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New spin on search ads

Tacoda Systems, a little-known tech company, is testing a system that lets marketers bid against rivals to reach targeted audiences as they surf the Web.

A little-known technology company wants to extend the success of search engine advertising into new territory.

Tacoda Systems, based in New York, is testing a system that lets marketers bid against rivals to reach targeted audiences as they surf the Web, according to company CEO Dave Morgan. Advertisers will be able to pay to reach a certain demographic of people (for example, high-income men aged 30 to 40 who have expressed an interest in buying a sports car) through sponsored text links that appear on Tacoda partner Web sites.

Right now, four major publishers, whose names Morgan would not disclose, are testing the system. Tacoda plans to publicly introduce the service, called Audience Match, during the summer.

Tacoda is poised to grow. On Wednesday, Tacoda hired former Time Warner executive Curtis Viebranz to be president and chief operating officer, both newly created positions. In addition, in recent weeks it raised $7 million in its first round of institutional funding, led by Masthead Venture Partners. Hansiatic Americas and Fred Wilson, formerly of Flatiron Ventures, also joined the round of financing.

"We see an enormous market opportunity, and we need to scale the business," Morgan said.

If successful, Tacoda could challenge the fast-growing ad networks of Google and Yahoo-owned Overture Services, which let marketers target people by what they're searching for, not by personal profiles.

Tacoda's new service will be a hybrid of Google's service and profile-based advertising--two of the hottest sectors in online advertising today.

The service draws on pay-for-performance search deals--popularized by Google and Overture--in which marketers bid to show up in query results based on specific keywords. Advertisers pay only when visitors click on their sponsored text listings that appear on search results pages. But instead of using search keywords to determine when to place ads, Audience Match draws on profiles of Web surfers. The profiles, culled from online publishers, are then used to tailor ads to visitors' behaviors and demographics, or what's called behavioral targeting.

Advertisers will be able to bid online to reach specific demographics of people. And their ads will appear in text listings on publishing partner sites.

To do this, Tacoda will build on its first product, Audience Management System, whose customers include Conde Nast owner Advance Publications,, iVillage and others.

That product is designed to give Web publishers more insight into their visitors so that they can better target their ads. At its full potential, it can create profiles that include a person's age, gender, location, billing address, e-mail address, Web surfing habits and subscription information to offline publications. To do this, it draws from data-mining technology, tracking software such as cookies and Web site registration information.

The Audience Match system would combine the profiles of many of Tacoda's 500 Web site customers to target Web surfers as they explore the Net. To protect privacy, Tacoda's Morgan said, no personally identifiable information will be shared with advertisers or publishing partners.

Tacoda is not the only company jockeying for attention in the market. Companies including Revenue Science, 24/7 Media, and aQuantive are all selling similar behaviorally targeted advertising, and much of it is catching on with companies.

"Behavioral advertising is definitely the 'it' thing this year, and advertisers are looking for a fast, easy and inexpensive way to do it," said Gary Stein, an analyst at Jupiter Research. "Publishers are in a place where they can start making decisions among a series of ad providers."