Trending: The buzz is building for Amazon’s HQ2

Downstream co-founders Salim Hamed (left, CTO) and Connor Folley (CEO) in their Seattle offices. (Downstream Photo)

The founders of Downstream are betting that Amazon’s somehow-stealthy surge in advertising revenue will attract lots of brands that need help making the most of their investment, and they just got some fresh cash to go make it happen.

Including the $120,000 that the 12-person marketing tech startup got after graduating from TechStars Seattle earlier this year, Downstream has now raised $1.925 million in seed funding from several different investors, including Semil Shah’s Haystack (its largest investor), Founders’ Co-op, Liquid2 Ventures (ex-49ers quarterback Joe Montana’s investment arm), Techstars Ventures, Unlock Venture Partners, Fabric Media and 9Mile Labs. Based inside Madrona Venture Group’s new Create33 office space in downtown Seattle, Downstream sells marketing software-as-a-service that helps companies figure out the tricky world of advertising on Amazon, said co-founder and CEO Connor Folley in an interview with GeekWire.

“Amazon advertising is very unique,” said Folley, an ex-Amazon marketing manager who founded the company last year with chief technology officer Salim Hamed, who worked in business intelligence engineering for Amazon Web Services. Unlike simpler search ads on Google or Facebook that direct traffic to a company’s own web properties, Amazon ads are generally looking to drive traffic to a product page. There are also lots of other complicating factors such as inventory management, price-matching, and third-party sellers that make it hard for newcomers to understand how best to take advantage of the Amazon Marketing Services platform.

Amazon Marketing Services has flown beneath the radar of the tech industry for the last few years, given the attention paid to Amazon’s retailing empire and market-leading cloud-computing service. But we got a pretty good glimpse at how much money is flowing through its advertising services last quarter, when Amazon reported earnings a few weeks ago and disclosed that revenue from its “Other” category — made up almost exclusively of advertising revenue — hit $2.2 billion during its second quarter, a 129 percent jump compared to last year.

Brands that have been spending money with Google and Facebook are now realizing they have a third option to reach consumers, Folley said. But Amazon is new to brand advertising, and brands are new to Amazon, which presents an opportunity for Downstream to work with brands to optimize their ad spending and scaling with automated tools that offer more control than Amazon’s basic dashboard of tools.

“Our overall thesis is that this is the next disruption in advertising overall,” Folley said. “Just as we saw Google and Facebook disrupt traditional print and television advertising by allowing brands to quantify ad engagement via clicks, Amazon and ecommerce advertising in general are disrupting the space again by allowing brands to actually quantify sales driven by their ads, which is really the holy grail of advertising.”

Downstream plans to hire several more engineers with the new funding in order to build new features for its product and figure out how to use machine-learning techniques to improve its ad-spending recommendations, Folley said. The company is working with over 150 brands but isn’t disclosing its partners just yet, he said.

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