July 29, 2010, 6:08 PM ET
(Editor’s note: This story is part of a VentureWire series of profiles that examines venture-backed companies with at least $100 million in revenue, an oft-mentioned threshold used by investment bankers to determine whether a company is IPO ready. Check out our previous posts on Acronis, Art.com, Bravo Health, Cellfish Media, Cortina Systems, ExactTarget, EHarmony, Freightquote.com, Genband, HomeAway.com, LiveOps, mBlox, Oak Investment Partners, Parallels, PlayPhone, Senior Health, ServiceSource and 2Wire.)
Tucked away in Kansas City, Mo., out of the limelight of Silicon Valley or New York, is the home base for an online advertising company whose nine-digit revenue continues to swell.
Since 2003, Adknowledge Inc. has managed to carve out a significant spot for itself while strategically going on a buying spree that positions it to take advantage of the boom in social media content.
Founder and Chief Executive Scott Lynn sums up the past seven years of the company’s work: “The business has grown from nothing to $300 million in revenue.”
With roughly 300 employees, the company has offices in New York, Los Angeles, San Francisco, Vancouver, London and Sydney. Half of those employees are in Kansas City.
While Adknowledge’s growth, both organically and through acquisitions, is impressive, it does bring it into more direct competition with bigger advertising search competitors like Google Inc., Yahoo Inc. and Microsoft Corp. Those companies are also making their own moves in the social media sphere, further putting them into competition with Adknowledge.
Backed by Technology Crossover Ventures, Adknowledge provides performance, or cost-per-action, advertising for companies looking beyond traditional search engines such as Google and Yahoo. Earlier days of online advertising attracted marketing messages that didn’t require much targeting, such as those for mortgages or credit cards. Lynn believes online advertising provides an ideal platform to tailor messages to Internet users. Today, more than 50,000 advertisers use the Adknowledge network to promote their offers.
The company has also managed to find a way to target ads without relying on keywords, which is what drives search advertising platforms like Google’s AdSense.
Using Adknowledge, marketers can bid on such ads as they can through the AdSense system. Adknowledge, however, has carved itself a niche by applying its technology across multiple advertising channels – from email to search to social networks.
While AdSense dominates the search advertising market, search is a relatively small part of Internet usage, and Adknowledge wants to dominate targeted ads in all the other aspects of Web surfing, including the increasingly important area of social networking. The Adknowledge Social Network serves more than 10 billion ad impressions per month across sites like Facebook, MySpace and Bebo.
To do that, Adknowledge has gone on a buying spree. In the past three years, the company has made seven acquisitions, most of which focused on social media.
For instance, in November 2008 Adknowledge bought Lookery Inc., a service to which social networks contribute basic, anonymous profile information and get paid when it’s used for real-time ad targeting. That acquisition occurred just days after Adknowledge announced the purchase of Adonomics, which built a suite of monetization and measurement tools for developers to track activity on Facebook applications.
“We’re buying additional distribution so we can take advertiser base and technology to new publishing communities,” Lynn said.
The major online advertising players, of course, are also trying to get a piece of the social media action. Last October, both Google and Microsoft struck deals with Twitter Inc. to show tweets in search results. Also, Microsoft owns a stake in Facebook through a $240 million investment in 2007.
Competition for social media spend will likely strengthen with most big players providing an offering, but Adknowledge is banking on being a one-stop shop for a range advertising formats. While Adknowledge can help you buy an ad on Facebook, it can also help with a traditional email marketing campaign.
Despite the active acquisition strategy, Lynn said the company still sees about 65% organic growth. While the company certainly is excited about that growth, it creates new challenges by vaulting it into more direct competition with the likes of Google.
“Our take on the online advertising space is it’s really easy to advertise with Google and Yahoo, but tough to reach the rest of the Internet because it’s so fragmented,” Lynn said. “The rest of the Internet is spread across 2,000 other companies.”
Lynn said the company’s current focus is to continue growing organically and through acquisition, while also stepping up its marketing efforts to help make Adknowledge a better-known destination for online advertising.
With a single, patient investor, Lynn said, Adknowledge has several options for its future. While he sees potential to take the company public, there is no immediate plan to go that route. In the meantime, the company receives acquisition interest from not only strategic players, but also unnamed private equity firms. Lynn declined to say how serious those talks have been.