eXelate Raises $15M for Targeting Ads (AKA the WSJ’s “Spying on Users”)

Amidst widespread discussion and fear of collecting personal data for ad targeting, one of the leading marketplaces for such audience data has raised a big round of venture funding. New York City-based eXelate today announced a $15 million Series B round led by Menlo Ventures, which included previous investor Carmel Ventures of Israel.

The Wall Street Journal set off a discussion last weekend with a series of articles it called an “investigation [of] the business of spying on Internet users” (not behind the usual WSJ paywall; that page links to all the relevant stories). Probably the most damning thing it described were the vast numbers of cookies assigned to users by commercial web sites without adequate warning, and sometimes without knowledge of the main web site that users were visiting. However, the WSJ conveniently ignored the fact that most behavioral targeting companies’ ultimate goal is not spying; their stated goal is to provide a better advertising experience that is more personalized and valuable. There’s always the chance that data collection could be diverted for nefarious purposes, but “creepy spying” is not a bullet point in the business plan of companies like eXelate.

eXelate charted interest in mobile computing based on audience data around the iPad announcement.

Sure, users are not out there clamoring for better ads, but they also like free, ad-supported content, and we all know nobody clicks on irrelevant banner ads anymore. Behavioral targeting promises to raise CPMs by finding more likely and desirable purchasers. Today, behavioral targeting is often kind of awkward; after you visit an online clothing or furniture store it seems to follow you around the web, popping up in ad units in the margins of all sorts of sites you visit.

But companies like eXelate say that’s just the beginning. “Most online advertising is stuck and the bottom of the funnel; It’s all performance based where you have people in the market for X and you want to get them to convert,” said Mark Zagorski, eXelate’s chief revenue officer, told me in a recent interview. “That’s the easiest, but I think how we can start moving up the funnel is with different data — demographics, income — stuff that goes beyond intent, because that’s where you want to create awareness.” (For more from that interview and on the general problem of monetizing the social web, see a GigaOM Pro (sub req’d) story I wrote called Social Advertising Models Go Back to the Future.)

eXelate, which has raised $19 million to date, says it has 150 million monthly U.S. uniques and emphasizes its attention to privacy. Meanwhile direct competitor BlueKai (which has directly rebutted the WSJ piece) has raised $34.7 million including a $21 million third round in February.

If you’re totally creeped out by behavioral advertising and would rather avoid it altogether, the best thing for you to do is go to this Network Advertising Initiative page, select all and opt out. You’ll still see ads on the Internet, but they won’t be tailored for you (and it’s possible, according to BlueKai CEO Omar Tawakol, that as a result you will see more and more disruptive ads to make up the difference in lost revenue).