SocialVibe, the advertising and technology company that powers much of Zynga's ad revenue, recently closed a $20 million round of funding led by Norwest Venture Partners. This gives the Los Angeles-based startup its Series D round, bringing the company's total capitalization to just more than $44 million. Existing backers Redpoint Ventures, Jafco Ventures and Pinnacle Ventures also participated in the round with Norwest partner Jeff Crowe joining SocialVibe's board.
SocialVibe brokers ad deals between marketers and social sites by prompting users of the social service to watch or interact with an ad before they can continue on with their activity on the site. As in the case of Zynga, where users are engaged in games such as "Mafia Wars" or "Farmville," SocialVibe will prompt players to click on an ad to win more Farmville cash. Many of Zynga's games require people to pay for virtual goods in the games.
The company also powers advertising on popular internet radio service Pandora, which relies heavily on marketing revenue, and the Huffington Post. Through its partnership with these publishes, SocialVibe acts "just like a network TV show," said CEO Jay Samit. "You want to reach anyone, we can do it."
The company can target up to 200 million people each month through its various social-service publishers, and it has already begun its expansion overseas. It recently opened up an office in the U.K. to service Europe and the Middle East, and it has increased headcounts in its offices in the U.S. "It's really a growth round," Mr. Samit said of the new funding. "It's a race for how much of the global market we can grab."
Norwest's Jeff Crowe said SocialVibe fit the fund's ambitions to invest more heavily in social media. "We felt that this form of engagement advertising is really gonna be a massive opportunity, and they have figured out the right business model," he said. "It's the right value proposition for consumers, and it's good for publishers." The Palo Alto, Calif.-based Norwest has made investments in social-game company Playdom and MyYearbook, as well as ad company Admeld and travel search engine Kayak.
One of SocialVibe's advantages is its foothold into Zynga, one of the biggest applications that run through Facebook's 600 million members. The ad-technology company is just one of the scores of third-party companies that drive much of the social network's economy, but SocialVibe is able to capitalize on the game-mechanics that seem to drive so much digital media today.
"You're out of free music; watch this ad from Toyota, and the rest of the day's music will be free -- this resonates with consumers," Mr. Samit said. "You've now entered the conversation."
Though these "conversations" are entirely transactional, SocialVibe's proposition does speak to recent moves by web publishers to find more direct ways to generate revenue from its readers. The New York Times, for example, just released its paywall, and though it has no immediate plans to incorporate an advertising wall into this mechanism, Mr. Samit said his company is already working with other publishers on such a program.
"Publishers are looking for ways to interact with their readers," he said. "That's what social media is about."