Google (NSDQ: GOOG) chairman Eric Schmidt has led an undisclosed amount of funding for rich media ad firm Spongecell. The investment appears to be independent of Google on Schmidt’s part. He was joined by an eclectic group of investors, including Jim Pallotta, chairman and managing director of PE firm Raptor Group, Brian Rooney, a board Member of the Pittsburgh Steelers, and existing backer Silverhaze Partners.
New York-based Spongecell was founded five years ago by several Carnegie Mellon computer science graduates. Spongecell previously raised capital in 2007 from Halo Venture Partners, The Pilot Group and SilverHaze Partners. The company’s rationale is premised on the ability to make banner ads “more creative.”
The notion of making display more of a branding medium is viewed as crucial to closing the gap in CPMS between online and offline. While that idea might have seemed fairly novel in 2006, just about every display specialist is predicated on driving premium “branding” dollars, as opposed to low-cost direct response ads, which still comprises the majority of banner ads and other display variants.
Spongecell has impressed investors like Raptor’s Pallotta by adding more than 200 unspecified brands to its client roster last year. The company has previously struck an arrangement with ad holding company Interpublic Group and its Media Lab. Founding CEO Ben Kartzman says that the proceeds from this latest round will be used to support the sales and product development teams. That could enable to reach out to other ad major ad firms.
It’s not clear whether there will be a direct connection to Google. Whether there is or not, highlighting Schmidt as the lead investor is enough to get the attention of the business press and the other ad agencies.
It also suggests where Schmidt’s interests as an investor lay. In April, Schmidt’s investment firm, TomorrowVentures announced a partnship (via Quintura’s blog) with Digital October, a Moscow-based business incubator.
While that was a more general arrangement meant to bring Schmidt’s company closer to the Russian market, which is viewed as an increasingly important online ad venue, this latest deal indicates the importance Schmidt believes in the ability of display to fulfill the needs of brand advertisers and their agencies at a time when Google has dethroned Yahoo’s long-held reign as the leader in graphical ads.