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RadiumOne About To Corner The Market On Social Data Before Competitors Even Know What's Happening

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RadiumOne is emerging as a leader in a new breed of advertising networks, with enhanced targeting based on social data. The company is positioning itself to lock in data sources before competitors even get rolling.

“Behavioral targeting in advertising led to double digit increases in effectiveness,” RadiumOne’s CEO Gurbaksh Chahal tells me. And he should know, this is his third advertising network. The last one, BlueLithium, sold to Yahoo in 2007 for $300 million. “But it’s commoditized now, and it’s time to innovate and differentiate.”

The key is to know what ad to show to a person, and when. That can turn low value remnant inventory to premium ad space, no matter what site or service that ad is being served on.

When a user visits a site the ad networks determine in real time, often through an auction, what ad to show you based on the profile that’s been built for you. RadiumOne builds a different profile for you than it’s competitors, though, and may grab ads that others leave untouched (or just pay more). The reason? They’ve built your profile based on what your friends like, too.

These ads appear to work. One retailer who was achieving $8 per dollar spent on advertising increased that to $14/dollar spent with RadiumOne, says the company. A credit card company decreased cost per acquisition from $200 to $75.

This also makes intuitive sense, of course. The problem is really how to get the right data. Previously only Facebook has a high level view of hundreds of millions of Internet users and are able to build an interest graph based on what those users’ friends like. It explains why Google is so interested in being Facebook – it’s all about the ad dollars.

The Data Is The Hard Part

How does RadiumOne build the interest graph at scale? Via data deals with all those sharing widgets you see on websites from companies like ShareThis, AddThis and AddToAny. Users of those services spread links on social networks. Through a combination of unique URL shorteners and cookies they are able to create a profile for people clicking on the links, as well as the implied social connection.

RadiumOne has deals with many of these widget providers, covering hundreds of millions of Internet users. They combine the data from the partners to extract more useful information about relationships and interests, and then target ads based on that. So if you’re using those widgets, or clicking on links from friends that use the widgets, there’s a good chance you’re seeing RadiumOne served ads around the web.

Here’s where things get really interesting. RadiumOne is using the $21 million warchest from their just-announced funding to begin to buy the widget guys outright, ensuring that no one else down the road can get the data. And anyone they don’t buy should watch out. RadiumOne says eventually they’ll probably pay sites to include their widget to get more distribution and data, possibly edging out anyone they haven’t bought.

If they pull this off, and there’s no reason to think they won’t, Everyone is going to want to own this company. Chahal, who dropped out of high school to start his first company at 16, may have his third ad network liquidity event on his hands in the near future. I can’t wait to see what his fourth looks like.