As Regulatory Scrutiny Intensfies, Ad Targeter eXelate Adds To Second Round

The behavioral targeting business is looking as challenged as it ever has these days, considering the recent developments coming out of Washington DC about regulating online users’ privacy and the FTC’s call for a “Do Not Track” button embedded in browser systems. Still, with online ad spend rising into next year, there’s still a lot of opportunity there and one of the leading companies in the space, eXelate, which operates an open marketplace for audience targeting data, completed the second round it raised in August.

Trident Capital is the newest investor. In August, Menlo Ventures and Carmel Ventures invested $11 million with a commitment to invest an additional $4 million if needed. New York-based eXelate found Trident Capital to complete the round at $16 million with their contribution of $5 million.

Since eXelate raised its first $4 million round three years ago, the company has captured a lot of attention from publishers as well as advertisers for its data gathering.

The company has done a very good job at making alliances, something that is going to be very useful as the battles on Capitol Hill rage on next year. Several months ago, the company added two big names to its board: Martin Nisenholtz, the New York Times Co. (NYSE: NYT) SVP of Digital Operations, and IPG’s Mediabrands Ventures CEO Matt Freeman.

Updated: In an e-mail response to some earlier questions, eXelate Chief Revenue Officer Mark Zagorski said that the company planned to do four things with the proceeds of the funding:

— Building out its technology around its audience access engine
— Increasing the functionality of that engine to help publishers package, protect and deliver data
— Building more outreach to consumers. The company is promising greater transparency as well as the ability for users to manage their data
— Enhancing the data pool, so that advertisers can target better

Asked about the company’s feelings about the rumblings on Capitol Hill and the insertion of a “Do Not Track” feature into users’ browers, Zagorski said that if users want to be able to access free content, then publishers will have to pay for it through advertising. “A key part of making advertising work is relevancy — driven by data. The challenge is that consumers haven’t had much transparency into this equation so we need to do a better job making this clear, giving consumers more control over the transaction and ensuring that we abide by clear self regulatory principles such as have been established by the Network Advertising Initiative [an ad network and data exchange organization] and the IAB.”

The best way to do this, while protecting the $20 billion-plus online ad business, is “via a strong, industry supported, self-regulatory initiative that compels all legitimate players to participate and leaves those who don’t play by the rules essentially ‘out of the game.’ The data protection tools, marketplace access processes and industry leading consumer transparency efforts that eXelate is driving enable the company thrive in an online world based on a more open transfer of consideration between consumers, advertisers and publishers.”

Naturally, regulators and privacy advocates have taken a different view of how onerous the Do Not Track regime would be. The industry is scrambling to portray itself in a better light and more controls and outreach of the kind are likely to be adopted. Whether that will mollify targeting critics, however, is another thing. But the more libertarian ethos likely to be ushered in with the next Congress gives the targeters a much better chance of beating back the most painful restrictions.