measured in terms of performance. Everyone contributing to the chain of events that result in an ad being served is ultimately at the mercy of the effectiveness of their product.
• Technology Innovation. The pace of technology innovation in AdTech is startling and the ability of a company to stay ahead of this innovation curve is an important consideration in how we think about Adhesive companies. Many of the companies in which we’ve invested were pioneering new technologies into this market and as a result became market leaders in their segments. But even these initial leaders need to have the ability to continually innovate and push their products and markets forward. Today’s latest technology in AdTech is tomorrow’s legacy — often without a path to whatever is next. We try hard to find companies with the staying power to remain in front of the market.

In a future post we’ll talk in more detail about how some of our existing Adhesive investments have met the challenges above, and some of the more specific attributes of their businesses which originally drew us to them.

Launched in June 2009, Urban Airship has found early success providing mobile developers with tools to optimize their applications, including easy-to-implement products for mobile messaging and content delivery and authorization. To date, Urban Airship has delivered more than 1 billion mobile messages across the Apple iOS, Android and Blackberry platforms. Many of the top brands in entertainment, media, publishing and gaming depend on Urban Airship to ensure their mobile marketing initiatives are profitable and scalable.

Urban Airship’s line of real-time messaging products, AirMail, helps businesses significantly increase user engagement with their brand and deliver more value to users by delivering push notifications. AirMail has been big business for Urban Airship since it gained early market traction by powering push notifications for Tapulous’ runaway hit app, Tap Tap Revenge, the first app in Apple’s App Store to be enabled with push. Since then, the company has helped popular mobile app publishers such as Universal Entertainment Group, Dictionary.com, LivingSocial, and Gowalla find success — and increase revenue — from their mobile apps. Most recently, Verizon Wireless named Urban Airship its preferred provider of push notifications across the entire Verizon developer network.

Urban Airship’s in-app purchase product, StoreFront, provides users with easy one-click purchases through Apple’s iTunes, thus opening up a new mobile channel for selling existing content. StoreFront also includes functionality to enable subscriptions through the iTunes interface, a much-needed solution to publisher challenges in managing and authenticating user devices for ongoing content access.

Urban Airship reminds us a lot of what we love about our previous investment in SendGrid, (but for the mobile ecosystem) sprinkled with some of our latest theme Distribution which is epitomized by our investment in BigDoor.

The company is located in Portland, OR which is a new geography for us, but with familiar and well-respected partner True Ventures, whom we’ve had the pleasure of working with on several other companies.

We will continue to do exactly what we have always done: invest in seed and early-stage investment opportunities in the software and IT space that are located across the United States. We’ll also continue to pursue a strategy of Thematic Investing that has served us well over our investing careers.

We very much look forward to working with another group of great entrepreneurs and portfolio companies.

- Jason, Ryan, Seth and Brad

When we speak about the history of Oblong, we tend to start with the movie Minority Report, where John was Steven Spielberg’s science advisor.  If you haven’t seen the movie in a while, check it out.  It is one of the only movies that we’ve seen that holds up in its vision of the future even 8 years later.

And while there was a working prototype of the system during the time the movie was being filmed, that was hardly the beginning.  In fact, John had worked at the MIT Media Lab to create what was called The Luminous Room. 

The Luminous Room was Oblong’s g-speak platform version 0.5 (perhaps).  When we first considered investing in the company, we were amazed to see how long John had been thinking about the larger issues of GUIs and the data implications of operating systems.

If you are interested in seeing John’s early work, the Luminous Room link has videos which will show you the building blocks of what we think is one of the most interesting companies that we’ve ever invested in. 

With our HCI thematic investing strategy, we think often about the future ways we’ll connect with computers.  We aren’t the only folks who think the mouse and keyboard are dead.  If you want to read what John thinks of the future of UI design, read the article. 

Sifteo is a game-platform development company that has developed “Siftables” the world’s first table-top gaming platform. Siftables are sets of cookie-sized computers with motion sensing, neighbor detection, graphical display, and wireless communication capabilities that act in concert to form a single interface: users physically manipulate them by piling, grouping and sorting to interact with digital information and media.

As cool as this sounds, it’s not nearly as cool as the company’s TED talk and demo below.

Sifteo is another investment in our Human Computer Interaction theme along with Emsense, Oblong, Organic Motion and Smith and Tinker.   

Founded by David Merrill and Jeevan Kalanithi, out of the MIT Media Lab, we believe that Sifteo is developing the next generation popular gaming platform that will go beyond the early successes of the Nintendo Wii and Apple iPad/Pod/Touch. 

The Sifteo platform will have an easy to use SDK that will allow developers to create and sell games on the system.  The tools includes a gesture recognition system that abstracts user actions, such as grouping and sorting, into events the designer can easily attach to software events. Overall, the system radically simplifies and speeds game development.

Most importantly, Siftables are fun.  The embedded video shows but a couple of possibilities, but we really look forward to seeing all the of the creative content that is developed on the platform. 

We really look forward to working with Jeevan, Dave and the rest of the team, including returning investors and our friends from True Ventures. 

“Organic Motion is a global leader in the development of breakthrough markerless motion capture and analysis technologies. Our software products utilize state-of-the-art computer vision techniques and high performance graphics hardware to deliver an industry first set of production, entertainment, and research tools for use in a variety of industries.

We are seeking to expand our Manhattan, NY based engineering team with applicants who have a solid mastery of practical C/C++ development skills combined with strong analytical and problem solving skills in a variety of areas including computer vision, computer graphics, networking, pipelining and optimization, biomechanics, and more.

We are looking for candidates having 2 or more years experience in a professional development setting in addition to a PHD, Master’s degree, or an exceptional Bachelor’s.

Required skills include some of the following:

* C, C++ (required)

* Stereo vision – 3d reconstruction / mesh creation & optimization 
* 3D programming (DirectX, OpenGL, Shaders, HLSL, CG, GPU) 
* Multi-threaded / multi-process programming

* Networking – sockets, RPC, streams, low latency hardware

* Computer vision / image processing

* Low-latency / real time 

Secondary skills:

* Game development
* Distributed systems
* Motion capture creation / analysis 
* Physics

* Scripting languages (Python, Lua, Bash, Perl, etc)

* UNIX, Linux

* Mathematical modeling, filtering, signal processing
* Biokinematics
* GUI development (MFC, Qt, WxWidgets) 
* Autodesk 3d animation suite API

Responsibilities include: 
* Optimization (single-core / multi-core / multi-process) 
* Algorithm development (raw 3D data analysis) 
* Application development (server and client side)

* Code maintenance and troubleshooting
* Supporting conferences and shows (past shows: SIGGRAPH, GDC, CES, I/ITSEC)

This is an exciting opportunity to join a dynamic team with potential for rapid growth and access to a great deal of compelling technological resources. We are looking for individuals with fresh ideas and the skills to put those ideas to the test. This is a unique opportunity to have a major impact on a growing company!

If you are an excellent candidate, then please reply with your resume in Word or PDF format to careers@organicmotion.com. A code sample would also be a big plus!”

This investment is part of our human computer interaction investment theme, along with previous investments Oblong and Smith and Tinker.

We got excited in Organic Motion after we saw their technology which allows computers to see objects without using the traditional approaches of body suits and or ball markers attached to the subject. The limitations of this approach are significant as tracking is crude because these systems are limited to a number of specific points and a large number of movements can’t be deciphered or tracked. Furthermore, the setup process is time-consuming and costly.

Organic Motion’s solution is the first commercial markerless motion capture system. The company created an advanced system which looks at people in a manner very similar to the way the brain processes human vision. Significantly, the Organic Motion system does this all using off-the-shelf and readily available low cost hardware.

The company already has customers in the retail, military and education markets and was founded by CEO Andrew Tschesnok. Along with President Jonathan Rand, we look forward to a long and rewarding partnership with the company.

The genesis of the idea was to get our three portfolio companies in our Digital Life Theme together – namely Cloud Engines, Memeo, and Pie Digital – for a day or two of knowledge transfer and collaboration. After mulling the idea around, we decided to extend the gathering beyond our own portfolio and invite executives and board members of venture-backed and public companies that play in the broader Digital Life universe.

On the first day, we hosted board meetings with our portfolio companies followed by a dinner as a group at Restaurant 4580, one of our favorite places to enjoy an evening with a medium sized group. We began day two with a closed session where our three companies got together and talked about topics and issues relevant to each of them. In the second half of the day, we had an open session that included executives from companies as diverse as Apple, Comcast, CBS, Bug Labs, Boxee, EchoStar, Liberty Media, Sling Media, Sonos and Qwest. This afternoon session was organized around a series of interactive panels dealing with topics from building extraordinary consumer devices, marketing new products, and working effectively with strategic partners.

The day was concluded by a fireside chat with John MacFarlane, CEO of Sonos and Blake Krikorian, founder of Sling Media, moderated by Stewart Alsop. The discussion of what the digital living room would look like in five years continued well into what was a fantastic dinner at 14^th Street Bar & Grill.

We had a great time hosting this superb set of people in Boulder. In addition to plenty of insights, we had a lot of fun together participating in a wide range of conversations that wouldn’t have happened at a larger conference. We’ve now got focused events covering three of our four primary themes – we expect it’s just a matter of time before we do something around our Human Computer Interaction Theme.

I’d just finished reading A Semantic Web Primer and was thinking about the various semantic web protocols that were the basis for our Implicit Web theme such as RDF, OWL, and XML.  At some point I realized that the bucket of Internet and web-related protocols that we have been investing in since the mid-1990’s included SMTP, RSS, XML, and of course HTTP.

During one of our weekly partnership lunches, we talked about all the various protocols that we liked and realized that “Protocol” was a great label for our theme that includes Email, RSS, and Implicit Web.  So – from this point forward, our new theme “Protocol” will join the three other core themes we are currently investing in: Glue, HCI, and Digital Life.