If you spend a lot of time on online travel sites like Expedia and Orbitz, you might have noticed that, occasionally, they actually serve up ads (that don’t look much like ads) that could drive you straight into their rivals’ arms. But that isn’t an ad network oversight, it’s a calculated choice.
New York-based ad tech company Intent Media says just three to five percent of visitors to most e-commerce sites actually buy anything. And, counter-intuitive though it may seem, they say those sites can create a new revenue stream by targeting ads to everyone else.
Since launching in 2009, the company said it’s tried to lay low while focusing attention on online travel agencies. But now that it’s expanding a product for hotel advertising — and looking to industries beyond travel — it’s hoping to raise its profile to attract new advertisers and talent.
In the past three years, it’s raised nearly $30 million from Redpoint Ventures, Matrix Partners, as well as individual investors including LinkedIn’s Reid Hoffman, Gilt Groupe’s Kevin Ryan and AppNexus’ Brian O’Kelley. Now it plans to double its 50-person team, mostly by adding positions in data science and engineering.
Founded by Richard Harris, who is now the CEO, and two other former Travelocity executives, the thesis of the company is that online retailers have even better intent data than Google. But instead of putting it to work for their bottom line, most squander it by letting the 97 percent of visitors who won’t buy on their site go back to Google (which gets to make even more money when those consumers click on to another company’s site). Intent Media’s pitch is that it can help e-commerce sites separate purchasers from mere visitors and then deliver targeted ads via its network to monetize the non-converting masses. (Advertisers bid for the spot and pay on a cost-per-click basis.)
Big data manages risk
Surfacing ads for a rival sounds like a risky proposition. Beyond the fear of cannibalization, it may make companies uncomfortable to think they’re in the business of selling products and services, rather than advertising. But he said Intent uses sophisticated data science — analyzing signals like how visitors entered the site, their relationship with the site, and their actions during the session – to make sure that only the right visitors ever see the ad.
“We take a lot of risk off the table by taking a very big data approach to predicting someone’s contribution value from transaction,” he said. “With every ad call, with every click on the site, we’re constantly updating what is the expected profit from this person… and we update that in real-time using thousands of signals.” When the company’s technology determines that there’s more media value than transaction value in a visitor, it shows the ad, he continued.
Intent Media said it doesn’t count many companies among its direct competitors, but to highlight the value of retail sites’ intent data, it pointed to Amazon, which is using its own intent data to sell ads for competing retailers. It’s a small business compared to its sales revenue, but Business Insider reports that it could be doing $1 billion in ad revenue.
Advertising for rivals is a risk Amazon, given its size and competitive prices, can likely handle better than other e-commerce sites. One can imagine that it would be a bigger hurdle – at least psychological, if not material – for smaller sites to overcome. But Harris said that the three to five percent conversion figure is consistent across industries (except for online flowers, which is, oddly, higher) and emphasized that retailers of all kinds could benefit by thinking of themselves not as a media company or transaction company, but a “traffic monetization engine.”
Looking beyond travel
Intent Media declined to quantify its performance with revenue figures, but said the revenue it can deliver for publishers is “meaningful,” citing its nearly year-long partnerships with travel sites like Expedia, Orbitz, Cheaptickets, Travelocity, Budgetair and Vayama (and more on the way) as a measure of success. It also said that click-through rates for its ads are 10 times the industry average (the industry average is a low standard and isn’t a direct comparison, but Intent Media’s ability to beat it does say something considering that the company is competing for the same inventory that would otherwise be filled by a banner ad).
Additionally, the company said its two-year-old intent-driven hotel advertising product, which it serves across a network of online travel sites, has attracted thousands of advertisers. (That tool matches hotels with prospective travelers at the exact moment they’re searching for and booking a hotel, as well as gives hotels the tools to optimize ad photos and copy.)
According to research firm Forrester, the online travel industry is expected to grow from $101 billion in 2011 to $143 billion in 2016, so there’s certainly money to be made from that sector alone. But since its launch, Intent Media said its aim has been to create technology for all kinds of commerce. While there’s nothing on the table yet, they said they’re discussing options beyond travel.