Peter Kafka

Recent Posts by Peter Kafka

Meet Spongecell, a Profitable Ad Tech Company With $10 Million in New Funding

You hate Web ads, or you ignore Web ads. Ah, but what if those Web ads weren’t boring old Web ads, but they danced or sang or jiggled around?

This is the pitch, more or less, for Spongecell, a start-up that helps produce “rich media” Web ads. That’s not a new idea, by any stretch, and there are plenty of competitors that do similar stuff. But last year the company’s story still attracted angel investors like Google chair Eric Schmidt.

And now the company has new funding: Tech investor/holding company Safeguard Scientifics has taken all of a $10 million B round.

The money will go to help Spongecell expand smaller product lines, like video ads, and eventually move into new ones, like mobile ads, says CEO Ben Kartzman.

Spongecell is a full-fledged “pivot”: Prior to 2008, it had raised $3 million and was trying to sell some sort of “event management” widget that Kartzman readily admits got no traction. Then it moved into ad tech, and things have been humming since. Kartzman says that last year he grossed around $10 million and cleared “seven figures” of profit.

Big picture: Smart people keep telling me that the ad tech ecosystem has too many start-ups funded with too much money, and that something has to give. But then I keep hearing about another ad tech start-up raising another round. Assume we’ll see more of these for a while.

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work