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Sept. 30, 2010, noon

Lesson from a tech startup: Sometimes you need a human

The Internet makes buying and selling things easier than ever. Who needs a salesperson when you can click and buy anonymously? When it comes to selling ads, though, that human element hasn’t lost all its value. A tech company in Seattle called Instivate initially planned to build its business on its technology — but it’s discovered that sometimes even a great tool still needs a person.

Instivate started four years ago, offering a free CMS called Neighborlogs, aimed at local news sites. The CMS comes with InstiAds, a tool that lets sites serve their own ads at their own rates. Instivate takes a 20-percent cut for all ads sold. InstiAds is also available as a standalone product, working with most other backends a small site might use, like WordPress. The founders thought the set of tools would be a big hit with local sites, and their business model would follow.

“We are like any good tech geeks, we thought, ‘Ah, we’ll build amazing tools and people around the country will put them to use and we’ll just make technology and we won’t have to do any of the hard work of selling ads,'” Justin Carder, vice president of business development told me. “Over the years we’ve evolved. We got into the advertising business.”

A year ago, Instivate realized that their model had a flaw. For small news sites, selling ads is both time-consuming and requires a skill set entirely separate from the day-to-day of writing a blog. The idea was to take on the job of selling for them — so Instivate began building out what has recently ramped up to a 22-site network of local sites called the Seattle Indie Ad Network. One Instivate employee is dedicated to selling ads against that combined impression pool, which garners a higher CPM than what most of these sites might sell on their own. Carder says they sell ads at a CPM of between $5 and $10, sometimes going up to $12. Member sites still keep 80 percent of the sale.

The tool also lets network members sell their own ads. “We encourage even more aggressive pricing,” Carder said, when it comes to individual sales.

Carder said his own site, Capitol Hill Seattle, gets a whopping $40 CPM for its top banner slot. “People laughed at that, but we sell it,” he said. Carder explained that the flexibility of the tool allows him to meet a buyer’s daily budget, even if it’s 50 cents a day, so the $40 CPM might still be worthwhile for an advertiser on a shoestring. The higher rates are also about audience. Regional news sites aren’t necessarily as attractive to neighborhood Seattle businesses trying to reach their bread and butter customers. A local site might have a smaller audience, but it’s a more targeted one.

As far as what’s next for Instivate, Carder says their attitude is more flexible when they first launched. Next up: trying to replicate the Seattle network in other cities.

POSTED     Sept. 30, 2010, noon
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