Deal focus: Video++ targets digital dollars

Using computer algorithms to design advertisements for palm-sized screens is far removed from the glitz of Mad Men, the US TV show that captured the spirit of Madison Avenue in the 1960s. But this is the reality of the industry in China as big data and artificial intelligence increasingly shape the way that brands interact with consumers.

CV Capital, a Shanghai-based GP, is looking for opportunities arising from this paradigm shift. This was what drove its participation in a recent Series C1 round of funding for Video++, a Chinese artificial intelligence-driven advertising solutions provider. The company claims to have received more than RMB1 billion ($146 million) over the past five months. Investors include Alibaba Group, which led a RMB349 million round with Chinese AI services provider Face++, among others.

“The digital marketing and advertising industry is going through a period of explosive growth in China. The general trend of is for greater use of advanced technologies and more interaction between brands and the target viewers of ads made by these brands,” says Ray Huang, a director at CV Capital. 

The country’s digital marketing expenditure reached RMB388.4 billion in 2017, up 51% from a year earlier. It will exceed RMB630 billion by 2019, according to iResearch Consulting, which expects the rapid growth rate to be maintained as more advertisers use video to market products.

“This is why the budget dollars for traditional media such as magazines have been in decline, whereas it’s the opposite for mobile-based platforms.” Huang adds. “What advertisers care about now is if their adverts can resonate with viewers and if they are highly matched with the videos that the customers are watching. For instance, if one of the characters in an episode of TV series yawns a lot, then Video++ could push an advertisement for energy drinks to the viewers of the show.”

The five-year-old startup employs computer vision technology to recognize faces, places, objects and brands, as well as other elements in video content. Advertisers use its self-developed system, known as AI Scene Marketing Platform, to search content and establish how their products feature in videos. 

Video++ claims to serve 120 brands while the advertisements it has launched have achieved a repeat purchase rate of 80%. The company works with about two-thirds of domestic video streaming websites, which bring in a combined 420 million users every month. These include short video streaming app TikTok and Alibaba-controlled Youku Tudou.

Founded in 2007 as a boutique investment bank, CV Capital moved into fund investment and now covers sectors including consumer, healthcare and manufacturing. Its current focus is the fast-growing new economy companies. The GP expects to re-up for the Series C2 round for Video++, although there is no set date for completing the deal.   

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• Topics
• Greater China
• Technology
• Consumer
• Support services
• Expansion
• China
• TMT
• Growth capital