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CTAM Live: Startup Slips In Ads

A Silicon Valley startup formed by two physics Ph.D.s has cooked up a form of Web video advertising designed to be less annoying — and more engaging — than pre-roll spots.

The company, Keystream, is pitching a system that analyzes a video segment and identifies blank areas on the screen. It then places a clickable ad banner or logo overlay on that part of the screen, based on rules set by the publisher.

The idea, according to Keystream CEO Schuyler Cullen, is to present an ad that's less in-your-face than forcing a viewer to sit through 15 seconds or more of pre-roll advertising.

“Web-video viewing has been growing exponentially but the advertising methods have been more suited to traditional television,” he said. “We believe Web video advertising needs to be nondisruptive and nonobstructive.”

The Mountain View, Calif.-based company was founded in 2004 by Cullen and Ed Ratner, both of whom have doctorates in physics from Stanford University. Keystream's technology is derived from their previous research on object-based video compression.

“We can track objects very accurately in real-world scenes,” Cullen said.

Gartner media analyst Andrew Frank said the approach holds promise but added that the devil is in the details as far as its effectiveness. For example, it's hard to know how well Keystream can identify video placement in low-contrast sections of a video.

“It's not the sort of thing you can see from a few demos,” he said. “The question is, what happens when you try to scale it to a lot of videos?”

Keystream is planning to pitch its system to 70 Internet video publishers that serve more than 1 million streams per month. The startup's pricing model is a flat cost per thousand impressions (CPM) for ads it serves.

The ads are delivered as either Adobe Flash or Microsoft Silverlight overlays on top of existing video assets, and publishers can set rules controlling where and how frequently the ads are displayed. Keystream said the system is integrated with DoubleClick's DART and Microsoft's aQuantive ad-reporting systems, and the company plans to hook into online ad exchanges and networks as well.

U.K. broadcaster ITV is using the Keystream system on its site, which provides a mix of professional and user-generated content. Cullen said ITV's click-through rates on the Keystream-inserted ads have been in “the high single-digits,” higher than other forms of Web advertising.

Keystream, which has 10 employees, has received $1.3 million in first-round funding led by Voyager Capital.

The ad-insertion system is Keystream's first product. Cullen said the company originally was developing security and surveillance applications based on its object-identification video technology, before shifting focus in 2006 to the Web video market.

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