Vibrant Media Puts Digital Ads in Context

AOL veterans pioneer new advertising technology—and find their business model needs tweaking.

NEW YORK, Janueary 28, 2011 —(CRAIN'S NEW YORK BUSINESS)—When Doug Stevenson headed
e-commerce at AOL Europe in the late 1990s, matching online advertising with the appropriate content involved lots of time-consuming manual steps for his technology team. “It was an inefficient system,” he said. “I thought there must be a way for technology to do this better.”

To that end, Mr. Stevenson, along with former AOL Europe e-commerce manager Craig Gooding, founded Vibrant Media in 2000. The pair hired software engineers to create “contextual technology,” which aligns words that appear in articles and other content across the Internet with relevant advertising and other information, such as videos.

Today, the $100 million Manhattan-based advertising technology company has 250 employees in New York, San Francisco, Detroit, Chicago, Boston, Los Angeles and five European cities. Messrs. Stevenson and Gooding were recently awarded the 2010 Ernst & Young Entrepreneur of The Year Award for the New York area.

Early industry critics panned the technology, but advertisers, tired of online banners and display ads, were sold because contextual advertising was quantifiable. Clients such as AT&T, General Motors and Unilever pick key words found in editorial content on media sites like Fox News, iVillage or MSNBC. The key words are
double-underlined; users who scroll over the words with their mouse trigger a box with an ad. When a user clicks through to the ad, the advertiser pays Vibrant a set amount. Then Vibrant shares the revenue with the media partner that owns the site where the ad was placed.

Mr. Stevenson would not reveal the revenue split. However, with more than 6,000 media partners, the owners have plenty of evidence that their approach is working. The company is preparing for a possible IPO.

HIT

If timing is everything, Messrs. Stevenson and Gooding were not in luck. They shopped their business plan to venture capitalists in early 2000. One VC, who promised them $10 million in startup capital, advised them to leave AOL. They did. Then the deal didn't pan out. Making 40 more pitches, they encountered closed purses.
“The dot-com bust dried up the appetite for companies like ours,” recalled Mr. Stevenson.

But he and his partner persisted because they strongly believed they would revolutionize online advertising. Finally Mr. Stevenson, who is Scottish, and his partner turned to a business incubator in Europe, which gave Vibrant $500,000. Not only did the founders learn that persistence pays off, but the small investment was a blessing. “Before the dot-com crash, companies that were funded were wasteful; investors wanted to get rich quick,” Mr. Stevenson said. “Many companies launched without a customer base. They squandered money prematurely on marketing. By having a small investment to work with, we focused on building a prototype and getting it to the market. We were singly focused on the fundamentals. That paid off.”

MISS

When Vibrant initially developed contextual advertising technology, it had a phalanx of big-name media partners, among them McGraw-Hill, NBC and Ziff Davis. But its advertisers, culled through online search aggregators, were smaller companies such as Hair Extensions of Texas. Bringing such advertisers to big media companies was a mistake, Mr. Stevenson now believes. Dissatisfaction with the business model resulted in the loss of publishing partners.

In 2005, Vibrant recalibrated it business model by relinquishing its relationship with aggregators, and hired a sales force to focus on the top 100 advertisers. More than 70 major brands in nearly a dozen industries, including consumer electronics, finance, health care and pharmaceuticals, are now advertisers, with the roster ranging from Microsoft to Toyota.

About Vibrant
Vibrant (www.vibrantmedia.com) is a world leader in contextual technology aligning billions of words across the Internet with relevant video, information, tools, and advertising. With over 6,000 premium publishers, reaching
225 million unique users per month (comScore, November 2010), Vibrant gives top brand marketers the opportunity to deliver highly targeted advertisements within premium Web content and offers publishers premium editorial tools to re-circulate users throughout their websites. Vibrant works with top brand advertisers such as Microsoft, Unilever, Warner Bros and AT&T. The company was founded in 2000 and has offices in London, New York, Boston, Detroit, Chicago, San Francisco, Los Angeles, Paris, Hamburg, Munich and Dusseldorf. Vibrant's rapid growth has been recognized by the Inc. 500 and Deloitte Fast 50 lists. Vibrant CEO and Co-founder Doug Stevenson was named Ernst & Young Entrepreneur Of The Year® 2010 for Metro New York. For more information, visit:www.vibrantmedia.com or www.hyperlinkevolved.com or www.facebook.com/vibrantmedia or http://twitter.com/vibrantmedia.