nFluence Rounds up $3M to Create Avatars of Advertising

2/14/12Follow @curtwoodward

Most consumers have made a bargain with the digital tools and services in their life: give me something useful, and I’ll give up some of my information. Sure, there are overreaches and controversies that cause companies to pull back. But overall, we’re firmly on the path of giving up more and more of our personal data.

Seattle startup nFluence Media thinks there’s another way—one that could give stronger control to consumers and offer better results for advertisers than the click-through advertising that runs some of the Web’s biggest names. And as of today, the fledgling company officially has $3 million in financing in the tank, led by the Alliance of Angels, to help make that a reality. Voyager Capital, two other unnamed VCs, and the Alliance of Angels Seed Fund also invested.

“We’ve got four huge tech companies fighting to own the customer’s data, in the form of Google, Apple, Facebook, and Amazon,” CEO Henry Lawson says. “And nFluence starts with a very simple proposition. We know exactly who owns the customer’s data—it’s called the customer. And if you actually start from the premise that the customer owns the data, the customer is determining what goes on and how things are done, then your customer’s much more engaged.”

NFluence first showed up in federal regulatory filings in January, revealing a new project with some notable names.

The company’s founder and chief technical officer is Brian Roundtree, the founder of SnapIn Software, which sold to Nuance Communications in 2008 for around $200 million. The board chairman is Tom Huseby, the well-known wireless industry VC who is a venture partner at Voyager Capital. Lawson is an advertising veteran who previously had served as executive in residence at Warburg Pincus and an advisor to Ground Truth, among other posts.

NFluence’s technology allows consumers to develop their own online and mobile profiles that are, apart from the location of their respective smartphones, totally anonymous. No names, phone numbers, zip codes, addresses, or e-mails are required.

Instead, a user starts building their profile by rating their likes and dislikes from a series of brands—from low-rent stuff like dollar stores all the way up to Brooks Brothers suits, for example. The company can use those as a pretty reliable translation for a user’s demographics because of a database of consumer research backing up each of the example brands, Lawson says.

That sorting allows nFluence to send the user daily deals and other offers from a long list of merchants that will match their tastes. Purchases are tracked to improve the kinds of offers served up in the future, and users can also rate offers as they come along—”If you sit and say ‘I don’t like manicures’ three times, we’re not going to send you any more manicures,” Lawson says.

NFluence plans to roll out a consumer mobile app in the next few weeks to showcase the technology and gather more data. But the real foundation of the business will be licensing the technology to mobile carriers, media companies, and others who want to improve their reach with consumers.

“They’re blown away when we talk to them about the fact that we don’t want to know what the phone number is. Don’t tell us what the person’s zip code is—we don’t want to know. The whole premise is, you as a media company, as a mobile carrier, can now have a relationship with your consumer where the consumer can completely trust and control the information that you’ve provided to them,” Lawson says. “Which is a radically different proposition than Google saying in return for giving you free email, we want to look inside your Gmail.”

Interestingly, the technology grew out of Roundtree’s earlier attempt to build a mobile app recommendation engine through a former startup called Appster. Lawson met Roundtree through Huseby, but the pair wasn’t sure what to tackle at first.

“I thought the technology was brilliant, loved Brian, really wanted to work with him. But I couldn’t quite see the advertising angle, or the media angle at least. And then, in March of last year, the penny dropped—I don’t know if that’s an American expression, but the penny dropped,” said Lawson, a Brit who works part of the time in London. “Hmmm, hang on a minute. If we use this as a way for consumers to actually find the deals, find the ads find the stuff on the Net anonymously, then we’ve actually got something very powerful here.”

NFluence bets that by letting consumers build an anonymous profile that they can control and perfect by ranking offerings and brands, they’ll actually get better offers that are less creepy and more relevant. The company sees a future version where users could set up several “personas” for finding things they want to buy—a vacationing-in-the-tropics persona, a homeowner persona, a parent persona, and so on.

If that pays off in better advertising responses, there’s a lot of money willing to help it grow. Companies that sell to consumers are, just like the media titans who used to rake in their money, still trying to grapple with the seismic shifts in the advertising channels that have come with much-improved online metrics.

Advertisers simply don’t want to pay for things that don’t work (imagine that), but traditional online advertising is still using the shotgun method to try to reach an audience. Businesses at the scale of Google and Facebook can make good money, but it gets much harder as you go down the chain—and, Lawson says, the average click-through rate in the online advertising world is presently about 0.4 percent.

“That means for every one response this fantastic digital ecosystem has generated, 249 people have either ignored the message or worse, been upset by the message,” Lawson says. “Our response rates are confidential, but I can say with great confidence they’re many times what we’re talking about in the normal world.”

There’s certainly plenty of competition for helping advertisers reach consumers faster, including other Seattle-area companies like ChoozOn and BlueKai. And it’ll probably take a bunch of companies fighting it out to find the solutions that really make advertising work for everyone involved.

Roundtree says the path taken by nFluence will find success in part because it’s aiming to harness the explosion in smart, connected devices that people carry around and use as part of their at-home leisure. In traditional advertising, you never quite knew how many individuals your message was reaching. Mobile devices and connected TVs allow direct targeting—with a tradeoff: “This is really highly personal,” Roundtree says.

“You can’t be impersonal about your advertising, because people really dislike that and just go away,” he says. “So we’re saying, completely as hard as possible the other way, lets go to the individual. The consumer’s the point, and they get to control their own world.”

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

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