A startup that adds a dose of Cash Cab to Uber and Lyft is getting a money pot of its own.
Octopus Interactive, a company that offers ride-hail passengers cash prizes for playing games and watching ads through backseat tablets, has raised $10.3 million from investors including the digital venture arm of Sinclair Broadcast Group and MathCapital, an investment firm tied to ad vendor MediaMath.
The cash infusion will aid the company’s plans to create a programmatic offering alongside the geo-targeted interactive ads it sells directly to brands like Disney, Walmart and Marriott.
The company has purposely limited its ad business to direct sales until now, according to CEO Cherian Thomas, forgoing high-volume automation for more control of the passenger experience and blue-chip brand deals to establish a reputation as a premium supplier.
But with growth accelerating in the months since a $3 million seed round at the end of last year, the startup decided programmatic tools would make buying easier.
“A lot of companies get out there, and they just do programmatic out of the gates,” Thomas said. “By going direct and by signing these massively attractive brands, we were able to give our platform credibility in the programmatic world.”
Octopus’ primary media output is games—trivia and simple puzzles with a chance to win up to $25 in prizes—but the screens also cycle through questionnaires, weather forecasts and maps. That content is interspersed with 15- to 30-second video ads that often involve direct response prompts or in-app promotions when not sold programmatically. Advertisers can buy sponsored quizzes, custom games and consumer surveys too.
Octopus isn’t the only venture attempting to monetize ride-share services’ backseats. Vugo also delivers ads via interactive tablet entertainment, Cargo outfits vehicles with miniature vending machines, and Steereo pays drivers to play certain music on behalf of record labels and artist managers. Bigger brands are also exploring in-car media in anticipation of a time when autonomous cars will create more demand.
“I think there’s a ton of potential in [the in-car ad space] since you have an attractive demographic to advertisers, and you know where they’re coming from and where they’re going,” said Harry Campbell, founder of the popular drivers resource blog Rideshare Guy and author of The Rideshare Guide.
It’s also not an entirely novel concept. Taxi TV screens have blared at bored cab riders for years as a means of offsetting the driver-borne cost of installing fare meters and card readers. But its ride-hailing equivalents have faced roadblocks in major cities like New York, where a judge recently upheld the Taxi and Limousine Commission’s right to ban in-car ads (with the exception of Taxi TV) after a four-year First Amendment battle; and, until a year ago, Chicago, which dropped a similar ban last December.
“The prohibition is the most direct and perhaps the only effective approach to prevent the harms of intrusive and annoying advertisements,” a New York appeals court judge said in the ruling, affirming passengers’ right to “peace and quiet” in the backseat.
On top of the regulatory issues, there are also growth pitfalls, Campbell said. “Like with all marketplace businesses, we’ve seen challenges in scaling the supply and demand side, since advertisers want hundreds of drivers in one large metro before they will commit to a campaign.”
Despite these obstacles, Octopus manages to log 750,000 touches per day and now operates in a dozen U.S. cities. Thomas claims its revenue has grown 500%, though the company declined to reveal concrete figures.
It helps that the company’s tech sets it apart from the average Taxi TV. Octopus uses the tablet’s camera to monitor whether or not the passenger is actually watching the ad, although Thomas emphasizes that it doesn’t store any of that visual information or perform any type of facial recognition. “Think of it as a silhouette,” he said. “And once an item is inside of that silhouette, a Google algorithm will say, ‘This, with a 95% confidence level, is in fact a person.'”
And the startup provides location fencing for ads so that brands can test run different creative in different areas or tag placements to a physical activation, heavily trafficked destination or landmark.
“What our brands will do most of the time is they’ll give us four different types of creative, and then we’ll run them all and give them the clickthrough rate that’s actually working better,” Thomas said. “But then we also have clients that say, ‘Look, when someone lands in LaGuardia [Airport], I want them to see this Tiffany’s ad, but if they’re landing in Logan Airport, I want them to see this Tiffany’s ad.'”
The operation ultimately rests on balancing the interests of the various parties Octopus is attempting to bring together. As the company adds more programmatic volume, it will have to weigh advertiser needs and those of riders who want a clean experience.
Drivers, meanwhile, get a free tablet, as long as they meet a certain mile quota plus a revenue split of up to $100 per month.
“We realized that when you create a platform, a three-sided marketplace where riders are happy, drivers are happy, and our brands are really happy,” Thomas said, “our goal is just to continue to scale.”