February 28, 2008 / 5:02 AM / in 9 years

Ad technology firm WideOrbit raises $14.5 mln

NEW YORK, Feb 28 (Reuters) - Advertising technology company WideOrbit Inc will announce on Thursday a $14.5 million round of financing from venture firms Khosla Ventures, Greycroft Partners and the investment arm of Hearst Corp.

The new fund-raising bolsters WideOrbit's aim to create an efficient system for taking stock of advertising inventory available across all media systems, from television to radio and even movie theaters.

The company's software manages more than $10 billion in advertising transactions for more than 900 television stations, radio stations and cable networks. Clients include NBC Universal, Hearst, Gannett Co Inc (GCI.N) and Qualcomm Inc's (QCOM.O) MediaFlo.

Founder and Chief Executive Eric Mathewson built his expertise in the equities derivatives market, where he gained a healthy respect for the potential for automated pricing and inventory to improve profits.

"The underlying inventory systems that run media were very archaic," Mathewson told Reuters in an interview. "I said to myself, how do you create an exchange like the New York Stock Exchange that has run time, or real-time pricing."

Changing that proved a challenge as most media inventory is priced on an overnight basis, while some outlets do it on a weekly or even semi-annual basis, he said.

While transaction-related costs for media buying and selling can easily top 14 percent, Wall Street was already working on a model of a fraction of a percent.

Building the technology backbone for the digital media era has provided opportunities for both start-ups and the Internet's largest players, including Web search leader Google Inc (GOOG.O), which has partnerships with satellite and radio companies to help automate ad sales.

"The only people that understand the speed at which my inventory is being depleted are the people running my inventory systems," Mathewson said. "So we do understand that but an outsider like Google or MSN, they don't know that information."

San Francisco-based WideOrbit has grown to about 200 employees from 80 in the last 18 months. It has recently hired Steve Sommer as its chief marketing officer and Igor Tsyganskiy as senior vice president of engineering.

The company aims to help its media clients integrate traditional media sales with their digital operations.

While the media industry's largest companies tell investors they are aggressively selling combined packages of traditional advertising and digital commercial space, Mathewson says many still do not have the proper infrastructure to pull it off.

"From a technology and execution standpoint, there's far too much bubble gum and peanut butter sticking these deals together," he said. (Editing by Braden Reddall)

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