Why it matters:

• AI and machine learning are transforming the way performance marketing technology companies like Wunderkind help businesses target potential customers via digital ad campaigns.
• The startup has raised a total of $151 million from venture capitalists despite the slowdown in funding, in part by delivering business clients high rates of return on their advertising investments.
• Wunderkind drives over $5 billion in annual revenue for its more than 1,000 clients ranging from HelloFresh to Uniqlo.

It’s not easy for a startup to raise millions of dollars in equity capital during a credit crunch when bankers and venture capitalists have tightened their purse strings due to the shaky economy.

But one that has defied the odds is Wunderkind, a performance marketing technology company that helps brands foster customer relationships through digital channels, text, and email. It does this by using machine learning and AI to help brands personalize their messaging to potential customers. In March, the company snared $76 million in venture capital in a financing round led by Neuberger Berman, bringing its total funding to date to $151 million.

It's a company in a crowded field where competition is fierce. According to the Performance Marketing Association, brands will spend over $6 billion on performance marketing campaigns across all digital channels such as email, search, etc., in 2023. These results-driven companies do everything from helping brands and advertisers generate leads, increase pay-per-click sales, and build email customer lists using a wide variety of approaches including social media advertising and search engine marketing.

So, what makes Wunderkind a standout for investors? “The company’s machine learning and artificial intelligence technology was a big attraction,” said Gabe Cahill, Managing Director of Neuberger Berman. Wunderkind has driven over $5 billion in annual revenue for more than 1,000 clients including HelloFresh, Samsonite, Sonos, and Uniqlo, he notes. As a result, it made the CommerceTech Power List of 2023, which recognized venture-capital-backed innovators in tech marketing who are shaping the future of retail.

“Few companies in the performance marketing industry can guarantee clients such high rates of return on their advertising investments,” said Cahill, noting the actual guarantee the startup makes to clients. “Wunderkind’s track record in generating sales for customers has given it a competitive advantage.”

According to Cahill, the company’s AI technology has proven to be an industry gamechanger. “The market opportunity for the company is massive if you consider that most shoppers begin their experience with retailers through digital channels. That’s what attracted VC investors,” he said.

As Will Warren, a partner at . who covers the marketing industry, explains: “In this economy companies are more conservative with advertising spending. They want to see good returns on any investment they make. There is a big focus on how AI can help with personalized marketing messaging across media and boost sales.”

Companies like Wunderkind who specialize in this field are reaping the benefits of this focus in the retail industry. Customers who have had successful Wunderkind campaigns have spread buzz about their experiences throughout the marketing world. This word-of-mouth advertising has helped the company build its fast-growing client roster.

But it's a company in a crowded field where competition is fierce. Rivals including Bluecore, Dynamic Yield, and Omniconvert are all vying for market share with similar product offerings.

[Read: How AI is Leveling the Marketing Playing Field Between SMBs and Big Business]

Wunderkind: ‘Identity network’ analytics tool is the secret sauce that personalizes customer marketing campaigns

According to Bill Ingram, Wunderkind’s CEO, the company’s secret sauce is its “identity network,” an analytics tool that uses machine learning and AI to determine who visitors are, and their historical behaviors and buying habits. This helps it make personalized product recommendations for customers and develop the most effective video, email, or text campaigns targeted to their preferences, he said.

The company also offers triggered ad campaigns that give brands the ability to serve ads to potential customers only after they have disengaged with the publisher’s site, so readers are not interrupted. “This improves the customer experience and boosts customer loyalty,” Ingram said.

[Read: Startups Turn to Venture Debt to Turbocharge Growth]

Reimagining digital ads as tailored online experiences is ‘the wave of the future’

Traditional ads on publisher sites often pop up and disrupt the user experience, regularly causing users to exit an ad immediately and leave. But Wunderkind ads “will not render on page load.” Instead, the goal is to “recognize real-time behaviors to find and serve visitors at the best time available,” Ingram said.

“This technology is the wave of the future for the industry as brands look for ways to connect with current and future customers through tailored online experiences,” he said.

Targeting marketing around personal customer experiences and interaction is a key issue for brands today, according to findings from the Digital Trends Report from Adobe and Econsultancy, based on surveys from nearly 10,000 marketers, consultants, and practitioners.

This is especially true for retail brands that do the lion’s share of performance marketing. Building such tech tools on their own and conducting these marketing efforts is difficult and expensive. In addition, navigating privacy and data storage regulations is a challenge.

Luxury footwear brand generates 14.5 times its return on ad spend via tech: ‘It was like putting jet engines on a prop plane’

Wunderkind only collects anonymous data—all of which is encrypted—which is a feature that helps ensure that brands are in compliance with consumer privacy laws.

That is why companies such as Koio, the Italian luxury footwear brand, turned to Wunderkind two years ago. The sustainable company that makes vegan and leather shoes from regenerative cows, is a favorite among such celebrities as Gwyneth Paltrow and Seth Rogan, but it is working on building brand recognition among everyday consumers too.

“We are a relatively young brand in the U.S. that wants to boost customer engagement, grow our needed help to push Koio to the next level,” said Joe Anhalt, Koio’s Vice President of Marketing. Wunderkind’s technology was able to identify potential customers and link them to Koio’s email system and send them targeted messages so we could boost sales.”

He notes that the company saw results from the first week of using the technology and today about a fifth of Koio’s total e-commerce revenue is being driven by Wunderkind. “It was like putting jet engines on a prop plane,” said Anhalt. It’s return on investment has been impressive: The company is generating 14.5 times return on their ad spend with Wunderkind.

Today Wunderkind has more than 700 employees. Plans are to use its latest round of venture capital to further develop its platform and build its generative AI team.

“Right now, our core client base is e-commerce retailers, but we are exploring ways to expand into other areas like fintech, hospitality and travel,” said Ingram.

Wunderkind has achieved tremendous growth in its two largest markets, the United States and the United Kingdom, increasing year-over-year revenue by 53% and 56%, respectively, and is on a path to profitability and has plans to go public in 2025 or 2026 when the market for initial public offerings becomes more favorable. “Scaling our business toward that goal is the priority,” said Ingram.

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Published October 24, 2023