Microsoft Corp.'s [MSFT] ongoing battle to buy Yahoo! Inc. [YHOO] in what would be the biggest high-tech acquisitions ever largely amounts to the software giant's wish to drill deeper into the rapidly growing market for small business online advertising. This market was basically created by Google Inc.'s [GOOG] breakthrough move years ago to include ads in search results. Google AdWords, along with similar but less successful programs offered by Yahoo! and Microsoft, have opened the floodgates to millions of businesses that could never afford to advertise on television or in mainstream print publications.
The problem? These small businesses, which often spend as little as $2,500 a month on advertising, are promoting themselves in a medium overflowing with choices, from where to advertise, to what format to use, which keywords to bid on and how much to bid for them. If you're spending only a few thousand bucks on ads, chances are you don't have a lot of internal resources to research the best ad strategies.
David Kidder, co-founder and CEO of online ad management company Clickable, maintains that many of the businesses that have started advertising on these low-budget formats, are flying blind. They take a stab at a keyword that they think will attract viewers and generally accept whatever results they get. Clickable, a company he founded in 2006 along with chief technology officer Munish Gandhi, offers these businesses with monthly ad budgets between $2,500 and $50,000 the tools to approach online advertising more scientifically. Kidder says there are roughly 300,000 to 500,000 businesses with ad budgets in that range, collectively comprising half of the entire advertising market. Clickable also offers services to help online advertising agencies better serve their clients.
Kidder, who has worked with Gandhi on various startups over the past eight years, says they identified "a whole lot of friction" when they started exploring online advertising. Companies were advertising online, but many were not using the medium in the most effective way they could.
"The search marketing space has a lot of complexity," Kidder says. "You have to have a beautiful mind to organize all the quantitative and qualitative aspects of online advertising and do it in real time."
The technology he helped incorporate into Clickable combines many of the variables that advertisers should be considering, into a single view where they can compare search results using different keywords and different placements, across Google AdWords, Yahoo Search Marketing, Microsoft adCenter and others. Indeed, while Google AdWords has nearly 70% of the paid search market, Kidder says that one of the main mistakes advertisers make is not considering some of the other ad channels, like Yahoo Search Marketing, which holds a 14% to 18% market share. The tools and analytics it offers help companies quickly compare different advertising options, so they can quickly make decisions and changes.
Although Clickable continues to fine-tune it's service--the challenge, Kidder says, is to not bog it down with too many features--it already has attracted about 800 customers, which it charges based on a percentage of ad spending. The 56-employee company (more than half its staff is based in India) recently raised $8 million from Union Square Ventures, Pequot Ventures and others, and it will seek to raising more money "in the next quarter or two," Kidder said. -- Andrea Orr
See March 12 interview with Union Squares partner Brad Burnham from Tech Confidential
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