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Summary:

Adchemy has figured out a way to tweak web ads to make them dramatically more effective. The company performs a crazy real-time technical dance to optimize the ads and landing pages shown to searchers. We visited its new office this week to learn more.

Adchemy, an emerging advertising powerhouse, has figured out a way to tweak web ads to make them dramatically more effective. The company performs a crazy real-time technical dance to optimize the ads and landing pages shown to searchers.

Adchemy CEO Murthy Nukala

The idea came out of a realization by CEO Murthy Nukala and his co-founder, Rajeev Motwani (the now deceased influential angel investor and Stanford professor), that to improve demand for online advertising, it must become more effective — not just efficient — and only then could it provoke a “share shift” of traditional advertising dollars. If all goes as planned, the web advertising market could grow dramatically. I visited Nukala at his company’s new Foster City, Calif., headquarters on Monday (which are actually directly across the office park from competitor QuinStreet) to learn more.

Last fall Adchemy signed up Accenture as an investor in a new $30 million round (also including Mayfield Fund and August Capital, bringing the 5-year-old company to more than $57 million in total funding). Adchemy is now in testing with some of Accenture’s powerful client advertisers, and hopes to announce relationships with them soon. Sure, these are early-day numbers, but the company recently announced it had grown revenue by 60 percent last year and its number of employees by 50 percent (to 135).

How does Adchemy actually work? “We featurize every part of advertising — every button, every page — then compute how much every feature is contributing to success or failure,” said Nukala. The company’s AudienceMaster system (which it is now building out as software as a service) takes in as much (non-personally identifying) data as it can about the person making the search. So if I’m searching for a keyword like BlackBerry, for example, it figures out as much as it can about my actual intent — for instance, potentially what I really want is to find smartphone data plan pricing in my area.

Adchemy then creates machine-generated ad copy to respond to my profile and the intent of my search terms, and shows a customized ad on the search results page on which I land. When I do click, a custom landing page is configured and served onto the advertiser’s web site using an iFrame — so instead of seeing a standard AT&T landing page, I would go directly to one that shows my options for signing up for a BlackBerry in my coverage area.

This all happens in the time of a click, with literally thousands of potential versions evaluated. Nukala said Adchmey can create a dynamically constructed banner ad, for example, within 30-40 milliseconds. One early Adchemy customer, home security provider Protection One, has increased conversion rates 218 percent. The idea is that people will respond much better to advertising that’s customized for them — the advertising really does become the content you were hoping to find.

  1. This is amazing and sounds like it could get pretty heavy, pretty quickly. I’ve been waiting for years for an advertising company (not in the traditional sense) to partner with me as a consumer. Just ask me for my information (minus name, address and social) and my preferences and then promise to serve me ads that are specific to me. As a consumer, if I see an ad that’s not a fit, I promise to report it to help improve the system. This changes advertising from a potential “well educated shot in the dark” to an iterative relationship. As as consumer I would always have the power to turn the ad service off but for the most part this enables advertising to become a much better experience.

    This will only be possible if data portability gets to where it needs to be.

    So if you’re listening Apple: I nominate you!

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  2. Get it? It’s like “alchemy” but it’s “ad” as in “advertising”.

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  3. Gotta love the term “Customer Profitability Layer”

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  4. The idea and intent behind Adchemy is impressive.

    Innovation in the advertising value proposition field is also being delivered by http://www.dataxu.com

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    1. @Alexander – are you affiliated with Dataxu?

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  5. Web 3.0 here we come!!!

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  6. Very cool. I would be interested in knowing how this is different from the Adobe (Omniture) Test&Target solution. Personalized behavioral targeting is a huge focus right now in the Web Analystics industry.

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