Quattro Wireless Hits “Hockey Stick” Growth, Raises Additional $10 Million

Quattro Wireless of Waltham, MA, announced today that it has raised $10 million in new venture funding to help expand its mobile content and advertising network. Despite the withering economy, Quattro hit a “hockey stick” in customer acquisition and revenue growth in late 2008 and needs the money to invest in sales, marketing, and technology efforts and move into international markets, according to CEO Andy Miller. (See below for our Q&A With Miller.)

The Series C investment round, led by existing investors Highland Capital Partners of Lexington, MA, and Globespan Capital Partners of Boston, brings the company’s total funding to $28 million. Quattro closed a $5.75 million Series A round at the time of its launch in the summer of 2006, and a $12.2 million Series B round in September 2007.

Overall, the amount of content available for consumption on mobile phones is growing faster than the advertising market can keep up, leaving many mobile publishers without as many high-paying ads as they’d like to run. But the continuing expansion of major online brands into mobile channels—meaning, websites optimized for access from mobile browsers, as well as text messages and video—means that, in general, the mobile advertising business is one of the economy’s few bright spots, Miller told me in an interview this morning.

“We have a lot of great brands in the network…and that has brought us real reach,” Miller says. “It has helped us evolve into a premium network, with some super content. And the whole idea is that if you match content with specific targeting, you will get an engaged audience”—in other words, an audience that’s more likely to click on the ads shown to them—“which is part of what has made people excited about mobile.”

Bob Davis, a general partner at Highland Capital Partners, made a similar point in Quattro’s official announcement of the C round this morning. “Globally, mobile is increasingly attracting premium ad dollars because of its advantages over online,” Davis said in the announcement. “Within mobile, there’s a flight to quality and advertisers continue to choose Quattro’s premium ad network and targeting solutions over lower performance alternatives.”

The declining economy and the destruction it’s wreaking on investors’ portfolios caused a few complications for Quattro as it attempted to close the latest round, Miller says. But in the end the company was able to raise the funds needed to expand and market its services, which focus on converting existing Web content for display on mobile platforms, and serving up targeted, interactive ads alongside that content.

[A note to followers of the local mobile industry: Quattro Wireless chief technology officer Eswar Priyadarshan will be among the speakers at Xconomy’s upcoming forum on The Future of Mobile Innovation in New England, to be held April 7 at Microsoft’s New England R&D Center in Cambridge.]

Here’s the full text of my interview with Miller.

Xconomy: How hard was it for you to raise this latest $10 million, given the economic situation?

Andy Miller: We had an interesting ride. We closed the round a little while ago, and are just announcing it now. But we really went through the gamut. We had a lot of interest at a pretty high valuation, right before the market started to tank. Then we had some VCs getting nervous about advertising in general, but still liking our business. We were fortunate that we had lots of interest before the market crashed. After, it was just a change of terms, and how much ownership people wanted.

I think people’s investment profiles have really changed, but mobile advertising has been a good space. I don’t think anyone knew that 2009 would be such a great year; that despite the recession—and maybe because of the recession—this might really be the year for mobile advertising. Marketers are really looking at where their dollars are going, and can they do fine-grained targeting, and mobile has all those things. Now that a lot of folks are trying it, they’re finding that it really works. But we really didn’t have that data point from the investment standpoint—our hockey stick only took off in November and December. And the first quarter has been amazing so far.

X: Are you helped by the fact that you’re not just placing ads alongside mobile content, but you’re also helping companies produce that content so that it looks good on mobile phones?

AM: I think so. As we got started, we were a super-premium network, with high-end sites like NFL, because of the mobilization technology. Because of that, we got exclusive inventory. The vast majority of our network is stuff that we sell; no one else is selling it. So when it came time to approach agencies and other brands, we were able to offer an immediate premium publishers’ network. We have a lot of great brands in the network, as well as publishers that we don’t mobilize, such as MySpace, and that has brought us real reach. It has helped us evolve into a premium network, with some super content. And the whole idea is that if you match content with specific targeting, you will get an engaged audience, which is part of what has made people excited about mobile.

X: How are you being affected by the shortage of advertising that other mobile advertising networks have run up against?

AM: Everyone wants more ads, there is no doubt about it. We are not in the beginning days, but it’s still the early days. There are more and more brands coming in. We’ve been lucky that we’ve always been a premium network, so we’ve always been working with the bigger brands. On some level that has hurt us, because we don’t have an overwhelming amount of ringtone or mobile-consumable advertising, just because that’s not the type of market we are. For a while, that hurt our overall revenue story. But now the people leading the charge are the brand marketers.

X: How big is the company now, and what kinds of expansion are you planning?

AM: We have 70 people, most of them in Boston. We have about 12 ad sales people in New York. We also have ad sales professionals in Toronto, Chicago, Dallas, San Francisco, and Los Angeles. We have three big hires coming up—one is a pretty high-profile person on the sales and marketing side, and we are also adding to our targeting platform on the technology side. We will be putting someone in Europe as well, for our international expansion, which began in January.

X: And the international business has been good, I take it?

AM: There is a lot of regional inventory. We always had a lot of available international impressions, with plenty of international traffic, but Quattro was not filling it. Now we are. It was easy, in January, to turn on the switch and say ‘give us your international ads as well as your North American traffic.’ We were able to pick up literally millions of impressions per month.

Wade Roush is a freelance science and technology journalist and the producer and host of the podcast Soonish. Follow @soonishpodcast

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