Swoop: Taking a Cue from Google to Make Web Ads Suck Less, Pay More

12/12/13Follow @curtwoodward

Banner ads are nearly 20 years old, and they’re not really getting better.

It’s widely accepted that almost nobody clicks on them, at least on purpose. But their cheap prices and endless volume have continued to attract billions of dollars in annual marketing budgets anyway.

Cambridge, MA-based startup Swoop thinks it can help fight the scourge. The company, founded in 2011, has been relatively quiet while developing its ad-technology service.

After raising a total of more than $10 million in investment backing, co-founders Ron Elwell and Sim Simeonov are making a little more noise now.

Over the past couple of years, Swoop (previously, briefly known as Shopximity) built and has been selling software that attempts to make webpage advertising behave more like its cousin, the paid ads at the top of search engine results.

Those search ads are far more likely to get clicked on by a Web user—in the realm of actual full percentage points, while your average display ads get clicked 0.1 percent of the time or less.

By improving the quality of webpage ads, Swoop hopes it can build a big business that also weakens crappy advertising and makes more money for the publishers who fill up the Web’s endless pages with stuff to read, see, and watch.

“As Sim is always fond of saying, `Who woke up in the morning and decided that advertising had to suck?’” CEO Elwell says. “If you look at what’s happened in advertising in the last few years, as users have gotten better at ignoring ads, the response is, `Well, let’s make them more annoying.’”

In broad terms, search ads and webpage ads (of several varieties) account for almost all of the digital advertising spending across the Internet today. Search ads are the bigger category in raw dollars, but not by a whole lot: research firm eMarketer expects search ad spending to reach $19.6 billion in the U.S. this year, with display ads of several kinds totaling $17.6 billion.

The divisions between those two sides of the online ad industry run pretty deep. Elwell, who was previously CEO of the soccer fan site Goal.com, has seen up-close how that affects the money publishers are able to make on their work. Since search ads are more effective, they make more money for the suppliers—mainly Google, with Microsoft’s Bing and its resellers well behind.

“We had half a billion pageviews a month, but the bulk of the revenue created by our content was captured by Google on the search side,” Elwell says. “They only exist to service readers, to help readers get to the right place for all the content that’s been created. Yet they extract the largest percentage of the revenue from that reader.”

Swoop’s business goal is to divert a bigger share of an advertiser’s digital budget from low-performing display ads, by selling its webpage ads to the people who normally would buy search ads.

It can do this, Simeonov says, because Swoop’s technology works with the piles of keyword data that search advertisers have built up to bid on specific kinds of searches. The startup has built a kind of mini search engine that combs a publisher’s individual webpages, figuring out what the content is about and matching it to the right search terms.

The big search providers sell similar services, but Swoop says its version just works better. “We find we have a click-through rate on these things, across everything we’ve ever done, of about 2 percent,” Elwell says—closer to the roughly 2.5 percent average click-through rate on a search result ad, and much better than the 0.1 percent or lower rate typically seen on webpage display ads.

So how can a tiny startup with about 20 people do this better than the titans of online advertising? “We actually look at the page and we break it down into these tiny, tiny bits … so the match is much more precise,” Simeonov says.

Swoop thinks it has a second technological advantage in trying to carve off some of an advertiser’s display budget: its software inserts the small Swoop ads into the main content stream of a webpage, actually creating a sliver of new white space for itself in the page’s HTML.

In practice, that means a link to an ad for Michelin tires is popped into place between the lines of this blog post about different kinds of tires. On food-related websites, the ads can be inserted right next to the list of ingredients in a recipe, putting a brand of vegetable oil or baking powder right in line with the need to buy some.

The startup has signed up some major brands to try its service. “With Sam’s Club, they said, `OK—here’s a bunch of money, run them for a week and we’ll see what happens,’” Elwell says. “So we ran it for a week, and they came back and said, `OK—can you spend six times as much next week?’ So we spent six times as much, and we’re still doing that.”

As someone who both consumes a lot of Web content and makes his living partly from digital advertising, the idea of what Swoop’s talking about seems promising enough.

The track record of the founders also is interesting—aside from being entrepreneurs, both Elwell and Simeonov have spent time working with venture firms to get a broader view of building high-growth companies.

One nagging worry, though is simply one of abundance. In a world where users are already ignoring most webpage ads, and publishers are chasing their eyeballs with repackaged advertorials—excuse me, “native advertising”—is the answer really one more piece of marketing jammed into the stream? Then again, if a Swoop campaign was really able to make a ton of cash for a publisher and replace all of the standard banners that junk up the rest of a page, that could be a fair trade.

And, of course, there’s the multibillion-dollar question of Google itself to contend with. Why bother digging into this turf if Google could turn around and squash you with relatively little effort?

“I think a lot of people avoid it for that reason,” Elwell says. “We look at it as, we never take money from Google. We’re trying to expand the overall search market. So we just maybe thought of it differently, instead of being strictly competitive.”

Google might not view it that way, of course. In any case, it’s an interesting time for ad-tech entrepreneurs in the Boston area—geeks and innovators of all kinds are trying to make some hay on the Web, social media, and mobile platforms, and there is definitely room for improvement.

“Look at the ecosystem. Google’s doing amazing things for user experience, but at the same time they’re withdrawing massive amounts of dollars from publishers who actually make the stuff that Google scrapes to make the search pages more valuable to users,” Simeonov says. “If that keeps going, eventually you actually end up with less great content built by publishers. Publishers need some money!”

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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