digital advertising

Will TripleLift be the startup that fixes the dreaded banner ad?

March 5, 2014: 3:00 PM ET

TripleLift raises $4 million to solve digital advertising's prickliest problem.

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FORTUNE -- Hatred for banner ads is one of the advertising industry's biggest clichés. The citizens of the Internet are conditioned to ignore them ("banner blindness"), and they certainly don't click on them. Clickthrough rates hover at a dismal 0.1%, and that's unfortunately the main way advertisers measure engagement on the web.

Ad-tech companies have been trying to improve upon banner ads for years, but few of the innovations have stuck. That's partly because banner ads have been built into the infrastructure of the web. They're standardized and can be bought and sold at scale.

The latest solution the industry has embraced, with great vigor, is native advertising. The term has become a catch-all to include various forms of content marketing, advertorials, sponsored content, in-stream advertising and any other ad that looks like it's not an ad. The category has been criticized for tricking readers into looking at ads, but publishers argue readers are smart enough to know which content is sponsored and which is editorial. Native advertising has been embraced by everyone from the New York Times to BuzzFeed. Kevin Gentzel, the chief revenue officer of the Washington Post, has said native ads are a "spiritual journey."

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TripleLift, a native advertising startup founded by ex-employees of programmatic adtech company AppNexus, has gained traction with publishers including The Daily Beast and Songza, and brands like H&M, Gap (GAP), and Nissan. The company's revenue run rate is greater than $10 million, and it has run campaigns for more than 50 Fortune 500 brands, says co-founder and chief strategy officer Ari Lewine. On Wednesday TripleLift announced it has raised $4 million in new funding from True Ventures with participation from existing investors, including iNovia Captial, NextView Ventures, MESA+, Liberty City Ventures, Social Starts, Laconia Ventures, and the Social Internet Fund, bringing its total funds to $6.13 million.

The company's product turns the images that accompany web content into ads. These units outperform traditional banner ads by four times in terms of clickthrough rates and mouse hovering, Lewine says, because the ads are a part of the content. People actually share these images on Pinterest and Facebook (FB), which doesn't happen with normal banner ads. (A company called AdKeeper tried to get people to save banner ads once, and the attempt fell flat.)

"We envision a future where ugly, text-heavy banner ads will eventually be replaced by big beautiful images," Lewine says.

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Chobani ran a TripleLift ad on a site called FoodGawker, and its ad was clicked on 0.49% of the time, a 3.7 times increase from the industry standard. Thirteen percent of users moused over the ad, a 4 times increase from the industry standard, and it was pinned more than 6,000 times on Pinterest.

The big challenge facing most players in the burgeoning native advertising industry is scalability. After all, someone has to create all this sponsored content. BuzzFeed, for example, has a team of writers churning out listicles for its advertisers. Other startups, like Contently, offer a marketplace of freelancers to create content for brands. TripleLift circumvents the issue because its ad units are the most standardized part of a piece of content -- the image. The company recently introduced the ability for brands to buy ads on its platform programmatically. TripleLift is in late-stage talks with the largest programmatic companies, Lewine says.

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