No venture capitalist’s week is complete without seeing a company in the semantic space holding steadfast to the assertion that its pre-money Round A valuation is a steal at $50 million. The situation wouldn’t be totally absurd if it were not for the facts that these technologies are mostly half-baked, or far from becoming a deployable product. And they are most definitely leaps and bounds from being able to generate revenue—let alone actually generating revenue at the time of their pre-money $50 million valuation pitch.
But in the middle of this circus is a modest and press-shy company called Peer39. The company, which has purposefully been under the publicity radar since its inception in 2006, is a promising example that semantic technologies have true monetization potential. Peer39 is demonstrating this thoroughly through semantic advertising, the next evolutionary step beyond behavioral advertising, which was preceded of course by contextual advertising.
Peer39 is spearheading this space with its semantic advertising network, which is on track to hit one billion impressions by the end of the year. Their network only handles display ads at the moment, charging advertisers based on a CPM (cost per thousand) or CPC (cost per click) basis.
In an interview with TechCrunch, Amiad Solomon, the company’s CEO, claims that through the networks’ 30 top-level categories and thousands of sub-categories, Peer39 is providing advertisers, on average, clickthrough-rate improvements of four times what they were getting before. Publishers hail from all verticals, including technology, automotive, finance, and health.
Powering Peer39’s ad network is SemanticMatch, an algorithmic engine able to perform precise matching of commercial offers with user-generated content content (blogs, forums, etc.). SemanticMatch employs natural language processing and machine learning to determine meanings, topics, categories and even sentiment. All this, mind you, is done in real-time and Peer39 does not employ cookies in any way, nipping many privacy-related concerns in the bud.
Peer39’s technology has been two and a half years in the making. The 44-strong Israeli R&D team includes the former VP of R&D at Nielsen Online, as well as scientists from the Technion Institute (Israel’s MIT) and the Israeli army’s prestigious intelligence units. Together they were able to tackle the challenges of breaking down text into small enough pieces to categorize text with algorithms that are 1) generic enough to be applicable across a wide variety of content categories, and 2) able to adapt themselves to new categories on-the-fly.
Unlike contextual analysis that seeks out key words, Peer39’s semantic analysis engine—SemanticMatch—looks at the entire page to derive its meaning and its relevant categories. Below are a couple of examples provided by the company (I’ve added the italics for emphasis):
Example 1: “Amazon is a great place to visit.”
Peer39’s Category Analysis: Travel, Brazil, South America.
Example 2: “Amazon is a great site to visit.”
Peer39’s Category Analysis: Ecommerce, Internet, Business and Finance.
Category granularity can go down to seven levels. For example:
Technology > Consumer Electronics > Digital Camera > Canon > Powershot > SD870 IS > SD870 IS Silver
Auto > Compact > GM > Chevrolet > Chevrolet Cobalt > Chevrolet Cobalt LS Sedan
Peer39 is also able to determine positive/negative sentiment. This is important because it allows Peer39 to offer its advertisers various brand protection thresholds, such as offensive content, negative content, mention of competitors, etc. Canon, for example, might not want to advertise on a page with a negative review of one of its cameras.
On the business execution level Peer39 is attempting to pull off a Tacoda or a Quigo exit. Both companies were able to develop sizeable ad networks by delivering quality ROI results and working closely with agencies.
The company has raised $11.7 million from Canaan Venture Partners, Dawntreader Ventures, and JP Morgan. (The company won’t disclose its pre-money valuation, but given how much it has raised, a valuation north of $50 million is a safe bet). Its board of advisers includes Eytan Elbaz, a co-founder of Applied Semantics (which was bought by Google and became the basis for AdSense) and the former president of Tacoda Daniel Jaye. Also, the company just announced that Matthew Goldestein, former SVP of Revenue Operations at Tacoda joined as COO.
Wow, these guys seem to mean business with semantics. It’s interesting how they fly below the public radar and still are able to build a substantial ad network.
Peer39’s technology looks truly state of the art to me. The fact that they’re combining numeric-based technology (machine learning) and symbolic-based technique such as natural language have something to say about what they’re doing, because these 2 non-compatible domains are quite difficult to combine into one single framework. You can use or adopt them both in an application, but they’re not working as one framework. They’re still 2 different methods working together in one application. There is progress in its development and it will continue to improve over time and there is no doubt that Peer39 is right into its development at the moment.
Perhaps, Peer39 shouldn’t blink its eyes as there is also a huge push from Yahoo, Microsoft, Google and others for development of better system for automated online advertisement. The first conference held on this subject took place last year in San Jose, California. The attendants were reps from Google, Yahoo, Microsoft, Neo Metrics, University of Hannover and others. The proceedings from the conference is available here:
Proceedings of the 1st international workshop on Data mining and audience intelligence for advertising
So, I reckon that the competition will become tougher as everyone is putting huge resources into R&D in this domain.
Truly great stuff. I thought there was no real progress in semantic web but obviously I was wrong.
One big challenge, and not to go after Peer39 since they are doing such a great job, is the use of semantic web for multimedia content. That’s one huge challenge, and seeing how popular and widespread videos and podcasts are - someone will have to go after it.
Looks good. Any word if they will be geo targetting the ads?
Roi great post.
Amiad and James are doing a great job on the execution. I have a feeling these guys will see a massive exit from one of the big engines in the next 12-18 months. I hear they have some pretty big clients.
This is innovative stuff here. Semantic search is absolutely the key to targeting more relevant “advertising.” While I’m sure they are working on it, I’m surprised Google hasn’t made as much noise in the semantic search field. I wouldn’t be surprised if Google bought out Peer 39. Peer 39 represents a second generation search ability, the ability to understand context. This is extremely important for advertising on niche driven sites and communities, because this is where a super relevant advertisement is most valuable, namely because people are more likely to click than on a general portal site advertisement. This is how you innovate. LOOK!… http://www.readtheanswer.com/index.php?RTA=web2
They just may be talking to Google about a potential sale. Anyone hear anything on this matter?
Nice writing style.
Have signed up… Even though there’s very little on their site about how the ads are integrated or served, or, indeed, the format of the ads that they support. (Or any mention of details on revenue or how their backend advertising marketplace is structured.) We’ll see…
Great stuff and we are probably going to see more of these in the future with different solutions and variations in niche/mash-up markets.
A point to note - though the technology is important but the human touch or chemistry on how the product connects with users is essential too.
Best regards,
Darren Lee
http://www.adexcel.com
Love the fact they were in stealth for more than two years, allowing them to get ahead of the game. Good stuff.
“examples provided by the company”
That smells like a marketing gig. Do they have a usable demo that publishers and advertisers can use?
If not, then it might be a good idea for Peer39 to publish a “how it works” page where publishers/advertisers can put sentences (text) and get the semantic results.
If their technology is solid, then this effort will go miles in order to attract more publishers and advertisers.
-> I am Sandeep @12
Note: If they have a product that is as solid as they claim (as per the example), then they do not have to be just an advertising network. They can beat Google in search! Yes, they can…if they have as good a technology as they seem to claim.
I was reviewing this company last Friday and I was quite impressed. They seem to have all of the right building blocks for a successful company.
@Sandeep They have been in private beta for a while. They have a usable product from my talks with someone close to this company.
@12 - My thoughts exactly when I visited the first time a few weeks ago.
It will be easier to demo/explain the complexity of the technology if they have a simple demo page that allows user to test drive the advanced “semantic” solutions. It’s good PR too if they can flaunt what they preach. Seeing is believing
Nonetheless, I have good faith in them that their 2 years in development will prove to be fruitful. But let’s see some skin already.
Article too long
@12 - Yes, they do have a demo and I got a chance to play with it at their offices. It is not a Web demo, rather it is a sales tool used when the company sits down with a Publisher or Advertiser.
Rest assured, Peer39 is not vapor-ware. It’s a serious company with serious technology.
very interesting
http://www.peer39.com/publications.html
Adsense and Co is so bloated and monopolized that it leaves big $$$ on the table for most that use it - however as of now it is the only viable solution that you can jut drop some code on your site and close your eyes and you can be reasonably confident that relevant ads will appear. Thus it becomes the defacto solution for
1- those who are not heavily involved in the I Advert industry and just want to get some advert bucks
2- those that have such a varied amount of content on their site that it is not possible to hand-select ads for each page or build their own engine.
However our research has shown that depending on the topic and audience adsense can leave anywhere from %50-%1000 on the table compared to highly targeted display and contextual adverts.
The reasons for this are that
1 - some markets just dont click - EPM is the way to go
2 - other markets have seen adsesne so much - they just wont click
3 - So many Adsense ads are arbitraged by affiliate marketers who grab a CPA from some place and setup a landing page. After the marketer takes him cut, and google theirs, the publisher is left with %20 of the value of the click paid by the original advertiser through their CPA
That all being said - - - If Peer39 can pull this off right and good, then they will have the most splendid time taking down the bloated giant.
Comparing Quigo to Peer39 is irrelevant. One created value by letting publishers manage their own network, this one trying to optimize the current ad display.
Can someone fact check this post??
David Lee said…
very interesting , http://www.peer39.com/publications.html
Yep, the number of papers they (staffs) have published in various journals are high quality publications. This shows that Peer39 can invent its own algorithms plus exploring other algorithms that are available from the literatures, perhaps improved those ones by developing new ones.
I bet that Google, Yahoo, Microsoft will acquire Peer39 at some stage. I reckon that this company is worth more than useless/timewasting social networking sites as Facebook, MySpace and those.
by the way this is “old” stuff…
http://www.adotas.com/2008/06/.....-platform/. Maybe techcrunch should focus on breaking news?
What kind of eCPM rates are we talking here?
Microsoft should buy this it would help them build on top of their powerset acquisition
this is really a good write up nice work author
it is very nice to see techcrunch getting back to its roots of getting innovative startups into the spotlight
does anyone here know of any other innovative startups in semantic web advertising?
Seen ads from them on community sites. See for example here: http://club.cdfreaks.com/f147/.....er-244100/ between the postings.
@24 - Semantic web advertising is still a relatively new concept and the definition of it is very subjective.
What does it mean to be semantic?
Some companies are overusing it for the purpose of marketing/hype E.g. Powerset ?! The best way to measure a “semantic” technology is based on real solutions/results and effectiveness in accommodating many harsh conditions. Easy to claim but never easy to prove E.g Powerset ?!
The evolution of online advertising is a matter of conditioning the rules to make online advertising smarter, more effective, more intuitive and engaging to users.
So why semantic? Perhaps it’s still too early to define this category as it may seem like a futuristic approach to web advertising and etc.
If you are still interested in futuristic web advertising, then perhaps I could interest you with “God Mode Ads” - more details here http://adexcel.com/blog/?p=4
Have a good one!
These guys are just another ad network. AOL has the best networks in the business (Ad.com, TACODA & Quigo). Peer39 doesnt stand a chance. Go AOL!
I know some of the guys at Peer39 back from my eBay days. Seems like Peer39 focused on getting eng. with serious scale experience. Interesting.
Forget ad solutions for Publishers and Advertisers! Go the whole hog and write the semantic search engine … a Google killer! Your $11.7m funding would be written in an hour !
semantic search is very diff than semantic advertising from a tech. stand point (analyzing short search terms vs. analyzing large sets of data in real time determining the meaning of the page). It seems like peer39 had made a wise decision to stealthy focus on solving a real commercial problem in the advertising world and came out ahead of the market with a first semantic commercial application . There is no doubt however that they will face comp. from the large internet companies (or will be bought by one of them much earlier) who are all moving into the space trying to lead the next gen of search and advertising.
Just saw they tapped Hugh Mcgoran from AOL as their SVP Ad Sales..interesting.
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gr8 thought and makes all the more sense in todays world … lets see if they can pull it off now
I also believe that the semantic targeting of ads is the way to go. However, I don’t see what’s so new and unique in Peer39’s offering. The company I represent, Leiki Ltd (http://www.leiki.com), has offered this technology over half a decade. For semantic reasoning, we use ontology of over 70 000 concepts i.e. way more than Peer39’s “30 top-level categories and thousands of sub-categories”. We can target all kinds of ads including text, banner and rich media, and support both contextual and behavioral targeting based on semantic analysis.
Anyway, good to see new companies popping up in this space as it hopefully increases the awareness of advertisers and publishers about the value of advanced targeting. It’s getting better in that regard and we are witnessing an increase in demand for semantic technologies from media companies.