Eric Schmidt And Others Invest In Rich Media Display Ad Startup Spongecell

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Spongecell, a startup that places rich media ads in display advertisements, has raised a new round of financing led by Eric Schmidt and Jim Pallotta, Chairman and Managing Director of Raptor Group. Participating in the round are Brian Rooney, Board Member of the Pittsburgh Steelers, and Silverhaze Partners. The amount of the round was not disclosed but we heard from people familiar with the matter that the investment was just under $1 million.

Spongecell transforms standard banner ads into rich-media-like interactive ads that can run in display ad formats. SpongeCell’s ads include video, social media, interactive maps, carousels, and downloadable/SMS coupons, and can be created and implemented within a matter of days. The startup’s technology can be integrated with popular ad serving platforms such as DoubleClick or Atlas.

Spongecell says its ads improve engagement rates from 2.4% to 11.9%. Interactions within Spongecell ads are anywhere from two times to eight times as frequent in comparison to average display ads.

Founded in 2006 by a team of Carnegie Mellon computer science graduates,
Spongecell previously raised capital in 2007 from Halo Venture Partners, The
Pilot Group and SilverHaze Partners. Spongecell actually started out as an Ajax calendar built on the Ruby on Rails platform. CEO Ben Kartzman says that the team pivoted from this model and started offering ads within widgets, but agencies and marketers didn’t respond with the sort of enthusiasm that could build a lasting business.

Kartzman says that the startup decided that display ads would find a resurgence and brought rich media to display ads. And the bet is paying off. Spongecell is working with around eleven large ad agencies to help bring rich media to their client’s display ad campaigns.

And Spongecell has gotten a big endorsement in the form of an investment from Schmidt, former CEO and current chairman of Google, which is a giant in the display ad space.

Kartzman says that when he sat down Schmidt, he said that the startup’s technology is essentially the future of display, calling Spongcell ‘everything that display advertisement can be’ in the future. Coming from Schmidt, that’s a huge compliment.