Lotame Matches Ads to Social Networkers

The web isn’t based around topics anymore. On an increasing number of web pages, it’s hard to align content along a tidy vertical and sell ads against it. Social networks, especially, are full of users chatting, musing, and relating to one another – and rarely does that conversation confine itself to a sellable topic like travel or plasma displays.

Some people say the answer is a change in philosophy – instead of selling banner ads, why not teach a marketer how to trick out a MySpace profile? Another approach is finding new ways to match traditional ads with user-generated content.

One startup, Columbia, Maryland-based Lotame, thinks it can target ads better by analyzing behavior on social networks. The idea is to provide software that bolts onto ad servers and feeds in information about people’s cookies, member profiles, interactions with other users, and responses to ads.

“We’re not looking to be an analytics company that just has cool reports,” says Lotame CEO Andy Monfried, a former executive at Advertising.com. “We’ll make it actionable.”

Lotame, founded in March, has raised an angel round of between $1 and $2 million. It will launch its first customer, whose identity is not yet disclosed, on December 4.

Monfried argues that contextual advertising, a la Google AdWords, is best fitted to a web 1.0 world, where information flows in one direction. “In a two-way conversation,” he says, “the information on the page is not the most important thing. It’s relationships, comments, amount of time spent.”

Sites like YouTube and MySpace currently do some behavioral targeting. (Try logging into MySpace from a female account, and then a male account. Lots more boobs in the latter.) YouTube uses TACODA, which follows users across nearly 5,000 sites to serve ads that relate to where else they’ve been surfing. (e.g., someone shopping online for a car one day would continue to see automotive ads throughout the week.) Privacy-oriented Facebook, on the other hand, has declined to engage in behavioral targeting thus far.

TACODA founder and chairman Dave Morgan told us yesterday he thinks the “behavioral economy” will be immensely lucrative, but his company is not ready to scrape personal data from the long tail, a la Lotame. A former lawyer, Morgan is concerned about widgets of all kinds transferring data across sites and away from privacy policies. TACODA adheres to a strict standard of anonymity, and its customers are primarily media publishers who have clearly established ownership of their content.

The risk is, this kind of behavioral monitoring could easily become adware 2.0, wrapped up nicely in Javascript. But Monfried insists Lotame data will be stored and shared only in aggregate, and strictly according to privacy policies.

On the upside, as GigaOM contributor Robert Young puts it, “social media is not mass media.” Modifying and improving advertising for the new-and-improved web is the best way to keep it running.


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