StumbleUpon Stumbles Upon a Better Ad Model: Paid Discovery

Stumbleupon CEO Garrett Camp

Fresh off a new $17 million funding round announced last week, StumbleUpon is now ready to put that money to work by ramping up revenue with a new product for advertisers called “Paid Discovery.” The new product, which the company calls a “social media brand advertising program,” is an extension of its existing paid placement option, but with new tiered pricing and advanced analytics.

StumbleUpon has been letting advertisers pay to have their pages placed in front of its users for years, but the new paid discovery platform adds new features previously unavailable to advertisers. The new platform, which was built from the ground up, now has a pricing structure that will give prioritized viewing to advertisers if they pay a little bit more

In an interview last week, StumbleUpon CEO Garrett Camp argued that the startup’s paid discovery platform is superior to banner or search ads that are run against web pages, since those impressions go largely unnoticed by viewers. By contrast, StumbleUpon’s new platform places entire webpages, micro-sites and videos into user streams.

Those sponsored sites are clearly marked as paid, and StumbleUpon lets users rate them in the same way they can rate any other content they “stumble” upon. Ratings then are used to determine how often and in which user’s content streams those paid messages appear. The platform is designed to provide user targeting, enabling advertisers to reach users that fit into a certain demographic or interest group. Advertisers can target based on age, gender, location and topics of interest to users.

Paid discovery also has a tiered pricing structure: StumpleUpon’s “Light” plan has a standard 5 cents per impression, with basic reporting; the “Standard” plan for 10 cents per engaged visitor that provides priority serving to StumbleUpon users, advanced targeting by device and advanced reporting features; and the “Premium” plan for 25 cents per engaged visitor that guarantees top priority in user streams along with the same advanced targeting and reporting features. The Standard and Premium plans are differentiated because advertisers are only charged for “engaged” visitors, depending on the amount of time a user spends on the page and depending on the type of media he or she is viewing.

While StumbleUpon wants to increase the amount of money it makes from serving up sponsored pages, it still walks a fine line when serving up content that is relevant to its users. If they find paid pages are of lower quality or not as interesting, they could stop using the service. Camp downplayed concerns, saying that paid discovery pages will be determined based on a blend of price and quality, and that the service would still seek to target the most relevant page to its users.

The new monetization plans come as StumbleUpon seeks to ramp up its business. StumbleUpon has grown aggressively since Camp and a few investors bought the company back from eBay (s EBAY) in early 2009. Since then, the number of registered users has increased to more than 14 million, with more than 700 million stumbles a month. And the company itself has doubled from about 30 employees to more than 60. With the new funding, expect StumbleUpon to hire even more aggressively as it looks to increase its mobile and connected device presence.