April 14, 2004

Next Wave: Where Google fears to tread

Vibrant Media pushes the envelope with online advertising.

In July 2000, former AOL Europe executives Doug Stevenson and Craig Gooding took a gamble. Despite a sliding stock market and a bleak online ad market, they started a business matching ads to Web content.

VCs snubbed the pitch, but the pair managed to raise $2 million from European finance institution Fortis and angel investors to found Vibrant Media.

Today, the company is carving a niche in the booming online advertising industry. It was profitable for the whole of 2003, says Mr. Stevenson, who is now CEO. He projects the 50-person company, which moved its headquarters from London to San Francisco in 2001, will make revenues of $25 million this year.

The company's "contextual advertising" business lets advertisers pick lists of keywords. Then, when these words show up in articles, relevant ads are inserted alongside.

Vibrant Media's latest product, IntelliTXT, is causing a stir in publishing circles. It goes one step further than matching banner ads with the content of a page - the ads are integrated with the content itself. IntelliTXT first scans articles for keywords provided by advertisers. When it finds a match, it turns the reference into an advertising link. The link appears in green and is double underlined to show it's an ad. When users roll over the link, a popup box appears (example). In addition to selling keywords itself, Vibrant Media also takes ads from paid search advertiser Overture, a strategic partner.

The key: relevance. "The more contextually relevant your ad can be, the better the performance," says Autumn Martin, media supervisor with Universal McCann, an advertising agency whose clients include Microsoft.

If it catches on, IntelliTXT will solve problems for publishers and advertisers alike. With Web users still reluctant to open their wallets to pay for content, it's another way for publishers to put more ads on the page. "It becomes an additional revenue stream, without taking any inventory," says customer Bob Gordon, president of The Auto Channel.

The service is also helping sites generate revenues from unlikely sources. Mike La Rotonda, general manager of consumer electronics for ConsumerReview.com, says he uses the ads on his site's message boards, which are typically more difficult to monetize. Both Mr. Gordon and Mr. La Rotonda say they haven't received any complaints from users about the ads. "The reality is that everyone is used to seeing advertising," says Mr. Gordon.

Advertisers, meanwhile, are looking for more people to actually click on online ads, says Nate Elliott, an analyst with Jupiter Research. He says that contextual ads, such as Google's AdSense program, which displays relevant text ads alongside articles, are not performing as well as ads that accompany search results.

The big question is whether publishers will want to invade their articles with ads, and if readers will tolerate them. At the moment, IntelliTXT's 150 Web site customers include the Auto Channel, gaming site IGN and Popular Mechanics. Convincing more mainstream publishers to join the party will be Vibrant Media's next challenge. Mr. Stevenson says he expects IntelliTXT to become a standard ad unit in time. "It just takes time for sites to get more comfortable with the concept," he says.

Charlene Li, an analyst with Forrester Research, says that for shopping or travel content, for example, IntelliTXT makes perfect sense. But for breaking news stories, contextual ads can backfire. Ads for knives, for example, would be bad taste within a stabbing story.

To be sure, Vibrant Media faces some stiff competition - not least in the form of Google, which could potentially expand its AdSense program into IntelliTXT's territory. To this, Mr. Stevenson says that the growth in the online advertising market means there's room for more than Google and Overture. He also sees IntelliTXT as a complement to AdSense: "The main competitors are TV and print advertising," he says.

Back to main Articles page