Mobile Marketer Swirl Networks Raises $18M as Ad Beacons Beckon

Hilmi Ozguc, founder and CEO of Swirl Networks, has thought for years that wireless devices that push ads to shoppers’ smartphones while they shopped are the future of marketing and retail. Now, some of the most influential names in digital marketing and media seem to agree—including Twitter.

Swirl, which is based in Boston, announced Thursday it has raised an $18 million Series C round. The money comes from strategic investors including Twitter Ventures, Hearst Ventures, and SoftBank Capital, as well as venture capital firm Longworth Venture Partners. The new round brings the total raised by Swirl to $32 million.

Swirl makes small devices called beacons that stores can install to beam messages to shoppers using Bluetooth Low Energy or Apple iBeacon technology. The company also creates the software needed to run the beacons, connect them to smartphones, and track shoppers as they move around the aisles and sales racks inside stores. Swirl goes a few steps beyond that and has created software its customers can
use to create automated ad campaigns narrowly tailored to customers and focused on their location.

The idea is to send ads and coupons to shoppers electronically while they’re in shops—and just as they’re approaching the right aisle or display. It’s part of a new category of advertising that marketers and analysts call “mobile-influenced retail store sales,” and they’re understandably excited about it. Deloitte Digital and eMarketer estimate that such sales will total $689 billion in 2016, dwarfing the $98 billion spent through mobile commerce and even the $393 billion spent through e-commerce.

That broad category includes deals customers learned about through social media apps before they start shopping, but the ideal scenario is to send customers ads just as they’re about to make a purchasing decision. The hope is the right offer at the right time can seal the deal or convince someone to make an additional purchase. That’s where Swirl’s promise is for store owners, Ozguc said.

“They’re looking for solutions that let them engage customers inside the store,” Ozguc said. “Companies like Twitter are great at helping retailers drive people to their stores, or helping them sell products online, but retailers still do over 90 percent of their business inside bricks-and-mortar stores. So they’re looking for ways of engaging consumers in specific aisles or specific departments of their stores.”

Some experts believe beacons could be a big deal soon. BI Intelligence estimated 85 of the top 100 U.S. retailers will be using beacons by the end of 2016 and that they will influence $44 billion in retail sales.

Ozguc said Swirl has beacons in thousands of stores like Lord & Taylor, Timberland, and Urban Outfitters, and Marriott has installed them in some of its higher-end resorts. The past few years have been spent developing and testing the product, and now Swirl is ready to take advantage of what Ozguc sees as a long head start, just as the industry realizes the potential.

“This market is beginning to take off—we’ve got a lot of interest from major retailers and brands. There are a lot of retailers that want to do this, and we want to be able to jump on it and tap into that demand,” he said.

Because Swirl was among the first to design and manufacture beacons, it’s possible to get caught up on the hardware, but Ozguc said that’s the wrong way to look at the company. Swirl really is a software company he sees as analogous to DoubleClick, the Google-owned company that dominates Internet advertising.

Swirl’s focus now is on creating software that will give marketers “a blank canvas” to create and run in-store mobile marketing campaigns, Ozguc said. A key part of realizing that vision could be Twitter and the other strategic partners that are part of the new funding round.

Companies could incorporate Swirl’s beacons and software into their own mobile apps, he said, but the most promising idea is to link Swirl with widely used third-party apps, such as Twitter or ESPN’s mobile apps (Hearst owns 20 percent of ESPN).

“Without that, it’s a nice little program you can run on your own app as [customers] go into your stores,” Ozguc said. “You’re only reaching your most loyal customers, which is important, but you’re not reaching everybody. With an app like Twitter, you’re reaching everybody.”

Such partnerships could open up lucrative new revenue streams for the third-party companies, Ozguc said.

Ozguc said Swirl will use the new cash to grow in a hurry. The company has about 30 employees who are predominantly in the Boston area and have focused on product development. Ozguc said he plans to triple Swirl’s headcount with an emphasis on building up the sales and marketing teams.

But engineers and software developers won’t be overlooked. Ozguc said “there’s a long list of new capabilities” Swirl wants to develop to take advantage of trends such as wearable devices and mobile payment platforms.

In the meantime, the advertising, retail, and digital publishing industries also will need to make progress. Ozguc believes Swirl has cracked the technological challenges to make beacon-based mobile marketing work. Now the team has to come up with the best and most “judicious” way to use the technology to maximize sales while keeping customers happy—and not bombard them with too many ads.

“We’re just scratching the surface of this stuff. As technologists, our job is to create the technology. It’s going to be the marketers, the business people, the creative people who figure out the cool use cases,” Ozguc said.

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