Incubator Y Combinator Takes Aim at Ad Industry

Don't bet on creativity, says partner Paul Graham

Paul Graham seemed to take on the role of tech ambassador to the advertising world this week when he spoke at Y Combinator, the startup incubator that he founded.

Y Combinator recently held its semiannual demo day for venture capitalists hoping to back its startups. On Wednesday, Graham was speaking to a different sort of audience, with representatives from digital companies and agencies who had come to see Y Combinator's ad-focused startups.

Not surprisingly, Graham placed a big emphasis on technology and measurement. For example, while he acknowledged that creativity still has a role to play in the creation of ads, he also argued that if advertisers have to choose between creativity and measurement, "bet on measurement." In part, he said that's because there will no longer be a single creative unit that's seen by everyone. Instead, advertisers should use audience data to present "a different ad to everybody."

"Creative will fuse with generated," he said.

Graham spoke approvingly of Netscape founder and venture capitalist Marc Andreessen's editorial, "Why Software Is Eating the World." If Graham was launching an ad startup today, he said he would make sure he was really building a software company that happened to be in the ad business, rather than "an ad company that has some programmers working for it."

That's not just the advice of a lone investor. You can hear echoes of Graham's stance in the way big Web companies don't want to say they're in the media business. And Graham is an influential figure, not just through his speaking and writing, but because he selects and mentors a small group of startups (63 in his latest class, chosen from thousands of applicants) twice a year, who often go on to become some of the best-known companies in Silicon Valley.

So do Y Combinator's startups reflect Graham's ideas? Well, there were certainly a lot of data and measurement companies on-stage Wednesday, such as Optimizely, which helps companies test audience response to websites, and MixRank, which crawls the Web to bring competitive data to online advertisers. Others try to bring new technology to the industry, like Tagstand, which can use Near Field Communication to integrate real-world objects into online campaigns, and Paperlinks, which wants to do something similar with QR codes.