Israel is small, its market is even smaller, prices are high and wages low. In other words – best soil for that kind of innovative thinking that led to the wide field of IT that has been dominating the Israeli economy for years now. The big question seemed – is the start-up scene solid enough to make it to the next stage? To cut a long story short: Yes, it does seems so, out of different reasons.
The first two cornerstones were time and human resources. Even though Asia is cheaper, it still lacks infrastructure. Berlin’s digital economy is not yet strong enough. And London is too expensive for young entrepreneurs. ‘Israel and the Silicon Valley are established landmarks,’ says Kevin Baxpehler, investor and head of the German Pro7/Sat 1 office in Israel.
While Israel doesn’t target the domestic market, international Venture Capitalists and Accelerators have been investing here for years now. This catapulted the market forward, more and more research centres and global enterprises opened offices – and bought Israeli technology. Prices rose, the fear of a bubble grew alongside and the big players started to sound like the local Who-is-Who: Amazon, Microsoft, Google, SAP, Philips, Software AG, Facebook, IBM, Cisco, AOL, Dell, Ebay, Yahoo and Intel with more than 10 000 employees in Israel.
Entries and Exits
However, over time, the exit rate with incredible increases of up to 15% more in 2015 compared to the year before seemed about to decline. Only, a certain niche within the IT sector was considerably growing. More than that. ‘This country is on the way to become the world leader for pragmatic advertisement,’ says Nimrod Kozlovsky of Jerusalem Joint Venture Partners.
What is pragmatic advertisement?
To deal with the growing amount of content on the internet, people, companies and broadcasters need to personalize content in order to stay competitive. Different personalized articles on the homepage depending on the preferences of the user and recommendations for further articles that might interest the user create a new closed circle. And while content is the defining asset of interest for returning clients – customer data has become the new gold of the industry. With rising value.
The other new development is coming from Asia, namely China. The far-eastern country found its way into Israel – even though there haven’t been major investments so far, every big player, such as Tencent, Alibaba or Baidu have been networking over the past twelve months.
Bye bye traditional media
Pragmatic advertisement as a whole new field of action plus the opening of a new large market highlight the fact that the global media markets are about to change: traditional publishers invest in e-commerce projects, sales giants like Amazon are active in television. New media like Buzzfeed or Playbuzz show drastically that new digital channels are business models on mobile internet devices. It is basically only a matter of time until Netflix and Facebook videos will be watched more than traditional television. According to latest Facebook figures, more than 100 million hours of videos are watched – daily.
Solid virtual reality
It seems for now that Israel has managed to escape a technological bubble and made it to the more solid grounds of after seed-stage ideas and a weathered and experienced workforce behind it. Worries about a bubble bursting soon don’t seem to be justified anytime soon and the development of new media and latest technologies is faster than ever – which means: Game on.