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Big Money Bet on Display Ad Tech

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The banner ad is the Web's original advertising format, but many have viewed it as a disappointment. Prices for display ads quickly tumbled, and marketers fell in love with targeted search options.

That's not to say display units are on their way out. On the contrary, tens of millions of dollars in venture capital is flowing into ad technology. Investors are betting that a market the Interactive Advertising Bureau pegged at $8 billion in 2009 can quickly grow five times or more with the help of better machinery. (See also: "Display Ads Aim for a Banner Year.")

"If you take the logic behind targeting to the extreme, it's all about discovering hidden tier-one inventory," said Terence Kawaja, managing director of GCA Savvian Advisors. "There's a lot of inefficiency in inventory pricing."
 
Inventory aggregator AdMeld is the latest company to benefit from this belief, closing a $15 million Series C round of funding that brings its backing to $30 million. Norwest Venture Partners led the round, which included AdMeld's previous VCs as well as a strategic backing from Time Warner Investments.
 
AdMeld operates a tech platform that publishers use to maximize the amount of money they make from display ads. Publishers like Discovery, Fox News, Reuters and Pandora use its yield-optimization software to determine how best to package display ad inventory for audience-based buys.
 
"It's a huge market no matter how you slice it," said Michael Barrett, AdMeld's CEO. "It's a market that's growing. There's a very clear problem that appears to be able to be solved through technology."
 
Currently, online publishers have two classes of ad inventory that are defined not by crunching data but by how they are sold. The top tier is what its sales force sells; the remnant is the rest that's unloaded through resellers, typically ad networks. The advent of audience-targeted real-time buying systems, whether ad exchanges like those operated by Google and Yahoo or inventory aggregators like AdMeld, promises a bigger market by matching advertisers to the specific audience they want. That would get the online world closer to its promise of matching the right ad to the right person at the right time.
 
That's led to a flood of investment in the many players building this new display ad architecture. AdMeld competitor The Rubicon Project has raised $42 million. Several demand-side platforms have received venture funding, most recently Triggit with a $4.2 million round. The hope is an exit like Invite Media, which Google bought for a reported $81 million. A leading player in data is expected to close a significant funding round this week.
 
The result is a crowded market. Kawaja has a slide that illustrates the point, showing more than 50 intermediaries between the ad buyer and publisher. Ad-buying transactions are not as complex as might be thought through such a slide, Barrett said, but there is clearly a need for fewer players.

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