Congratulations to ADiFY, the company that enables publishers to create niche online ad networks, on the news that it has bagged a cool $19m in funding from investors including NBC Universal and Time Warner Investments.

Despite being a relative minnow, ADiFY could seriously threaten Google’s dominance of the online ad space, and it is a little surprising that the search giant hasn’t hedged its bets by getting involved in this funding round.

ADiFY, which now has an office in London’s Soho, has various online advertising related products, most notably its ‘Build Your Own Network’, which allows publishers to create and profit from vertical ad networks.

The BYON product is expected to give rise to various niche and not-so-niche ad networks in the coming months, and if it takes off will provide a serious alternative to Google’s Adsense.

Is Adsense going out of favour?
Google now generates about a third of its revenues from its Adsense product, which provides contextual text ads for publishers. The main trouble with Adsense is that Google doesn’t tell publishers the revenue sharing percentage, leaving publisher partners in the dark. People familiar with both Adwords and Adsense suspect that Google takes the lion’s share of revenue.

Adsense is huge, but publishers are scanning the horizon to see if they can extract more (transparent) value from their page estate.

Inventory shortages

In some sectors publishers are selling out of inventory, but BOYN allows them to embrace smaller third party publishers in order to create a vertical network, increasing the amount of inventory they can sell. ADiFY, the major publisher, and the smaller publishers all take a cut, typically along the lines of 20/30/50%.

Since the major publishers already have relationships with media buyers it makes a lot of sense for them to a) focus on the selling of ads, and b) increase the amount of ad space to make more money and satisfy demand, while c) creating a highly targeted, sector-specific network of content sites.

It should benefit all concerned, including advertisers, and certainly smaller publishers who can find it hard to get on media buyer’s radars.

What to do with the dosh?

With a number of new clients on the verge of being announced, ADiFY Europe’s head of business development Rob Procter told me that boosting headcount is the immediate priority.

“We’re looking to hire another half dozen people in the next month or so, specifically in account management,” he said. “It is a difficult market to recruit good people but we have a great product and need to satisfy demand and service accounts.”

I asked him about the company’s key selling point:

“The main driver is that the enterprise publisher can increase their ad inventory by creating its own ad network. That is very attractive to publishers that regularly sell all of their ad space.”

“By creating a custom ad network and joining forces with smaller publishers, everybody concerned will earn more ad revenue, while advertisers will benefit from increased targeting.”

Big names

Rob told me about some of the publishers the firm has onboard, but hasn’t yet announced publicly, and they are very significant deals:

“We have a number of enterprise publisher deals ready to go. We’ll be announcing these publicly over the next month or two.”

I really like the ADiFY concept. Whether it can withstand the might of Google and the other major online ad firms remains to be seen, but to some degree that’s neither here nor there.

At any rate, the proof is in the pudding: with big deals in the pipeline this looks like one company to keep a close eye on.