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Unlocking Growth in 2023


State of the Israeli B2C Ecosystem


Navigating challenges, expanding opportunities: Insights and trends from Israel's thriving consumer-facing industry. A comprehensive review of the B2C ecosystem's performance and future prospects.cking Grpow

report by Meta (Facebook)

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Opening notes

From a branch of the startup nation that virtually didn't exist 15 years ago, through to the first seeds planted by gaming companies, to a thriving industry riding on the waves of rising digital consumption - the Israeli B2C industry is nothing short of a success story. Reaching roughly 30% of the tech industry today, B2C is no longer a foreign concept to Israeli entrepreneurs, product experts, marketeers and investors. In fact, it may be the industry that finds the right opportunities for growth even in a time of crisis.

I know it's not trivial to talk about opportunities during this period, but as the Disruption Nation - this is what we do best. In times when reality is perfect, we as Israelis often can't find the cracks through which to break in and do something different. Instead, we're are at our best when reality requires innovative and out of the box solutions. When we have to break the rules and re-build, we have the ability to bring the same creativity we put into our products and technologies to cracking efficiencies, org structure and financial models. As scarcity drives innovation, this challenging period might actually be an opportunity to shine.

So for this upcoming period, our challenges are around maintaining profitability and efficiency, while continuing to innovate and drive growth. But if there’s an industry that can work through this delicate balance, it's the Israeli B2C industry.

In this report, you'll find our perspective on the opportunities that lie ahead, across all verticals, and the knowledge and tools you and your companies will need to seize them. As a sworn optimist, I truly believe this global economic crisis will make all of us better, stronger and more resilient and, despite all of its challenges - it will be a moment of growth.

Adi Soffer Teeni, VP & GM Israel

Despite a turbulent year, Israeli consumer-first startups showcased strong resilience, both in growth and profitability.

US GDP growth returned to a positive outlook in 2022: 3.2% in Q3 and 2.9%
in Q4.

In Q4 ‘22, the number of people daily using Facebook, Instagram and WhatsApp was at its highest ever.

E-commerce

Non-VC backed companies have the opportunity to win market share

Read chapter →

Digital Health

We’re seeing more bootstrapped digital health brands emerge

Read chapter →

Entertainment and Media

Publishers are looking to optimize revenue from programmatic ads

Read chapter →

Consumer Tech

Product diversification and data-driven decision making is increasing

Read chapter →

Gaming

AI and the metaverse are fueling the Israeli ecosystem with innovative ideas

Read chapter →

Fintech

Challenging macroeconomic conditions have pushed the industry towards a more conservative marketing approach

Read chapter →

Self-Serve B2B SaaS

Primary KPIs are now customer acquisition cost and net dollar retention

Read chapter →

Unlocking the Creative Machine

A recent Meta survey found that top performing advertisers create 50-70 new ads a week

Read chapter →

Unlocking the Creators Economy

93% of Israeli B2C startups leveraged creator marketing in 2022

Read chapter →

Unlocking the Reels Opportunity

Reels is now seeing 140 billion plays across Facebook and Instagram every day

Read chapter →

Unlocking the Future: Metaverse

If metaverse adoption began in 2022, then its estimated total contribution to global GDP in 2031 would be $3.01 trillion

Read chapter →

The evolution of consumer-first digital companies in Israel

The landscape of consumer-first digital companies scaled massively over the last few years.

From a startup nation that mainly focused on B2B and mostly B2E (such as cybersecurity), we’ve seen a growing share of global consumer focused brands out of Israel.

2023 is shaping up to become a year of sobering, in which companies and investors alike are focusing on healthy unit economics, agile operations and ROA (instead of CAC) based growth marketing spend.

Ron Tamir
Founding Partner, Kaedan Capital

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B2C landscape in 2023: Fast facts

25%


Out of ±9,000 startups in the startup nation, consumer-first startups accounted for more than 25% of the ecosystem with over 2,500 companies. Source: IVC

35%


In 2022, 35% of newly founded startups were consumer-first companies (up from 30% during 2018-2021). Source: IVC

36%


In 2022, consumer-first companies accounted for 36% of unicorns and 24% of exited companies (public and acquired). Source: IVC

$1.7B


In 2022, B2C companies raised $1.7 billion (80% growth vs. 5 years ago) in an average deal size of $8 million. This accounted for ±10% of funds raised in Israel ±18% of deals. Source: IVC

$2B


Self-serve B2SMB companies raised $2 billion in 2022 with an average deal size of $23 million and accounted for 11% of deals in 2022. Source: IVC

Consumer-first verticals in Israel: Vertical map

10 years ago there were a few large consumer-first startups in Israel, mainly just gaming companies. Over the last few years, as this landscape evolved, new industries emerged as seen in the verticals map below.

Digital Health

Fintech

Gaming

Entertainment & Media

Commerce

B2B SaaS

Consumer Tech

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~300

Estimated industry size

~100

Estimated industry size

~200

Estimated industry size

~50

Estimated industry size

~300

Estimated industry size

~200

Estimated industry size

~300

Estimated industry size

“Every year should be the year of efficient growth, not just 2023. However, just as overspending to buy growth at all costs was a mistake in 2020 and 2021, so is underinvesting in the down markets of 2022 and 2023. The strong get stronger and the weak get weaker in tough markets. Now is the time to take market share and now is the time to invest in efficient growth.”

Alan Feld
Co-Founder and Managing Partner, Vintage Investment Partners

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Our annual ecosystem survey

At the end of 2022, we ran a survey [1]. We wanted to dig deeper into the latest trends from 2022 and the ecosystem sentiment towards 2023.

Despite a turbulent year in 2022, consumer-first startups in Israel showcased strong resilience, both in growth and profitability:

  • 80%

    of companies surveyed reported positive growth YoY, despite the turbulence of 2022 and a high base of 2021.

  • 66%

    of surveyed companies reported growth of over 20% YoY.

  • 82%

    of companies that reported YoY revenue growth, also reported higher profits vs. 2021.

  • 40%

    of companies reported higher profits by more than 20% YoY vs. 2021

2023: The year of efficiency

While in 2020-2021 growth was the name of the game, with digital transformation that occurred given the tailwinds behind COVID-19, 2022 brought a wind of change, with companies shifting from a growth mindset to profitability focus.

Only 36% increased marketing budgets during 2022 vs. 2021.

For 2023, only half of the companies reported they will focus on growth:

Efficiency improvements will be based on a mix of measures:

Reducing customer acquisition cost (CAC) is top of mind - 63% of companies mentioned they’re worried about CAC:

Over the following chapters, we'll focus on the main opportunities to drive efficiencies in order to balance scale and growth with profitability.

“In 2023 and continuing through the next few decades, Israeli tech companies will aspire to earn a spot on the distinguished Fortune 500 global enterprise list. These companies will focus on sustainable growth with a positive impact on our society and environment. They will aim to scale bigger than before – exceeding $1 billion, $5 billion, and even $10 billion in annual revenues – making Israel one of the most vibrant and attractive innovation economies on Earth.”

Chemi Peres
Managing Partner and Co-Founder, Pitango

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Funding trends

Year 2021 set a record breaking in investments in Israeli tech.

However, throughout 2022 we saw a decline by 43% in funding and 15% in number of deals.

When looking at funding trends by half, and considering the overall drop in 2022

We're actually at an even lower run rate, as historically H2 has been a stronger half.

The sharpest decline has been in investments in companies in growth stage, while early stage investments are less impacted.

Funding trends

Investors in 2022 shifted more focus on profitability. 45% of investors are attesting to an over 25% change in profitability goals:


By how much profitability goals changed in 2022 vs. 2021 among your portfolio companies?

Source: Meta Investors Survey, 2022


Investors also reported that they focused more on their portfolio companies in 2022 rather than new investments.


In 2022, how have you allocated your time?

Source: Meta Investors Survey, 2022


Valuations were dramatically impacted in 2022: 60% of investors estimated valuations of their portfolio companies were down 20-50%.

Source: Viola 2022 EoY Report "Israel's High-Tech Ecosystem", p. 25



2023 sentiment: It’s an investor’s market, but not an easy setting for VCs to raise future funds

In the next 2-3 years, you estimate it will be:

We will continue to see a decline in valuations over the coming months. Since the focus of B2C investors is on profitable unit economics, it is critical to raise money as soon as possible, once positive KPIs are achieved.

Danny Cohen
General Partner, Viola Ventures

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US consumer trends

2022 was a challenging year:

  • US inflation was at its highest level in 40 years, reaching 9.1% in June 2022. However, it improved later in the year, ending at 6.5% in December 2022. (source: US BEA)

  • Consumer confidence declined significantly during 2022 amid rising prices and concerns of a looming recession.

  • Consumer savings were at their lowest level in decades. In December 2022, the personal saving rate (i.e. the ratio of personal savings to disposable personal income) in the US amounted to 3.4%, down from 7.5% in December 2021. (source: US BEA)

There are some signs for cautious optimism, but it remains to be seen how 2023 will shape up:

  • GDP growth returned to a positive outlook with 3.2% in Q3-22 and 2.9% in Q4-22 (source: US BEA)

  • The US labor market remained strong with a low unemployment rate of 3.5% in December 2022 (source: US BEA)

  • Consumer spending (in real value) in the US remained strong in 2022 (but consumers did dig deep into their savings) (source: US BEA)

  • Retail sales were up 9.2% YoY during 2022 vs. 2021 (source: US Census)

Industry overview

Over 300 startups with global presence make up the Israeli e-commerce landscape. It's made up of the following categories:

6%

Fashion

10%

Jewelry

25%

Beauty

20%

Home

10%

Other

We surveyed dozens of leading e-commerce global brands, across stages, from the Israeli ecosystem. Here are the key trends that emerged:

In 2022, over 40% of surveyed e-commerce startups crossed $50M in annual revenue and have more than 100 employees. A new point in the maturity of the ecosystem of e-commerce in Israel:

The majority of companies are bootstrapped or have raised less than $5M to date. Funding isn’t as common in e-commerce as in other tech industries in Israel. As a result, most of these companies are profitable and healthy businesses - an advantage in 2022.

Given this advantage, most companies experienced revenue growth in 2022.

50% reported a rapid growth of over 40% YoY vs. 2021:

However, companies continued to invest in improving efficiency during 2022. 40% of companies reported they improved their profitability by over 20% vs. 2021.


The top trends

Trend 1

US e-commerce continued to pace strong even in a challenging year:

Online shopping significantly accelerated in 2020. The question was what would happen onced stores opened up. It turns out that old habits die hard.

However, e-commerce's share out of total retail in the US has remained strong and at a stable, high rate of ±15% out of total retail. This is 85% growth vs. pre pandemic.

Source: FRED, US Census


In 2022, US e-commerce surpassed $1 trillion with 10% YoY. (source: US Bureau of Economics)

The D2C (direct-to-consumer) segment (i.e. digital native brands that sell directly to consumers) – the closest to global e-commerce companies within the Israeli ecosystem – grew over 20% YoY, crossing $150 billion in 2022.


D2C e-commerce sales in the United States from 2019 to 2024 (in billion U.S. dollars):

Source: Statista

Shopify (its merchants represent this segment well) reported a growth in GMV on its platform of 13% YoY in 2022 vs. 2021. (source: Shopify financials)


Trend 2

The Israeli ecosystem of e-commerce startups grew 5X in 5 years:

Building global e-commerce brands out of Israel used to be a faraway dream, with only a few brands succeeding at a global scale. Today, the ecosystem has reached a new point of inflection in its maturity. In 2022, there were more than 300 global e-commerce brands out of Israel.

There are several brands reaching a global unicorn stage, like IL Makiage, and ones that are category leaders in the US, like Resident: the largest online mattress brand in the US.


Trend 3

While e-commerce continued to pace strong and consumer spending in US didn't halt despite inflation, companies in 2022 were still focused on efficiency and increasing profitability.

In our survey, 55% of companies mentioned they focused on profitability over growth in 2022.

This shift manifested in several ways: including setting stricter targets for marketing spend as a percentage of total revenue, or improving their operational costs:

“Collaborating with the Meta team in 2022 was a game-changer for Underoutfit. With their exceptional support, we were able to refine our approach, improve our creatives, expand our reach and even develop new products. Thanks to their expertise, we achieved 500% year-over-year growth and surpassed our goals for the year.”

Felix Leshno
Founder & CEO, Underoutfit

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2023 opportunities

Non-VC backed companies have the opportunity to win market share

In the wake of challenging macroeconomics and the increase in interest rates, non-VC backed companies that are self-sustained and already possess a healthy DNA as a profitable business have an opportunity to gain market share. VC-backed companies that mainly focused on revenue growth in the past 2 years have now cut marketing spend across the board, leading to lower competition in certain fields. This creates a unique opportunity for brands who have always been focused on profit to invest in expansion and position the company ahead of the curve.

Indeed, in our survey, most companies reported they’re going to focus on expansion via new geos, products, audiences and distribution channels.


Are you working towards/considering any of the following growth opportunities in 2023?

With the increasing integration of social media and e-commerce, brands have the opportunity to leverage Meta’s on-site checkout platforms as new sales channels, and reach customers where they’re already spending time discovering new brands and engaging with content they love. (Source: Shopify Commerce Trends 2023: Industry Report)

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We're on a mission to help people create homes they love. We do that by creating easy-to-use products. We started with Mixtiles - the easiest way to hang your photos on your walls, and continued with Easyplant - the easiest way to grow houseplants. One of our growth strategies is product expansion.

Eytan Levit
Co-Founder, Mixtiles

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Industry overview

2022 was a turbulent year for digital health, or the health D2C industry. Whether it was the post-COVID aftershock, macroeconomic uncertainty or a drop in funding, most companies had to adjust, pivot or go dark. From that understanding, a few insightful observations emerged:

The rise of the bootstrapped health businesses

The ongoing question around consumers in health

The multi-serve model is becoming mainstream

Before diving into the above, some context is needed. The digital health sector in Meta, as we define it, includes three main verticals:

  • Consumer packaged health goods: Formulated foods designed to meet people or pets' nutritional needs.

  • Wellbeing: Holistic solutions to improve people's quality of life and prevent disease.

  • Health tech: Supportive technologies throughout the patient's journey or for particular health conditions.

Each vertical has sub-industries and categories: overall, we mapped around 300 relevant companies in the Israeli ecosystem. The industry has a "healthy" balance between VC-backed and profit-driven businesses, with an obvious shift towards the latter given funding sentiment.

  • We saw decline in mega-rounds (-60%), M&A activity (-50%), and IPOs and SPACs (18 vs. 99 in 2021).

  • On the positive side, we saw 107 startups reaching unicorn status (second highest year after 2021) and a 29% increase in median angel deal size.

Source: CBS Insights, State of Digital Health 2022 Report


Only 37% of the digital health companies that raised in 2022 were D2C, compared to 43% in 2021.

Together with health D2C stocks feeling market pressure (Peloton, Beachbody and more), and mobile privacy updates raising customer acquisition costs, it’s easy to understand the environment in which health bootstrapped companies have been born – and why health companies expanded their offering to additional revenue streams (payers, providers, employers and government applications).

Source: Rock Health, 2022 year-end digital health funding: Lessons at the end of a funding cycle


The main categories where we saw an increased interest in bootstrapped health-tech companies were online pharmacy, serving sensitive health topics, delivery of care and medicine for various use-cases for mental health conditions. We’re also seeing a slight rise in FemTech companies as a whole.

On the wellbeing side, fitness, personalized nutrition and weight management remain top growing categories, together with emerging categories like mindfulness, sport tech, sleep and self-improvement services. McKinsey research shows that consumers will keep spending more on products that improve their health, fitness, nutrition, appearance, sleep and mindfulness. In 2021, the wellness industry was estimated at more than $1.5 trillion.

McKinsey estimates the spend on wellness products and services to be more than $450 billion in the US, growing more than 5% annually. Millennials prioritize health and wellness more than other generations – and plan to prioritize it even more.

High prioritization of health and wellness attributes today, Millenials vs overall, % of respondents

Future high prioritization of health and wellness in the near term, Millenials vs overall, % of respondents

Source: McKinsey & Co., Still feeling good: The US wellness market continues to boom


The consumer packaged health goods industry is profit-driven by nature, with the online supplements category leading the way. This includes a wide range of products, like vitamins, minerals, herbal supplements, protein powders, weight loss supplements and more. Some trends shaping the online supplements category in recent years include an increased interest in natural and plant-based supplements, a growing focus on personalized nutrition and supplementation, and a rise in demand for convenience and subscription-based models. The dietary supplements market size alone is estimated at $155.2 billion in 2022.

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“Working with the Meta team in 2022 was an exceptional experience. Their innovative ideas, attention to our specific growth metrics and commitment to excellence were superb. We particularly appreciated their support in data, creative and various pillars of business strategy. In 2022, we invested in Meta solutions like Reels and user-generated content (UGC), powered by creators, to achieve strong performance and expand to new audiences.”

Dror Ceder
Founder and CGO, Lumen

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The ongoing question around consumers in health

Although health and wellbeing is an essential part of our quality of life, the question remains if consumers have the affinity to pay-out-of-pocket for those products or solutions, especially in times of crisis.

Health consumers can be segmented by age and health status (healthy, single chronic, polychronic, etc), but it’s obvious that there are additional factors like genetics, social, life habits, financials, motivations and many others that determine each person's perceived health and wellbeing (equalling happiness and life expectancy).

Source: Global Wellness Institute, "Health, Happiness and the Wellness Economy: An Emirical Analysis


With clear signs of recession worldwide (400% increase in the number of global conversations about the topic of ‘inflation’ on Facebook from H1 ‘21 to H1 ‘22), consumers are in a “cost of living” crisis in which rising prices squeeze consumer’s purchasing power. (Source: Meta Internal Data, Global, H1 2021 to H1 2022 / OECD, July ‘22)

With 50% of Americans holding a medical debt, employers cutting in wellness benefits and rising costs across the health space, including paying out of pocket expenses, it's a fair assumption that consumers might rely on mandatory health and wellbeing services and won’t go premium.

Consumers' awareness and knowledge about the importance of health and wellness will influence their willingness to pay for these products or solutions. In recent years, there has been a growing awareness of the importance of self-care and wellness, leading to increased demand for products and services that promote health and wellbeing. Therefore, we’re optimistic on this matter.

The top trends

Digital health solutions will stay at the forefront of the industry

Digital health solutions have been gaining momentum in recent years, and the pandemic has accelerated their adoption. These solutions offer numerous benefits, including increased access to healthcare services, improved patient outcomes and reduced healthcare costs.

Access to health data will become a need for personalized care

Access to health data is already becoming a critical component of personalized care and this trend is likely to continue. Personalized care is an advanced approach that tailors treatment and self-care to the individual needs of each patient, based on their unique medical history, genetics, lifestyle and other factors.

AI and XR technologies will grow rapidly as a tech enabler for better health

AI has already shown promise in a variety of healthcare applications, such as medical image analysis, clinical decision support and predictive analytics.

XR technologies, such as AR and VR, are also becoming increasingly prevalent in healthcare, particularly in areas such as medical education, surgical planning and pain management.

Industry overview

The Israeli ad tech industry is one of the oldest in the country, and part of the founding fathers of global programmatic advertising. In its evolution since the 1990s, the industry continues to be the hub for some of the leading products and services in the global ad tech ecosystem, with a substantial hold throughout the value chain of ad monetization and affiliation.

On top of its tech and data infrastructure, the industry has developed content creation capabilities over the years, manifested across multiple companies with publishing activities and premium publishing brands. Whereas in traditional publishing data and tech are second to content, in the Israeli industry, content is a key factor for success – but after data and tech. This results in sustainable businesses that are able to be profitable through various monetization methods (ads, affiliation, B2B SaaS partnerships etc), and vast business model agility.

Due to its track record in the ecosystem and technological dominance, the industry is now home to global media technology holding groups, with both B2C and B2B offerings. M&As are accelerating the creation of these holding groups – a growing trend over the past few years.

B2C companies in the ad tech industry: 100-150

Categorized by the following revenue streams

Money raised to date

Number of employees

Annual revenue

Revenue growth in 2022

The top trends

There has been a growing number of M&As involving Israeli ad tech companies, creating more huge, global, media technology holding groups, with a foothold throughout the programmatic advertising value chain. Over the past couple of years we’ve seen a growing number of M&As of Israeli ad tech companies (Wazimo acquired by Minute Media for $60M-$70M, Pub Plus acquired by ClearPier for $60M, Hive acquired by OpenWeb for $60M, Content IQ & Vidazoo acquired by Perion, Aporia acquired by CentraNic, IMGN acquired by Warner etc). These companies are media technology companies, which are profitable from the get-go, and demonstrate a sustainable track record of double-digit YoY revenue growth. The combination of profit, hyper growth, and super advanced technology, makes them appealing for acquisitions, especially in the current macro-economic environment.


Partnerships as a growth engine

The main growth engine for B2C ad tech companies in 2022 was partnerships with traditional publishers, in which they leverage their cutting-edge technology as a B2B SaaS product that evokes disruption in the traditional media and publishing industry, and optimizing its revenue. This is an even bigger opportunity in 2023 due to macroeconomic effects on the publishing industry.

2023 opportunities


Progmmatic ads

Both directly sold ads and branded content have taken a hit, being the largest revenue decliners for publishers in the second half of 2022. As a result, publishers are looking to optimize revenue from programmatic ads to help navigate a potential recession. This is a huge disruption opportunity for Israeli ad tech companies, helping traditional publishers increase their revenue from programmatic ads through their technological, data driven solutions.


Selling through content

With the rise of costs and decline in CVR for intent based ads alongside the loss of third-party signals, leveraging content to convert discovery audiences into intent-based users is an even bigger opportunity for Israeli ad tech companies. Selling through content is a growing trend which we expect to continue into 2023.

Industry overview

The consumer tech vertical refers to B2C startups that are consumer centric and have tech in the core of the company. Over the years, several distinct industries have matured in the Israeli B2C ecosystem (such as gaming, fintech, health tech, commerce and more). We can clearly identify many companies in each industry in different sizes and stages.


Consumer tech (B2C tech) vertical in numbers:

  • Over 500 B2C tech startups in the Israeli ecosystem

  • The consumer tech vertical consists of a variety of B2C tech companies, many of which are consumer apps (both iOS and Android)

  • The main industries and verticals we identify in 2023 are:

  • Education (startups such as Simply, Masterschool and TinyTap)

  • Productivity (startups such as AI21, CallApp and Karma)

  • Security (startups such as Guardio and Ironvest)

  • Creativity (startups such as Lightricks and Bazaart)

There are many more B2C tech startups, many of which are unique and pioneering, and don’t fall under the traditional definition of industries.

“Israeli Lemonade, Simply (JoyTunes) and MoonActive are just some examples of successful Israeli B2C companies. It's not a coincidence. Recent years have shown how the combination of performance marketing based acquisition, community management and emergence of brand building capabilities have turned Israel into a consumer powerhouse. I expect that in the coming years, as the talent in these companies founds or joins the next generation of startups, we'll see even more B2C global scale-ups by Israeli founders.”

Eden Shochat
Equal Partner, Aleph

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The top trends

Generative AI

Over the last year we’ve witnessed a major breakthrough in the field of generative AI and its wide adoption by users. The auto-creation of content by algorithms can potentially impact every consumer product with audio, visual content (video and images) and text etc.

We’ve also seen initial use cases in the B2C tech ecosystem, especially with viral products by Lightricks (Facetune) and MyHeritage.

Although the use cases are just starting to unfold, it’s only a matter of time before we start experiencing a broader adoption in the B2C tech. ecosystem, including pioneering companies with generative AI at the core of their technologies, such as AI21 Labs and Loora.

Signal loss - iOS 14.5 implications are kicking-in

In mid-2021, Apple released iOS 14.5 which transformed the digital marketing industry. Since then, those changes have received mass coverage – but the main issue is the adoption of the SKAN protocol.

The main implication was restricted, aggregated and delayed signals for performance advertisers that led to limited measurement capabilities and the need to explore new ways to acquire users in order to mitigate signal loss.

Product and funnel diversification

One significant technique that’s becoming more common within the industry is product diversification – with an emphasis on the onboarding funnel.

Companies that have historically relied solely on an app-based funnel (Google Play and App Store) have begun activating web-based acquisition funnels in order to reach new audiences and utilize web-based performance capabilities.

Those web funnels come in a variety of formats, from very simple landing pages to “quiz funnels” in which the user goes through a series of interactions with the product before the paywall.

“The new privacy environment pushed us to revisit our measurement methods and approach, with an emphasis on the true incremental impact of every channel. Testing has become more crucial than ever to make sure that we spend the next dollar where it should be, with GeoLift being a major breakthrough in the way we make marketing decisions.”

Omer Gal
VP Performance Marketing, Lightricks

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2023 opportunities

Adopting data-driven decision making with an incrementality mindset in times of efficiency
Measuring the true value of every channel, while conducting an always-on incremental testing approach, has never been more important than today. Meta solutions, such as open-source tool GeoLift, allow performance advertisers to make data-driven decisions regarding their marketing budgets.


Enhanced consumer experience with the rise of 5G as a mass-market opportunity in North America
From ~80M devices in 2021 to ~230M in 2023: the potential audience with 5G devices has nearly trebled, providing a huge opportunity for consumer apps.

Source: Top 15 Mobile App Development Trends to Watch for in 2023, Net Solutions


With (much) faster connection and reduced latency, the way we build and use apps will change.

Higher resolution, video streaming, mobile payments and data transfer between devices will become easier, faster and seamless. 5G will allow app developers to start experimenting with new types of experiences such as AR/VR, dedicated apps for foldable devices, new integrations with wearables and more.

Key data points - Israel ecosystem

“New capabilities like AI and concepts such as the metaverse are fueling the Israeli ecosystem with innovative ideas. Additionally, there’s exciting growth in Israeli indie studios that target more than just mobile platforms. We believe that 2023 will see the next set of developers, publishers and service companies.”

Guy Ben-Dov
Chairman, GameIS, The Digital Games Industry Association in Israel

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Notable industry “moves”

  • Rovio hits nine-month high on starting talks with Playtika (Yahoo! finance) and Playtika is looking for a buyer just one year after IPO (Calcalist)

  • Mobile gaming company Voodoo acquires Beach Bum (TechChurch)

  • Moon Active acquiring Zen Match for estimated $100-150 million (Calcalist)

  • Unity and ironSource’s $4.4B merger is now complete (TechChurch)

  • SciPlay continues expansion into fast growing casual market with acquisition of Alictus, a leading Turkey-based developer of hit mobile games (BusinessWire)

Key data points: Gaming

Trend: Macroeconomics

AppsFlyer - Most gaming IAPs involve micro payments (which are easier when facing an economic downturn), while more costly IAPs in non-gaming verticals like e-commerce, travel and transportation etc. might mean consumers think twice.

(Source: Driving ROI through a storm: 2023 app trends & C-level predictions)

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“2023 started as an exciting year. Although markets are still in the lows and financial sentiment in major markets is low as well, people do continue to play games - and we actually see core metrics such as average revenue per paying users stable and even growing. I expect this trend to improve LTV/CAC ratios and support new games in reaching scale in a profitable way. On a macro level, gaming companies should shine - financial independence and profitability should continue to drive shareholder value.”

Eitan Reisel
Found & Managing Partner, vGames

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Industry overview: 150-200 B2C companies


~30-40

Lending and financing

~30-40

Financial management

~50-60

Commerce, trading and investments

~40-50

Banking and money transfers

20-30

Insurtech

Capital raised in 2022

  • $1.6B raised in 2022, down from $6.1B in 2021

  • The number of rounds declined from 174 in 2021 to 78 in 2022

  • Average round size in 2022 was 20.5M$, significantly larger than than the B2C average in 2022 (8M$), yet smaller than 2021 Fintech growth-stage round which averaged at 58M$

  • Capital raised by round type:

  • Third largest sector in the Israeli ecosystem, accounting for 10% of capital raised (down from 18% in 2021) - cyber (21%) and IT/DevOps (13%) are the leading two sectors.

  • Sub-vertical investment activity shift – trading and banking on the rise while payments, insurtech and financial software are declining.

The top trends

Macroeconomics and business models

March 2022 ended a two-year period of nearly-0% interest rate globally - forcing fintechs to adapt their spreads, risk appetite and business models.

Source: https://tradingeconomics.com/united-states/interest-rate


Rising interest rates and public market slump have taken their toll on fintech. Higher cost of capital has imposed significant hardships on business models that require high-liquidity. The industry has adopted a more conservative approach around margins, spreads and underwriting risk appetite, while shortening the time-to-ROI matrix as much as possible, even at the expense of a significant slowdown in growth.

💡Fintech innovation: The challenging interest environment and macroeconomic headwinds have brought innovative business models to life, such as alternative financing, valued at $6.62 billion and growing at a 6.3% compound annual growth rate.
An interesting example for alternative financing is the flexible debt repayment model which is subject to a consumer’s spending habits or a business’ monthly revenue, also known as revenue-based financing (RBF). SixtyFive capitalized on this trend and enables retirees access to home equity with a monthly variable and flexible income.


Embedded finance has become a prominent phenomenon that creates an opportunity for fintechs to diversify their go-to-market strategy

Non-financial institutions wish to provide a more holistic customer experience, while offering financial services as a part of the greater value proposition. Embedded finance includes a wide range of services such as payments, cards, lending, investments, insurance and banking: from “mass-market” propositions such as buy now pay later (BNPL), which already exceeds $24 billion in gross merchandise volume, to tailored banking solutions.

Regulation related to embedded finance is still lagging (similar to other fintech domains). But it’s clear that the fast-growing field has captured the eye of regulators – we'll likely see them attempt an accelerated catch-up in response. A first sneak peek was released in September by the Consumer Financial Protection Bureau regarding the need to monitor and standardize BNPL services. (Source: CFBP Report, Buy Now, Pay Later: Market trends and consumer impacts)

💡Fintech innovation - Tesla’s User-Based-Insurance (UBI) is presenting both an individual pricing model based on the user’s driving data, as well as an immediate indication on changes in premium price from month to month. The indicators are indicated to the driver, thus allowing him/her to adjust the driving habits in real-time (drives after dark, drives over 10MPH without a sit-belt, etc.).


Maximizing ROI through advanced measurement systems

While margins are shrinking and business models are being challenged, we have witnessed market leaders taking a different approach towards measurement. It’s no-longer a side-project for the BI and analytics team, but rather a cornerstone in the decision-making process of marketing executives, making the smartest business decisions. Different reporting systems with conflicting data, are requiring executives to determine which marketing efforts truly caused users to convert. Making incrementality-testing a strategic effort.

“In the current climate, where every dollar counts and there’s a drive towards optimizing efficiency, we’ve adopted a geo-based incrementality testing approach, alongside marketing mix modeling to validate our decision making. This testing mentality is now our business as usual: we run these tests on a quarterly basis.”

Udi Ryba
Analytics & Measurement Lead at Lemonade

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Incumbents and disruptors are taking advantage of current climate with M&A plays

The “build vs. buy” dilemma is always prominent, but these days it seems that the scales are leaning towards buying more than ever – especially given the current climate and valuations of the ecosystem.

While traditionally M&A is more of an incumbents’ play, we’re seeing mid-size disruptors playing in that field too, with Israeli fintechs taking a strategic stand:

eToro’s $50 million acquisition of Gatsby to better cater to US users, while doubling-down on their options trading proposition.

Lemonade’s $145 million acquisition of Metromile to expedite its auto insurance product penetration in the US, while leveraging its AI risk assessment and underwriting model with Metromile’s first-party data.

Plus500 continues its global expansion to the Japanese market with the acquisition of EZ Invest.

2022 was a difficult year for the industry

  • FTX collapse - from a mainstream Super Bowl commercial to insolvency in nine monthseds

  • Bitcoin crashing from over $45,000 to $13,000 (and climbing back up)

  • The NFT bubble burst and valuations of digital assets went down

While the use cases and adoption of blockchain are still in their early days – mainly by early-adopters and speculative investors – we’re seeing the early seeds of standardization in the industry.

Increased interest by incumbents in 2022 has been driving development of infrastructure, compliance and risk management tools that are standardizing the space.

2023 opportunities

Expanding the value proposition and total addressable market via M&A and partnerships

Unlocking sustainable growth via M&A and partnerships should be on every board’s agenda for 2023. Nearly every B2C fintech company emerged from a single value-proposition aiming to disrupt a specific domain or category. The trend is clear and so is the opportunity to hedge and scale the business, such as Revolut, Robinhood, Acorns and others: all started small and diversified their value proposition in order to scale and increase lifetime value.

Given the current climate, the most prominent opportunity for 2023 could be the utilization of “shortcuts” to enrich a brand’s value proposition and diversify its go-to-market approach: the bundling of services, selling via a third-party, adopting revenue-share mechanisms and more. All are coming into play more significantly than before.


The beginning of “Web3 consumerization”

From a speculative investment vehicle to a “conventional” currency accepted by “big brands,” Web3 is the “next generation of the internet.” It refers to a set of technologies and standards that aim to decentralize the internet. So far, the main applications of Web3 technologies are relying on blockchain infrastructure and are mainly manifested in the form of crypto, smart contracts and NFTs.

Consumer habits are determined by our daily core behaviors and services. Therefore, they’re mostly controlled by the big brands that dominate the public eye and our smartphones. The process that accelerated in 2022 could yield initial fruits in 2023 with new services.

Notable Web3 M&A by Public Companies

The top trends

2022 was a hectic year in SaaS. We began the year with growth being the main thing on everyone’s mind, topping profitability, whether it was logo or user count or annual recurring revenue (ARR) growth at all cost.

In 2023, SaaS businesses are longing for efficiency through extending runway, alongside building healthier growth: the primary KPIs for 2023 are customer acquisition cost (CAC) payback period and net dollar retention (NDR). This sentiment has been strong in the Israeli SaaS ecosystem and it spans across the board within the industry – from early stage to IPO, and across sub-verticals.

While there are more than 6,500 B2B companies to date in Israel, there are about 370 Israeli SaaS companies with a primary focus on SMB audiences, going to market mainly via product-led growth (PLG) playbooks and self-served funnels. We categorize them across three sub-verticals:

  • 50%

    Marketing technologies

  • 25%

    Finance

  • 25%

    Productivity platforms

B2B Israel SaaS funding over time

Deal amount decreased in 2022 68% Y/Y and 22% 2Y/Y

Number of deals decreased by 40% Y/Y and 9% 2Y/Y

Funding distribution across stages

Source: IVC, 2023

"Key creative craft that's proven to provide sustainable return is UGC. We managed to leverage this craft, aligning with current social trends, to reach marketers and business decision makers with heroes they can relate with. Beside positive performance, UGC, compared to other executional productions, is lighter weight in terms of execution and, therefore, significantly more cost-effective."

Seffy Kotz
Chief Growth Officer, CHEQ

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2023 opportunities

PLG playbooks continue to be widely adopted. In some sub-verticals, it’s by far the dominant go-to-market approach (90% in productivity software, 94% in software development and 77% in marketing software). We’re seeing more companies embrace PLG strategies via paid and earned media, and double down on a growing combination of the two, with B2B influencer marketing and user-generated content (UGC) fueling the paid media impact with sustainable flywheel and halo effects.

We’re also seeing more companies adopt a hybrid product-led sales approach where prospects engage with products self-served and are then guided to sale based on qualification. In some cases, this is part of the wider motivation and focus on short-term efficiency to increase average revenue per user. For it to succeed, B2Bs need to excel at the top of the funnel: from the creative experience, to landing pages and light product onboarding and on CS; alongside a data-driven qualification mechanism to swiftly move leads towards sales when appropriate.

The focus on increasing NDR can create a defocus in logo count growth, leading to long-term growth issues: since SMBs tend to have higher churn, by stopping to focus on SMBs, you can create a positive NDR trend at the expense of fueling future growth.

  • We recommend finding the right balance between runway optimization via CAC payback and NDR and fueling growth with logo count by developing and rethinking PLG/PLS programs at scale: be it in the realm of rethinking about ICP or re-evaluating your pricing model.

  • On the topic of pricing, for example, usage-based pricing (UBP) was “the thing” in SaaS pricing evolution during recent years, and fit PLG motions to a great extent. The main issue with using this pricing model under the current macroeconomic sentiment is that UBP creates a certain level of ambiguity around collection and cash flow predictability.

  • Therefore, a good balance would be to resume PLG motions and defer back to “classic” pricing packages - with an emphasis on promoting annual or multi-year packages to extend cash runway.

Two mega creative trends that could impact your company

The creative world is going through an evolution. The two mega trends driving it are velocity and diversity.

On velocity, it’s moving from scheduled ad campaigns to an always-on approach; from formal production windows to shorter, occasional production cycles. On diversity, it’s moving from specific targeting to multiple messaging way-ins that filter out relevant and irrelevant audiences; from a few new creative concepts a year to hundreds of them.


Triggers of velocity and diversity

Many things fuel the creative evolution but two stand out above all else:


Ad fatigue
As targeting evolves, audiences become smaller and convert better. Although this is generally a good thing, it also means that ads become ineffective quickly, with most of them “dying” after a few days.

Once a user has seen an ad multiple times they will spend less time looking at it, and are less likely to click or convert off of it. Our definition of creative fatigue is built from a count of previous exposures to the same creative image or video. When we keep track of how many times each user has seen a given creative we can predict future performance for that ad. It’s hard to overstate the impact fatigue has on marketing performance. After four repeated exposures to the same creative we expect a ~40% drop in click-through rate (CTR) and a ~60% drop in contingent value right (CVR).


Signal loss
In a world where advertisers receive fewer signals, it’s becoming harder to read online behaviors and reach prospects. Although Meta’s targeting capabilities are quickly improving, it’s safe to say that advertisers will need to develop new muscles to target effectively.


Riding the waves of velocity and diversity is important but hard

High velocity and ultra diversified creative ads are key for 2023 marketing effectiveness – they’re the best methods to combat ad fatigue and signal loss.

  • Velocity and volume

    Simply put, a marketing organization must ensure it pushes a constant flow of fresh ads into the platforms. Some new ads showcase a completely new creative concept but most are iterations performed on existing ads based on media results. A recent survey conducted by Meta in Israel found that top performing advertisers create 50-70 new ads a week.

  • Diversity

    It’s important to remember that these new ads are worthless if they’re too similar to existing ones. To make a real difference in fatigue they must be noticeably different. A new ad with a different font or color is technically new – but is just more of the same to the potential consumer.

Creating thousands of different ads a year is a challenge – it can cost a fortune and overload a company’s operational teams. Moreover, making consistent smart creative decisions requires capabilities that mix left and right brain.

When you create four campaigns a year, regular creative teams with regular creative processes can do the job. When you aim at 1000X of that amount, the regular way collapses and the solution must be systematic: the world’s leading creative and marketing teams are those that manage to build a system around four creative dynamics: ideation, production, analysis and iteration. On a weekly basis, teams come together to input (analyze, brainstorm) and output (script, produce) on the company's creative arsenal. These companies create content as if they were publishers, and their creative teams move fast as if they were content creators.

3 tips on how to build a forward looking creative organization (one that drives high velocity and ultra diversification)

First tip

Creative organizations de-siloed from growth

Creative orgs within digital native companies need to be collaborative, agile and lean: an in-house team that’s 100% focused on growth and creativity. It continually improves performance through curiosity about the ’why’ of data, people and culture. It shapeshifts to gain advantage through a flexible approach to forge collaboration between creative and growth teams. They usually have shared KPIs but it’s not enough. Traditionally, growth minds and creative minds work differently and aren't always in sync because the most ‘creative’ answer doesn’t always drive the best performance. But in a culture of relentless focus on ‘what worked,’ aside of the need to keep things fresh due to being live on an always-on basis, we believe we’ll see more and more PPC&C duos (PPC and creative) who work on a team that moves independently in its realm: ideate, produce, run, analyze, iterate and repeat. This stands against the traditional creative duo of writer and designer (copy and art) which has ruled creative departments over the past decades. The role of the art director could become cross-team design lead, who is the guide and connector of PPC&Cs with studio services.


Second tip

Hybrid creative departments who work with creators

Creators are a huge production extension of modern creative departments – they’re experts in fast and cheap productions. It varies according to the stage of the company, but there are DR-advertisers that produce more with external creators than they do in-house. And why not? Creators are perfect fit for hyper-growth companies with global expansion aspirations: creators help localize your brand through language and relevancy; their creative deliverables costs are substantially lower than traditional production process and they often deliver in a shorter time.


Third tip

New roles in the creative org of the future to enable fast productions:

Growth creative manager

Builds and leads a culture of data-driven creative experimentation that delivers ever more effective business results. Connects creative ideas to hardcore performance data.

Production streamer

Creative volumes are increasing, organizations aim to create more ads with high diversity in formats and concepts. This role ensures that the expanding need for creative content is managed effectively and efficiently working with multiple internal and external teams.

In-team creator

Ads that are in-line with how people speak on the platforms perform better and creators are the most fluent speakers of the social media language.

The creator economy is big and in hyper-growth

What’s the difference between content creators and influencers?

  • Creators make content for the sake of creation by using digital technology to share unique and creative content and monetize through advertising, subscriptions and direct payment from platforms.

  • An influencer is someone who has built a personal brand and established a reputation online in a specific niche or industry.

The scale and scope of creators and the creator economy is large – and it’s growing. The influencer marketing industry is valued at $16.4 billion. Global creator marketing spend will exceed $24.1 billion by 2025.

The creator economy has expanded rapidly in recent years. There are now estimated to be 50 million content creators globally. 46.7 million consider themselves to be amateurs, and 30 million of them share their creativity on Instagram. More than 2 million consider themselves to be professional creators and more than 25% of them are mostly active on Instagram.

30% of 18 to 24-year-olds and 40% of 25 to 34-year-olds consider themselves content creators. 3.32% Instagrammers have more than 100,000 followers.

The average age of creators is 40, with Gen-Z (age 24 and younger) making up just 14% of all creators. More than half of creators are male (55%), though women outnumber men by nearly 2-to-1 when it comes to being full-time professional creators.


Startup funding

The creator economy is also a source of significant investment from our competitors: creator tools are the fastest growing category of apps, and 50 startups raised at least $2 billion in the first six months of 2021 alone.

Just three city-regions — the San Francisco Bay Area, Los Angeles and New York —account for nearly two-thirds of all global venture capital investment in creator economy startups. But these startups can be found in 65 cities around the world.


Creators are growing and leveraging opportunities

How much creators earn

21% of content creators earn at least $50,000 annually. 1.4% earn over $1 million a year, and another 1.5% make between $500,000 and $1 million. More than two-thirds of creators earn less than $25,000, with more than a quarter earning less than $1,000 per year.

Meta technologies have always provided an opportunity for individuals to shape the content that we can see. Content creators earned $460 million on Instagram in 2022. Online creators earned over $23 billion in 2020.

We split creators into amateurs (46.7 million) and professionals (2 million+). Notably, more than half of amateur creators (30 million) share their creativity on Instagram, followed by 12 million on YouTube, 2.7 million on Twitch and 2 million on other social platforms. In contrast, you’re more likely to find professional creators on YouTube (1 million) than Instagram (500,000), Twitch (300,000) and other platforms (200,000).

The startup ecosystem is growing in the creator's economy

The creator economy consists of over 300 startups. These startups offer tools, platforms, products and services that help creators launch their careers and turn their side-hustles into businesses.

The creator economy is far past what it was 10 years ago. Creators, startups and the ecosystem as a whole have become a $104.2 billion industry, leading to millions of new job positions that never existed before.

The pandemic has brought massive growth to creators and creator economy startups – Facebook and Instagram saw 19% and 16% growth in monthly usage through the pandemic consecutively.

Creator economy investors doubled down and started huge funding rounds:

Funding dropped in 2022 but Q1 of 2022 ended with total investment of $1 billion so we expect reshifting its focus, investing in startups that have something valuable to offer, and the potential to grow and dominate the space.

Deeper interactions with creators through generations

Nearly two-thirds of Gen Z plan to use social media to make money in 2023. 65% of Gen Z (online 18-24 year olds) agree that content that’s personally relevant to them is more important than the content that lots of other people talk about.

Sustainability is a key issue for Gen Z, and they’re active about it: in 2023, a majority of Gen Z will shop to support causes they care about.


Two important trends we identify for 2023:

  • Creators are investing in creating engaged communities and turning niche passions into common experiences for their audience.

  • Gen Z are into mixed media: 40% of them say they’ll listen to a podcast of a creator they follow. Creators are exploring a range of mediums and we see an increase in “multi-platform creators” who can adjust their content through the different platforms.

Creator marketing is big and creates value for all parties

Top global brands are leveraging creators marketing: 93% of Israeli B2C startups leveraged creator marketing in 2022, with the top 1% of adopters investing nearly half of marketing spend on creator marketing alongside their BAU – campaigns creating and testing multiple creatives on a weekly basis.

Creator marketing brings value for all parties involved:

Brand

+15% ROAS increase from leveraging creators marketing in media.

Creator

+13% increase in followers; +23% increase for creators with less than 10K followers.

Consumer

2x as many people prefer creators ads over traditional ads.

Creator marketing builds consumer trust

Two Israeli brands partnered with creators and saw the following impact on paid marketing performance, leveraging consumers trust build by the creator recommendation:

Particle


  • 4% increase in ROAS

  • 3% lower CPA

  • 2% in CTR


Read case study →


Underoutfit


  • 38% increase in ROAS

  • 31% lower CPA

  • 47% in CTR


Read case study →


Key areas to scale creator marketing

The main questions advertisers that have begun to adopt creators in paid marketing, are around their sourcing: which creators to choose and how to manage the process.

Type of creators

90% are leveraging micro-influencers, 60% use customer reviews for sourcing creators and creatives.

Sourcing

60% of companies are using multiple methods to source creators including manual sourcing through social networks to leveraging platforms.

Process - team

Operating method is still shaping up: 80% still don’t have a dedicated creators team. There is no clear organizational method on how to manage paid creators work.

Process - briefing

Most collaborations are based on “light” briefing from the brand.

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Why Reels?

The rapid increase in short video consumption across social media

Short video consumption is rapidly increasing across all social media platforms, as evidenced by various key trends and statistics. According to a survey by Deloitte, about 1 in 5 US consumers use social media to discover new video content. Further research by Deloitte found that almost a third of respondents have increased their consumption of video on social media or live streaming services in the past six months. And a survey by Dynata and Streamlab showed that nearly 60% of US adult internet users watch social videos weekly, while 36% share social videos on a weekly basis.

Instagram and Facebook's role in driving short-form video viewing

Instagram and Facebook have played a major role in driving the change towards short-form video viewing, particularly with the popularity of Reels. With more consumers using social media and finding new video content, and the viewing of video on social media increasing overall, it’s crucial for advertisers to take a video-first approach to social media content and ads. Whether for organic social media marketing, paid advertising or influencer marketing, short-form videos should be a key part of every marketer's strategy.

The success and monetization potential of Reels

Reels is a fast-growing feature on Instagram and Facebook – and it’s proving to be an exciting opportunity for advertisers. The feature has seen a significant increase in growth and engagement, with 140 billion plays across Facebook and Instagram every day – a 50% increase over the previous six months.

Reels is Meta’s fastest-ever growing format and is generating higher revenue than Stories did at identical times, post-launch. Over 40% or our advertisers use Reels ads across our apps. That demonstrates the strong monetization potential of Reels and makes it an attractive opportunity for advertisers.

Reels’ focus on AI-driven content and creator-first approach

Reels’ appeal to advertisers goes beyond just its strong growth and monetization potential. The feature also has a focus on AI-driven content and a creator-first approach, making it an attractive platform for reaching and engaging with users. Reels continue to grow quickly across our apps - both in production and consumption. Reshares of Reels have more than doubled on Facebook and Instagram in the last 6 months. The AI technology that powers Reels' content recommendations is expected to double throughout 2023, further contributing to its growing engagement.

Why Reels?

140B


There are now more than 140 billion Reels plays across Facebook and Instagram every day.

40%


Over 40% or our advertisers use Reels ads across our apps.

2X


Reels plays across Facebook and Instagram have more than doubled over the last year.

Conclusion

Reels is an exciting opportunity for advertisers, looking to reach and engage with users on a rapidly growing platform. With strong growth, high engagement levels and Meta’s investment in development and monetization, Reels is well positioned to continue its success. The company's focus on AI-driven content and a creator-first approach make it a unique and attractive platform for reaching and engaging with users. As Reels continues to gain time spent on competitors, it's an opportunity for advertisers to tap into this growing format and reach a wide audience.

How to get Reels right

Creative tips to make your next Reels ad shine

Creative themes to get started on your next Reels ad

Think of the stories that resonate most with your brand and audience, and the best way to sell your products. Here are some creative thought starters to build your next Reels ad:

  • Before and after
    If you want to highlight the magic of your brand, before and after videos allow you to illustrate the value of your product by presenting it as a problem to a solution.

  • Tutorial
    From “Exclusive hack to apply eyeliner” to “Learn my secret to better fitness.” By using the tutorial, you can educate – and entertain – viewers by showing your product in action.

  • Listicle
    Whether it’s “5 best coffee subscriptions” or “10 best must-have sneakers,” a listicle is a great way to present your product via a list of benefits, USPs and top features.

10%

of Reels are viewed with sound on.

40%

of Reels are using effects.

25%

higher CTA for Reels showcasing a person in the creative.

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Why Reels?

A variety of key trends and statistics is accelerating the consumption of short videos across social media. Instagram and Facebook have played a major role in driving this change. Both are also seeing an increase in short-form video viewing, particularly with the popularity of Reels.

A fast-growing feature on Instagram and Facebook, Reels has strong growth and engagement, with 140 billion plays across Facebook and Instagram every day, and a combined annual run rate of $3 billion. It also has a focus on AI-driven content and a creator-first approach, making it an attractive platform for advertisers to reach and engage users.


Reels: How to

To create successful Reels ads, it’s important to make them entertaining, visually appealing and relatable to the viewer. Sound is also an important factor to consider: 93% of Reels are watched with sound on. There are many creative themes that can be used for Reels ads, such as before and after videos, tutorials and listicles. These themes can showcase the value of a product, educate the viewer and present a list of benefits and features.

What is the Metaverse?

The metaverse as conceived today is considered by many as a “successor” to the internet. While there’s no agreed upon definition of the metaverse, one way to think about it is that it’s an expansive network of digital spaces – including immersive 3D experiences in augmented, virtual and mixed reality – that are interconnected and interoperable so you can easily move between them. In essence, it means you can create and explore with other people who aren’t in the same physical space as you.

Some have referred to the metaverse as an “embodied internet” in which individuals will feel as if they’re actually “present” in experiences and not simply looking at experiences through their screens. This means that interacting with the internet (and the devices that provide access to it) has the potential to be much more natural, incorporating modes of communication that include gesture and voice, meaning individuals aren’t limited to typing or tapping. In addition, the metaverse is envisioned to be able to host almost all the activities we currently take part in (e.g. socializing, work, learning, entertainment, shopping, content creation) and make new types of activities possible, too.

Read more ↓

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Stepping into the future

Augmented reality (AR), virtual reality (VR) mixed reality (MR), extended reality (XR), blockchain and non-fungible tokens (NFTs or “tokens”) are fledgling technologies of today that are expected to be the backbone of the metaverse or form its social and economic activity. For example, blockchain and NFTs are expected to play a central role in the exchange of digital goods within the metaverse.

Some of the early components of the metaverse are already here – but in bits and pieces. And these components are already having significant societal, commercial and business impacts. As users continue to adopt these technologies, their potential to transform society in unpredictable ways will only accelerate. In the long run, the metaverse’s reach could extend well beyond things we can conceive of today, becoming integrated with traditional businesses, creating new jobs and affecting consumers in novel ways.

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Uses of metaverse technologies around the world

An anticipated benefit of the metaverse is the creation of new markets and broader economic and social impacts. As with the internet and other technologies, the metavese's form and shape will materialize slowly at first. It's once a critical mass of adoption is achieved that its full potential will begin to take a more definitive shape.

In the US, metaverse technologies are currently expanding access to sports, helping to combat biases via simulations, and merging physical and virtual worlds in gaming. For example, iGYM is an AR system for inclusive play created to give young people with mobility disabilities access to physical play activities with their nondisabled peers.

Read more ↓

For anti-bias training, the Lab for Applied Social Science Research (LASSR) at the University of Maryland created a training program for law enforcement personnel that includes immersive VR simulations, in which officers interact with civilians in different policing situations.

In Europe, industrial companies are adopting XR technologies to simplify and streamline prototyping, training, remote guidance and customer relationship processes. German manufacturer Siemens offers a VR product for product design and prototyping called Teamcenter VR. The ability to change the design and characteristics of the prototype in 3D has the potential to cut significant time and costs – iterating in 3D reduces both raw materials and production time.

Read more ↓

Professional industrial training also stands to benefit from VR applications: BMW, Peugeot and Audi are among the early adopters of industrial VR training, which has been shown to reduce training budgets without reducing quality.

In the Middle East, Expo 2020 Dubai embraced metaverse technologies, opening its virtual doors to visitors from all over the world through the Expo Dubai Xplorer multiplayer experience. The app allowed virtual visitors to enjoy views of an interactive “digital twin” of the Expo site via AR spectacles, synchronized with the real-world location.

In Africa, Africarare – coined as “the first South African metaverse” – launched in October 2021. A digital land called Ubuntuland offers immersive VR experiences, including an art marketplace. Africarare featured the premiere NFT art collection from well-known South African artist Norman Catherine. After the collection sold out, the artist said, “NFTs have opened up a whole new medium for artists to explore. This is a new era of investment art”.

In Latin America, Brazilian company MondoDX created the first XR platform for online retail shopping, VYRCH. VYRCH allows customers to visit a virtual store where they can walk around, pick up and try on items, speak to a shopping assistant and more. VYRCH has experienced a higher customer conversion rate than standard online stores, attracting much interest from retailers.

In East Asia, the metaverse is drawing attention and investment from major digital platforms and gaming companies, the entertainment industry and governments. In South Korea, major gaming company Krafton and internet conglomerate Naver are partnering to jointly develop a “user-generated NFT metaverse platform.” Naver has already developed Zepeto, a social gathering and digital goods shopping platform that boasts over 200 million users globally.

In India, Chennai-based startup TardiVerse made headlines for enabling India’s first metaverse marriage. Developed based on Polygon Technology blockchain and led by Vignesh Selvaraj, TardiVerse announced in January 2022 they were to host a couple’s wedding reception in the metaverse. The digital reception was Hogwarts-themed, and accessible to friends and family of the couple from around the world, with the guests choosing their own avatars.

Read more ↓

According to XROM, a Mumbai-based Extended Reality venture, there are over 2,000 AR/VR startups in India that will drive economic growth in the near future.

How did the previous technological revolution impact the economy?

Mobile technology is associated with a large share of global GDP. A series of studies conducted by the industry organization GSMA found that the “mobile economy” contributed approximately $2.4 trillion (3.6%) to global GDP in 2013, $3.9 trillion (4.6%) to global GDP in 2018 and $4.4 trillion (5.1%) to global GDP in 2020 [40].

Studies have found that mobile technology has contributed to GDP growth. Using data on both developed and developing countries, a 2012 Deloitte study found that a 10% substitution from 2G to 3G penetration was associated with a 0.15% increase in the GDP per capita growth rate globally. Furthermore, a doubling of mobile data usage was associated with a 0.5% increase in the GDP per capita growth rate [41]. This GDP growth was more pronounced among developing nations.

The “mobile revolution” created tremendous growth in economies around the world. The “metaverse revolution” is set to be the next big technological step.

The potential economic impact of the metaverse

We can contextualize our results against current projections of the economic potential of the metaverse by assuming that it exists today, and calculating the contribution to GDP after 10 years in US dollars. Our model implies that if metaverse adoption began in 2022, then the metaverse’s total contribution to global GDP in 2031 would be $3.01 trillion (measured in 2015 U.S. dollars), one third of which, or $1.04 trillion, is attributable to APAC. Additionally, contributions to Canada, Europe, India, LATAM, MENAT, SSA and US GDP are $0.02, $0.44, $0.24, $0.32, $0.36, $0.04 and $0.56 trillions, respectively. The global estimate lies within the range of existing projections. Industry analysts and observers have offered a wide range of estimates for the potential valuation or addressable market size of the metaverse. Near-term estimates range from about $800 billion to upwards of $2 trillion over the next few years [42].

Long-term estimates range from approximately $3 trillion to $30 trillion by the time the metaverse reaches widespread adoption, with the most optimistic estimate being over $80 trillion [43]. A number of sources project that a mature metaverse could be a multi trillion-dollar industry, though they do not estimate the amount of time needed for the metaverse to reach maturity.

If metaverse adoption were to begin today, our estimate of a $3.01 trillion (in 2015 US dollars) contribution to global GDP in 2031 would be on the high end of the near-term projections, consistent with our 10-year timeline being longer than that of the near-term projections.

However, there are challenges to overcome

The metaverse is still at an early stage, with many contributors from around the world helping to plan its inclusive design and construction. We’re currently witnessing the early phases of development, including the rolling out of infrastructure and technologies that will likely support it.

The extent to which the economic potential of the metaverse is realized depends on how effectively the necessary infrastructure and technology are developed and deployed, as well as how widely it's adopted by consumers and businesses. Once the infrastructure is in place and adoption is underway, the door is opened to develop endless endeavors – built by creators, developers and businesses, as was the case with the internet and mobile technology.

The metaverse will require many new technologies, innovations and discoveries before it can be fully realized. New metaverse-specific protocols will evolve, new companies and innovations will come into existence, and new industries will emerge that directly or indirectly sustain or are sustained by the metaverse.

(The Potential Global Economic Impact of the Metaverse / Analysis Group)


A total of 130 pure metaverse startups operate in Israel

A recent study we conducted using various startups indexes, surveys, our metaverse developer community, media coverage, and meetings with entrepreneurs, mapped the active metaverse startups in Israel with XR technology and 3D content development.

A typical Israeli metaverse startup is one founded in the last five years, has up to 10 employees, develops 3D content or platforms in the entertainment, gaming or retail industries, and is in the seed round of funding.

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Our research revealed the following insights:

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