Interview With Nir Eyal, CEO of AdNectar

-Nir Eyal Headshot-AdNectar is one of the most interesting advertising companies that currently service the Facebook platform as well as other social platforms. What makes them unique is their laser focus on virtual gifts. When I first met them in person earlier this year, they were one of the presenting companies at a conference in New York and I had a chance to learn more about what their company offers. AdNectar is in an interesting position in that they are competing directly with companies like Facebook who currently offer branded gift campaigns outside of the platform.

I’ve been trying to get an interview with the company for a couple months now but just recently got the opportunity. Below is an interview with Nir Eyal, CEO of AdNectar.

Nick O’Neill: What is AdNectar and how did it get started?
Nir Eyal: AdNectar specializes in deploying branded virtual items across top social networking properties and applications. Virtual items are images sent to communicate a message between users of social media. It can be in the form of a virtual gift, an e-card, or a product placement. We offer our brand clients a way to integrate their message into the social networking experience in a way users actually appreciate. Advertisers are rewarded with consumer-spread advertising which has proven to be a highly-effective way to reach this audience. Our publishers, social networks and applications, integrate our API in order to deploy AdNectar’s sponsored virtual items and are paid from the campaign proceeds.

AdNectar was born out of a class project at the Stanford Graduate School of Business in January of 2008. The founders are all avid social network users and we wanted to see if we could discover the optimal way for advertisers to reach consumers in a way that felt authentic and organic, and yet was scalable to a mass audience. We’re a very data driven company and we were surprised as anyone to discover that the most effective form of advertising was branded virtual items. It’s been full-steam ahead since our test results revealed that virtual items are the way to go.

Nick O’Neill: What’s your role at AdNectar and what does your job consist of?
Nir Eyal: As CEO, my main responsibility has recently shifted from verifying and testing the efficacy of our ad unit to telling to world about our results. We’ve run several sponsored campaigns now and we can unequivocally say that branded virtual items are a very effective way to reach social networking audiences and influence their purchasing decisions. It’s now my job to share these exciting results.

Nick O’Neill: What are the most successful types of applications in your network?
Nir Eyal: All our publishers, including applications, have virtual items functionality already built-in. We simply swap their generic items for branded ones by using our API. Our API enables us to provide our customers with very detailed information about the demographics and viral spread of their virtual items. The most successful publishers in our network reach a large audience and keep their users coming back regularly to interact with their property.

Nick O’Neill: Can you say what types of results developers are seeing from using your network?
Nir Eyal: We originally started AdNectar to serve brand advertisers but we’ve now found that our publishers are greatly benefiting from integrating our system. In addition a new revenue source and the data our API provides, it turns out users actually prefer branded over generic virtual items. This isn’t surprising in that users love brands in the real world so why wouldn’t they love them online as well? However, this is unique in that at the end of the day, our virtual items are ads. What other advertisement can draw users to a site and increase their enjoyment and usage of the application?

We’ve seen our publishers experience an uptick in traffic and gift-throughs simply by integrating our campaigns. In fact, some of our publishers have seen a significant percentage of the virtual items exchanged on their property, up to a third, are AdNectar sponsored items. These results drive more traffic and ultimately generate more revenue for our publishers.

Nick O’Neill: What are your thoughts about Facebook entering the application advertising space? Are you concerned that they will eventually become a direct competitor?
Nir Eyal: Facebook has really paved the way for us and we owe them a debt of gratitude. They pioneered the branded virtual item through their Gifts app and have done a great job generating interest among advertisers. Given the miniscule percentage spent on interactive advertising, let alone social networks, I think our competitor continues to be traditional advertising and boring banner ads. Facebook is doing their part to educate media buyers that they can’t keep buying the same ads over and over again and expect different results. They’re moving the market in the right direction and that’s good for everyone.

Nick O’Neill: How many platforms are you on?
Nir Eyal: We deploy on over 40 of the top social properties, mostly consisting of applications on Facebook and MySpace. However, we also deploy on dating sites, mobile social networks, and casual games.

Nick O’Neill: What are some of the most successful campaigns AdNectar has launched?
Nir Eyal: We recently completed a campaign for Godiva chocolates and sent over 1 million virtual Godiva boxes in just two weeks through 5 applications on Facebook. The campaign also lifted the average user’s purchase intent by over 20% according to third-party verification. This is remarkable when you consider that the average online campaign only generates a purchase intent lift of 2%. However, when users are allowed to voluntarily pass along branded items, they spread it to their friends who are most likely to appreciate the item. Users see it as something fun, that they enjoy sharing, which is great for the publisher, the brand, and the user.

Nick O’Neill: How long has the company been around?
Nir Eyal: The founding team has been working together since January 2008 and we received our venture capital round in August of 2008.

Nick O’Neill: Have you considered working directly with the social networks?
Nir Eyal: We already work with several of the social networks and are in talks with some of the larger properties as well.

Nick O’Neill: Do you ever provide custom gift applications to brands or do you always partner with developers?
Nir Eyal: No, we don’t create applications and we always partner with developers. From the founding of the company, we decided we didn’t want to be in competition with our publishers and would not create our own apps. We want to place branded items where users are already spending time online.