Monday, April 21, 2008

Startups like Entrecard bet on blogs as the next hot ad market

By Christopher Calnan

Advertising revenue on blogs has increased sharply, and several local companies are positioning themselves to reap the benefits, building technology designed to help blog publishers connect with advertisers.

Entrecard, a Cambridge-based startup company that enables bloggers to advertise with other blogs, launched in November 2007 and now serves nearly 8,000 blogs. Norwalk, Conn.-based Lemonade Inc., which helps bloggers and other online publishers to sell items through virtual "lemonade stands," is now claiming 32,000 customers -- six months after launching.

In March, CBS television stations in five markets including Boston launched local ad networks for regionally focused blogs as a way to generate revenue by including CBS news widgets on their websites. And last year, Yahoo Inc. bought for a reported $10 million Northampton-based MyBlogLog, a website started in 2005 that tracks visitor activity on blogs -- a key statistic for online advertising.

All the activity in the blogosphere is giving online publishers more advertising channels, and consequently, providing greater opportunities for more businesses to link bloggers with advertisers, industry observers said.

Arlington-based Blogpire Productions, the publisher of 24 consumer blogs, now considers more than 50 advertising services for its blogs -- up from 10 when it launched in 2004, CEO Jay Brewer said. "I think in the last year it's gotten crazy," he said.

And while the numbers are tiny compared with overall advertising dollars, the growth rate supports his observation. Advertising revenue from blogs, podcasts and real simple syndication (RSS) feeds reached $196 million in 2007 compared with $78 million in 2006. During the next three years, that figure is projected to reach $1.1 billion, according to eMarketer Inc., a New York online marketing research firm.

Blog traffic is still not high enough to attract major ad networks, and blogs generally allow users more leeway on feedback and interaction, which makes large brand advertisers nervous. But that's changing as blogs band together and grow in credibility, industry observers said.

Blog ads also tend to be more feature-rich than typical online display ads, offering everchanging graphics without the need to refresh the web page. Lemonade CEO Thomas Zawacki said such features, combined with the targeted audiences that blogs attract, usually lead to a higher rate of visitors who click on the ads.

The banner advertisements found on conventional websites tend not to work for blogs because blog visitors expect more interaction, said Venkat Kolluri, CEO of Chitika Inc., a Marlborough-based company that supplies ads to blogs and social networking publishers.

Last month, Entrecard received a $112,000 angel investment that founder Graham Langdon said should last the company through its first year of operations. Entrecard is a free service, and Langdon plans to generate revenue by selling commercial ads -- which he hopes will eventually make up to as much as 10 percent of the total ads the company places -- after it reaches 10,000 members.

This week, Langdon traveled to Calfornia to seek $2 million in venture capital that would be used for promoting Entrecard. He said he would move the company to the West Coast if a VC firm there invests in Entrecard.