TechCrunch50: Show me the money

Forget plain old advertising--one batch of start-ups at the event was dedicated entirely to coming up with new ways online for people and companies to make money.

Caroline McCarthy Former Staff writer, CNET News
Caroline McCarthy, a CNET News staff writer, is a downtown Manhattanite happily addicted to social-media tools and restaurant blogs. Her pre-CNET resume includes interning at an IT security firm and brewing cappuccinos.
Caroline McCarthy
6 min read
CNET / Josh Lowensohn

SAN FRANCISCO--The world of Web 2.0 has been criticized for being too much about the nifty ideas and not enough about raking in the dough. So there were likely more than a few sets of ears in the audience on Monday at TechCrunch50 that perked up at the start of the third batch of start-ups presenting: "New Advertising & Monetization Platforms."

The judges included such Silicon Valley marquee names as Google executive Marissa Mayer, industry veteran Marc Andreessen, Sequoia Capital's Roelof Botha, YCombinator founder and investor Paul Graham, and Zappos CEO Tony Hsieh, who sold his company to Amazon this summer.

The first company to present was 5to1, an advertising technology company that tackles the seemingly unsolvable problem of filling up remnant advertising inventory that can't be filled up by premium or direct sales--and which often ends up getting filled by ads that are cheap and irrelevant. 5to1's model lets site owners and publishers fill up their ad inventory as though it's a music playlist.

"What we're talking about here is total control by the publisher," founder and CEO James Heckman said. "No ad is going to show up that you don't like." (He described typical remnant ads as "the dancing fat bellies and the punch-the-monkey ads.")

But some judges were lukewarm on 5to1.

"I think it's a really slick interface but I would just be worried," Tony Hsieh said. "It just seems like a lot of work to have to go through and decide which ads (to run)...my question is how does it scale as a publisher grows."

The next start-up was another advertising platform, DataXu. The focus of DataXu's product is a data dashboard where publishers can buy ads through ad exchanges like Google's and Yahoo's with a highly refined algorithm that promises to show the right ads to the right people at the right time--for example, that news- and sports-related ads get more reception in the morning--and then tracks the success of an ad campaign with all sorts of analytics.

President and CEO Mike Baker called DataXu's offering "rocket science," adding that the underlying technology was actually used by NASA for a Mars mission plan. "What we're doing is actually using machine-learning techniques to take vast amounts of data with a small positive-action subset, which is very consistent with the Internet advertising problem: there are very few clicks and even fewer actions," Baker said, while declining to provide any real trade secrets. "We're applying on top of that the concept of control systems."

SeatGeek co-founder Jack Groetzinger explains how his service can save people money on tickets. CNET / Josh Lowensohn

Up next was something much more consumer-focused, and that left the audience pretty impressed: SeatGeek, which forecasts concert and sports ticket prices, much like airline price applications like Microsoft's Bing Travel do. Co-founders Jack Groetzinger and Russ D'Souza explained that sometimes ticket prices can drop unexpectedly at the last minute--and sometimes they don't.

The secondary ticket market is around $15 billion, Groetzinger said.

SeatGeek pulls in ticket prices from secondary sellers such as StubHub or Craigslist and then forecasts where they might go based on an algorithm. "We have a system that every day crawls the Internet and pulls in thousands of actual ticket sales," Groetzinger explained. "We're also pulling in other external factors that we know to drive ticket prices." For a baseball game, for example, it can come down to the weather, the starting pitcher, and whether there are popular concerts in town. "Right now we're testing at about 75 to 80 percent accuracy, and that's going up every day as our system learns."

SeatGeek, which says it's already profitable due to ticket purchases made by alpha testers, also offers a product to brokers and other ticket sellers that retails for between $2,000 and $10,000 per year, and plans to roll out an insurance product later this year. The company's founders said they did consider using the algorithm to simply run a reselling business themselves, which they said would have required significant upfront costs. SeatGeek in its final form does not.

The fourth company in the set was HealthyWage, which addresses the hot-button issue of health care and weight loss by letting individuals track their diet and exercise habits, network with other members, and track progress--and then compensates them financially if they meet their goals. The money comes from companies that advertise on the site and "invest" in its members, and if members invest their own money in their health goals, they receive a bigger return when they meet that goal.

Responses were mixed--the judges seemed to find it interesting but wanted more information about exactly how it would work. "I definitely like the idea and I know for us health care costs have been going up," judge Hsieh said. "I think the idea of paying someone to do something is interesting, but I think that you may want to figure out how to separate the actual incentive from the example of losing weight in this situation...some of them may need a different incentive."

Andreessen, who said he "love(s) this idea," asked how it could potentially lower health care costs for companies, and wondered just how much investment would be needed for, say, a seriously obese person to be willing to make that change.

Mayer said she was "skeptical" of the start-up's potential for success. "What's to stop Weight Watchers or someone else from rolling out the same kind of company-based incentive?" she asked.

So HealthyWage is dedicated to making people change their life habits; its successor at TechCrunch50, RackUp, is dedicated to "changing the way people buy and spend their money," CEO Mark Rochman said. How? It's a gift card auction site. You bid a dollar amount to fill up an empty gift card from a retailer (participants include American Airlines and AMC movie theaters). But you can earn bonuses on the dollar value so that the winner ends up with more than he or she actually paid, since there's some strategy involved (bigger bonuses if you bid high, fast, and early). Auctions are 60 seconds in length.

A demo of how RackUp's 60-second auction system works.

Rapid-fire, nail-biting retail has proven to have some appeal, as evidenced by the cult success of Woot.com, Groupon, and Twitter fire-sale deals from the likes of airline JetBlue. "We are already spending that money every day on those brands," Rochman explained, adding that he'd gone through the requisite research to make sure that it's actually legal and isn't constrained by any gambling laws. "So why not take 60 seconds of our life (and) have fun?"

RackUp makes money by taking a cut of what retailers pay, Rochman said. The judges seemed to like it, too.

Udorse's Geoffrey Lewis pitches his start-up's clothing tagging service. CNET / Josh Lowensohn

The final "New Advertising & Monetization Platforms" presentation came from Udorse, which can embed endorsements in photos on photo-sharing sites--clothing lines worn, products displayed, venues and businesses where photos are taken, for example. About a dozen major brands have signed on, including fashion brands Armani Exchange and American Apparel; Udorse will launch with an iPhone app, a Javascript plug-in for blogs, and Facebook and Twitter apps. Unfortunately, Udorse tags can't be displayed on the actual Facebook photo-sharing app; it needs its own app built on the Facebook platform.

Udorse users can earn an affiliate cut of endorsements and either opt to have them delivered through PayPal or donated to a charity.

"I really loved it," Marissa Mayer said, "I always said that this would be one of the primary ways that social networks make money."

But not all the judges were sold. "I do think it's a little weird, like if you and I were friends, so that you could get paid so that I could look like you and dress like you," Hsieh--who is in the apparel industry himself--said, complimenting Udorse CEO Geoffrey Lewis on his energetic presentation. "If tomorrow you and I were wearing the same outfit because I saw you wearing it on Facebook, that'd be just creepy."

"Is there an anti-product placement foundation that I could donate the money to?" Andreessen joked.