Adknowledge, based at 4600 Madison Ave. in Kansas City, is the No. 4 digital advertising network. Scott Lynn (right) is the company’s chief executive officer, and Marco Ilardi is chief revenue officer.
The biggest advertising spots on the Internet are household names: Google, Facebook, Bing.
But by pulling together all sorts of digital advertising — from e-mail and search-engine ads to mobile ads and online-game offers — a Kansas City company, Adknowledge, has become the No. 4 digital advertising network.
And it plans to keep growing after announcing in January that it attracted $200 million in new outside financing.
Scott Lynn, Adknowledge’s chief executive officer, said most of the roughly million online advertisers today turned to Google. And heavily trafficked websites such as The New York Times, ESPN and Expedia attract big-brand advertisers.
But “the remainder of the Internet is very, very difficult to advertise with,” he said. “We’re trying to create a single advertiser marketplace for those other segments so that advertisers can go to a single website, enter a credit card number and buy traffic with all of these different companies through a one-stop shop.”
In just six years Lynn’s company has put together those pieces, roughly doubling its annual revenue last year to $300 million.
Its work force has grown to 330, about half of them in Kansas City. Adknowledge also has offices in New York; Los Angeles; San Francisco; Chicago; Fort Myers, Fla.; Britain; and Australia.
The Silicon Alley Insider, a website that focuses on tech business news, last year ranked Adknowledge No. 18, after Hulu and before TheLadders.com, on its list “The Digital 100: World’s Most Valuable Start-Ups.” The report estimated Adknowledge’s value at $900 million.
Some of the building blocks of Adknowledge’s success:
Lynn said the company’s 2009 acquisitions of social media businesses such as Super Rewards (an Internet advertising company that offers points or other rewards to online users who sign up for services) and the media division of Miva Inc., one of the largest independent online advertising networks, supported Adknowledge’s vision of creating a single marketplace for online advertising.
And last summer Adknowledge acquired the Hydra Group, which has thousands of online advertising affiliates — sites that get commissions when the ads they display are clicked, especially if they generate sales or other desired actions, such as requesting information on products or services.
“We currently maintain market leadership positions with our social media and e-mail advertising businesses,” Lynn said at the time of the acquisition, “and believe that Hydra will allow us to achieve the leading position in the affiliate industry.”
Lynn said another factor in Adknowledge’s success was that “a majority of the company is technology-focused,” enabling it to come up with powerful, innovative products such as bidsystem.com and its programming to predict which advertising approach would be most effective for a particular client.
A start in games
One growth area that serious Internet users might not think of is advertising tied to casual games. But it’s one that goes back to the beginning of Lynn’s online career.
A decade ago, while a political science major at the University of Missouri-Kansas City, Lynn left academia to found the company Virtumundo and start TreeLoot.com — a popular online sweepstakes site that involved searching for money in a “money tree.”
“In 2000 we built this game with ‘punch-the-monkey’ banners,” Lynn said.
The banner ads attracted visitors by enticing Web surfers to use a mouse click to “punch” the monkey that hurried across the ad, and then to play a game called TreeLoot, in which the player could win “virtual” currency — and sometimes real cash.
Lynn said he was interested in creating a game but more so in creating an online advertising model.
“I think it was 2000,” he said. “We were the No. 1 or No. 2 advertiser, so we ran more ads online than anyone else.”
It might cost TreeLoot $1 in ad money per person playing the game, Lynn said, but that was OK if the person played long enough that the website could display ads for which other advertisers were paying TreeLoot.com $1.25.
“That’s when it really clicked with us — that the business model was really marketing the game as much as we could because we knew when we marketed it we actually made money from people seeing ads when they played the game.”
“I think like a lot of people who stumbled into the dot-com space in 1997 and 1998, (we) originally started out with gaming, but even gaming was an online advertising model because the way we earned revenue from the game was by showing ads,” Lynn said.
Eventually, the idea evolved into the creation of Adknowledge and the use of behavioral targeting — a practice by which marketers can gather data to customize ads to suit users’ interests.
Lynn said the idea behind Adknowledge was to take companies using search engine advertising and help them place their ads on other types of websites. With enough data on people’s online habits and preferences, Lynn said, the ads could be placed “so that when people go online and they go to websites, they actually see ads that are relevant to them, rather than the same types of ads for credit cards or mortgages or whatever they may be.”
Privacy concerns
Concerns about online privacy led the Federal Trade Commission in December to urge Congress to require that browsers be equipped with “do not track” options. And the Commerce Department called for a “privacy bill of rights” that would let Internet users decline some or all data collection about them.
Lynn said the public should be concerned about companies gaining and using personally identifying information. But he noted that Adknowledge did not use “cookies,” the tiny text files that some companies leave on people’s computers to enable tracing of their online behavior.
Adknowledge’s system does gather data on how people interact with online ads, Lynn said, while protecting their identities.
“We don’t track or store any personally identifiable information,” he said. “To us, people are random numbers, and those random numbers are associated with ad interactions within our network. So we know that number 1234 clicked on an ad for steel-toed hiking boots, but that is the extent of our knowledge.”
So it isn’t clear whether, or how much, Adknowledge or any similar company might be hampered by any congressional action. Browsers already offer many privacy controls and have increased them just in the past year.
Moving ahead
With more than $200 million in new financing, Adknowledge can expand and keep acquiring other companies that increase its reach into all types of online advertising, including mobile devices and video sites.
The company in January said the financing included an equity investment led by JMI Equity, which invests in software, Internet and business services companies, and debt financing led by Bank of America.
And Lynn is happy to be providing some economic growth during tough times.
“The business has grown significantly in Kansas City over the past year,” he said. “The interesting thing from a local economic development perspective is that roughly two-thirds to three-fourths of our employees in Kansas City are relocated. So almost always we’re pulling (people) out of the (San Francisco) Bay area, pulling out of New York, pulling people out of L.A. and moving them to Kansas City. So the economic growth from that has been great for the city.”
On the grow
Adknowledge roughly doubled its annual revenue last year, to $300 million. Much of that came internally, but Adknowledge also grew by acquiring other companies. Here are some of its recent acquisitions and other announcements:
2009 March 12: Acquires the media division of Miva Inc., a large online advertising network.
July 22: Acquires KITN Media, owner of Super Rewards, which enables online games and social sites to offer virtual currency to people who sign up for advertising offers.
Nov. 3: Acquires the Lookery ad network, which Adknowledge says increases the total ads displayed through its social ad network Cubics.com to more than 10 billion monthly and more than 40 percent of ads on Facebook applications.
2010 June 21: Acquires the Hydra Group, which has thousands of online advertising affiliates.
Nov. 3: A leader in data-mining technology, Usama Fayyad, joins Adknowledge as an adviser with the title of chief scientist. He had been chief data officer and executive vice president at Yahoo.
2011 Jan. 12: Announces more than $200 million in new financing.
Some Internet advertising terms
Affiliate marketing: An affiliate website runs ads for a business and gets a cut of the revenue from the business when someone clicks on an ad and then makes a purchase. Affiliates also can get paid if the person clicking the ad then performs a desired action — say, signing up for a newsletter or requesting an insurance quote. Many advertisers also use — and pay a cut of each sale to — an affiliate network that helps them find and manage their affiliates.
Display ads: Banner ads and pop-ups are typical display ads, but they are being placed more strategically, based on demographics, geography and other behaviors of users that might be known.
Pay-per-click search-engine advertising: A company pays for text ads to be displayed on a search engine results page when a key phrase is entered by the search users. The advertiser pays for each time its ad is clicked on, which can take the viewer to the advertiser’s website. There is no fee for displaying the ad if it is not clicked upon. Also known as paid performance search marketing, paid for placement, paid listings and sponsored links advertising.
By MIA KATZ Special to The Star
Photo: Rich Sugg