AdBrite to auction Web ads to brand marketers

(NOTE: This story contains language in paragraph 7 that may be offensive to some readers)

By Eric Auchard

SAN FRANCISCO (Reuters) - Web advertising start-up AdBrite on Sunday said it will offer a new auction system for buying online brand advertising that aims to disrupt the concentrated hold on the market bigger Internet players have.

The San Francisco-based company backed by top venture firm Sequoia Capital said its new auction system, called AdBrite 2.0, makes online ad space instantly available to the highest bidder across any part of its network of 28,000 sites.

AdBrite said it brings together national brand advertisers such as ESPN, Speedo, Estee Lauder, Vonage, Skechers, Snickers and Sports Illustrated with tens of thousands of independent and niche Web sites and blogs.

The system is a challenge to the way most corporate brand advertising is sold, where companies like Yahoo Inc. (YHOO.O) focus on selling ads to national advertisers on premium sites.

Unlike the broad reach offered by major players, one advantage of AdBrite's network is that it allows advertisers to target the audiences they want down to exact Web sites, by reserving space on specific pages at precise times.

"This is totally transparent advertising market," said Iggy Fanlo, AdBrite's recently hired chief executive, previously an executive at shopping comparison site Shopping.com until shortly after it was acquired by eBay Inc. (EBAY.O).

AdBrite, founded in 2002 by Philip Kaplan, has raised around $12 million in funding to date. Kaplan, a.k.a. "Pud," AdBrite's chairman and chief product officer, is best known for chronicling the end of the dot-com era on his Web site FuckedCompany.com.

AdBrite's new system allows advertisers to make instant ad-buying decisions based on demographics, keyword searches, geography, site quality, among other factors. Initially, only text and graphical ad space will be auctioned. In a month, AdBrite also soon expects to offer online video, mobile and location-specific "inline" ads over its network of sites.

The aim is to create a transparent market that opens up the buying and selling of image-based brand advertising to smaller advertisers and niche Web sites in parallel to the way that Google has decentralized the market for Web-search text ads.

The graphical display Web advertising auction system builds on AdBrite's two-year-old text ad network, which delivers more than 700 million daily page views, a basic measure of the audience for online advertisements, Fanlo said.

Industry data shows that 94 percent of online ad spending goes to the top 50 Web sites at a cost of $2.70 per thousand viewer impressions. These sites account for 40 percent of Web page views -- the basic billing metric for such ads.

But while the dominant players in the online ad industry remain focused on the most well-traveled pages of major sites, Web users are spending far more time on their own profile pages or those of their friends, analysts say. This non-premium ad market is where start-ups like AdBrite and Right Media play.

To reach this more decentralized market, Yahoo last month said it had agreed to take a 20 percent stake in Right Media, which connects ad networks to the less-trafficked portions of sites like MySpace and Yahoo and many smaller sites as well.

The cost of ads on the 60 percent of remaining Web pages averages just 11 cents per 1,000 ad impressions. AdBrite said its auction system can reach this highly decentralized market at a fraction of the cost of existing online ad networks.

"This could really help increase the size of the overall online ad market by reaching previously unserved audiences," said ThinkEquity analyst Stewart Barry in San Francisco.