Vincent Cacace didn’t take the typical route into the virtual reality (VR) space. A self-described “hardcore analytics nerd,” he spent nearly two years working on data solutions for General Motors before launching ad tech VR startup Vertebrae last year.
“I was fascinated by the potential of VR, because you can measure the entire 3D content experience,” said Cacace, who is Vertebrae’s founder and CEO. “I was thinking, ‘That would be really interesting to a brand advertiser.’ And that’s such nerdy way to get into VR. And then I thought, that’s cool, let’s take a step look at what the real issues are right now.”
According to Cacace, the biggest issue facing VR is monetization, and Vertebrae aims to help solve the problem with its new advertising platform. Officially announced today, it’s already been put to use in private beta by studios, gaming companies, creative agencies and brands in projects ranging from a Taco Bell VR experience and an immersive trailer designed to promote Lionsgate’s upcoming “Blair Witch” movie.
The Vertebrae platform provides clients with engagement analytics including completion rates, gaze-based tracking and field-of-view (FOV) reporting, which not only help them optimize brand placement, but also provide insights into what works and doesn’t work creatively.
Vertebrae also announced today that it has closed a $10 million Series A funding round that will be used talent acquisition and product R&D.
VideoInk visited the company’s Santa Monica, CA, offices and spoke to Cacace about why VR is good for brands, consumers’ willingness to pay for VR content and how fast we should expect the VR economy to expand.
You believe that ad-based monetization is key to VR’s growth.
Cacace: With VR games and experiences, the production cost is 30 to 60 thousand dollars a minute. So what ends up happening is, you have these studios making content that’s 4–7 minutes long, and they’re charging transactionally five or six dollars for that experience. And what you see is, when people buy a Samsung Gear or get a Google Cardboard, they’re willing to pay for a couple of those, but the willingness to pay decreases. I use the parallel of renting a movie. Somebody rents a movie for five bucks, but it lasts two hours, versus buying something for five dollars that doesn’t have much replay-ability and only lasts a few minutes. You’ll do that a few times, but you’re not going to keep doing that.
If I’m an ad agency or a brand, why is VR is important to me? Does it provide more engagement?
Cacace: I think it allows a brand to tell their story in a really transformative way. Movie trailers are very, very effective ads because studios are really good at transporting people to new worlds. With VR, your whole product doesn’t have to be a storytelling thing, but now all of a sudden you have the opportunity to build this transformative experience where, whatever story you want to tell with your brand, you have a way to do it in a way that’s much more engaging and compelling, if done correctly.
There’s a fever to get into VR and AR in Hollywood, but there’s a confusion about how to go about it creatively. What is it like at with brands and advertising agencies? Are they eager to get involved or a little bit reticent?
Cacace: Up until about six months ago, you’d say, “We do VR advertising,” and they’d look at you and say, “Cool. What’s VR?” It was a huge education process. Now, it’s on the tip of everybody’s tongue; everybody’s boss’ buzzword is VR. A lot of times, the attitude is screw 360 video, we want to do full-blown VR. But when it comes down to reality, it’s better to say, let’s start with 360 video and see how we do with that. Because with 360 video, the distribution is easier at this point, because they can put it on YouTube and there are various aggregators they can go to. With the real-time rendered experiences, they’re generally distributed to a singular endpoint or shown at an event activation. And mobile VR — meaning VR that’s driven from a cell phone, like Google Cardboard and Samsung Gear and Daydream — those are more casual experiences and generally more suited to advertising.
How do you see the growth of VR progressing?
Cacace: I look at the cycles. If you look back to mobile, [mobile advertising and app monetization platform] TapJoy is a good example. Zero to 18 months, they had no revenue, then in the next nine months they had $150 million. Granted, we’re not going to see that same total landslide in VR, but I think there really is an opportunity to lay the groundwork with some formats and standards and underlying infrastructure in place. It’s going to take 20 million users of VR for advertising to become a sustainable revenue source, and we’re at least nine months away from that. Part of the reason for the large [$10 million] raise is we know this is going to take time. We want to keep the team relatively lean and not completely blow through our runway, so we can position ourselves to be in the right position when the time comes.