John Wanamaker once famously said: “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.” Startup Adchemy thinks that’s not true, at least not as fas as Internet advertising goes. And Mayfield Fund seems to agree, to the tune of $19 million, in a funding round that also included Hellman & Friedman and existing investor August Capital. Rajeev Motwani, one of the co-authors of the PageRank paper that got Google started, sits on the company’s board.
Unlike traditional ads, online transactions leave a trail. Adchemy’s products analyze this trail to optimize online advertising campaigns. Optimization is particularly important as advertising moves from pay-per-click to pay-for-purchase.
“Most companies stop at the level of the click,” CEO Murthy Nukala told me in a phone interview, “but we look at actions.” The company is quick to point out that it’s not a web analytics firm, like Omniture, but rather an operational tool that dynamically places and tests ads to find the most effective mix.
So far, it seems to work: The company claims a two to five times improvement in ad ROI for its customers. With over $10 billion spent in the first half of 2007 on online advertising, those can be impressive yields.
No one thought anyone would unseat Yahoo or Microsoft on search but it happened. As organizations like Google grow, I think it is fair to expect guys like Adchemy (I agree, horrible name) to be able to make inroads simply because they are more nimble and dedicated to one goal as opposed to many.
Time will tell…
I have been in advertising business for last 20 years and have seen several companies like these come and go. I don’t see anything unique this company has to offer which Google tools (Google Analytics, Website Optimizer, etc), Omniture does not provide.