Pixazza raises $12M to be more image-conscious

Online display advertising is a big business. Just in the United States, advertisers spent an estimated $8 billion—more than a third of every ad dollar spent online—on website banners and rich media displays last year, according to one trade group.

Yet if you ask people how many of those ads they remember, expect a short list. For the most part, people are so used to seeing ads in the same spots, they’ve trained themselves to tune them out.

So says Bob Lisbonne, CEO of Pixazza, a Mountain View, Calf.-based startup that runs a service for embedding marketing messages in online images. The company, which closed a new round of venture funding last week, is one of several startup businesses built around the concept that the display ad sector, which has lost significant market share to search-based advertising over the past decade, is in dire need of innovation.

“After 10 years of stagnation in display advertising, most consumers today are adept at ignoring the banners and display ads that adorn the typical Web page,” Lisbonne says. Publishers, meanwhile, have been missing out on substantial revenue that can be generated from under-used online real estate, such as images.

Investors seem to agree. The 2-year-old company announced that it raised $12 million in a Series B financing round that was led by Shasta Ventures and was joined by August Capital, CMEA Capital and Google Ventures.

The funding round comes a little more than a year after Pixazza raised $5.75 million in its previous round.

Lisbonne declined to say how much revenue the company is currently bringing in, save that sales are “ramping very quickly.” Traffic is also growing swiftly, he says. Currently, sites featuring Pixazza’s technology draw more than 25 million unique visitors per month, according to the company, of which more than two-thirds are based in the United States.

To use Pixazza, consumers mouse over an online image and information appears, providing details, pricing for similar products, and often the ability to click to purchase.

For example, Lisbonne says that a user might mouse over a picture of some well-dressed celebrities, and get information about who designs their clothes and where to purchase them. The company earns revenue through advertisers and merchants, taking a share of the sales generated from marketing messages it embeds in images.

Pixazza is one of several companies targeting display advertising to raise funding in recent months. Others include:

• Click Forensics, an Austin, Texas-based provider of online advertising and audience verification applications, announced in late June that it closed a $6 million Series C funding round led by Austin Ventures, with participation from Sierra Ventures and Shasta Ventures. The company says it will use the money to expand development and marketing of new tools to help brand advertisers and agencies verify online audiences and use that data to allocate display advertising investments.

• PubMatic, a Palo Alto, Calif.-based company that provides online publishers with the technology to manage their advertising inventory, announced in April that it has closed a $7.5 million up round led by existing investor Helion Venture Partners. Existing partners Draper Fisher Jurvetson and Nexus Venture Partners also participated.

• AdReady, a Seattle-based provider of software for large agencies and companies to target display advertising, raised $5.3 million in May from Madrona Venture Group, Bain Capital and Khosla Ventures. —Joanna Glasner