NEW YORK (AdAge.com) -- Internet startup Outbrain just grabbed $11 million in a third round of funding, bringing the company's total financing to $29 million. Previous investors Gemini Israel Funds, Carmel Ventures, GlenRock Israel, Rhodium and Lightspeed Venture Partners all participated in the latest round.
"This allows us to expand even more widely," CEO Yaron Galai said. "We're going abroad."
Outbrain, a New York-based starteup, is a content recommendation engine that steers web readers to other stories within the site or to other sites that are relevant to the article they're reading, but the business is built on paid distribution, where big publishers such as Slate, USA Today and Conde Nast, which have all been using Outbrain's technology, pay to have articles show up on another site. As an example, Slate might pay to have a link to one of its articles appear under a USA Today story as long as the content is relevant.
"What makes it work so well is the advertisers are publishers," said Sandor Marik, executive director of business development at Conde Nast.
The company recently acquired competing recommendation engine Surphace from AOL for an undisclosed sum. A report in AllThingsD speculated that it was a no-cash equity deal, but people familiar with the matter say there was no equity traded. More significantly, Surphace's main client is AOL, and given its recent acquisition of the Huffington Post for $315 million, Outbrain may begin parking its recommendations within Huffington Post.
Mr. Galai warned, "There's no contractual obligations by the Huffington Post to deploy it, but we're absolutely hoping to work with every AOL piece of content."
Surphace's other clients include Time, Los Angeles Times, Dow Jones and Tribune, and for the moment they remain distinct from Outbrain's platform. The company is still integrating Surphace's customers into a unified platform, but that will take time.
"There's so much potential left, we're just scratching the surface here," said Danny Cohen, general partner at Gemini Israel Funds. "This will allow them to substantiate their position as being number one in this market. This is a phenomenal company."
Outbrain will be using part of the new funding to open new offices in Los Angeles and London, and though the company would not talk about pending publisher partnerships, it appears Reuters UK has been using Outbrain's technology. A look through its web site reveals some articles that show the company's recommendation links.
"Europe is a part of our expansion plans," Mr. Galai said.
The practice of buying traffic by paying for links is not new, although it's become a less common practice as social sites such as Twitter and Digg have increasingly provided significant referrals for free. But packaging contextually relevant paid links with other related content might be more compelling for web users than posting links more on their own. Slate buys traffic from MSN and Outbrain but has seen better results from Outbrain. "The average MSN reader might hit one or two pages on Slate," explained editor David Plotz. "With Outbrain, the reader was hitting three or four pages. The quality of audience they were sending us was pretty high."
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