Federated Media’s $50 Million Round: Where Will It Go?

Federated Media will use a significant portion of the $50 million in minority funding it secured this week to further differentiate it from other ad networks by offering its clients deeper and more expansive branding services.

Chas Edwards, publisher and chief revenue officer of FM, said the company will be investing in creative resources, better technology and event marketing capabilities in order to offer publishing partners more than just ad sales.

“If you’re only selling IAB banner ads and what-not, that doesn’t require much technology or human intervention,” he said. “But [we want to] fulfill premium brand sponsorships, or populate a section of our partners’ Web sites and fill them with content. Those kinds of services are of a much higher value to marketers, but also require higher-touch executions.”

Whether that means organic growth or acquisition remains to be seen, however. “We don’t have all the money spent yet,” said Edwards. “But there might be some acquisitions around content or service offerings.” The C round of funding comes from Oak Investment Partners, and reportedly gives the FM a $200 million valuation.

Sausalito, CA-based FM, launched in June 2005, has always sold itself as more of a branding partner to its clients than other ad networks. It sells ads mostly for blogs and content creators unconnected to any specific Web property (such as Graffiti Wall, which is available on Facebook and other social networks) with an emphasis on engagement and content.

Edwards pointed to FM’s foray into back-end event production as an example of how it can help its clients build their brands beyond the Web. The company also recently helped blog client BoingBoing extend its brand onto television.

Analyst Emily Riley from Jupiter Research noted that ad networks of FM’s size –meaning those significantly smaller than market leaders like Google or Yahoo — need to focus on differentiation rather than reach or scale.

“They need to do two things: They need to get a lot of customers quickly, and they need to broaden their offerings,” she said. “Advertisers don’t want remnant inventory, so they need to work with publishers to provide more premium packages.”

“These networks don’t have billions of impressions, so they have to develop a voice or a niche or a killer app,” she said. “And they can develop that in-house or snatch the little guy up for $5 million who can do it for you more easily.”

Either way, Edwards said that his company now has the money in the bank to attempt many of its more ambitious goals. “This money isn’t earmarked for anything yet, and we’re looking for opportunities to accelerate our business and our publishers’ business,” he said. “Whether that means hiring people or acquisitions, well, we haven’t figured that out yet.”

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