Online advertising is growing, and it doesn't show any signs of slowing down. According to a report from eMarketer, online ad spending topped $100 billion for the first time in 2012 and growth will remain high through 2015. What is perhaps more interesting are the changes in the ways ads reach us.
IP targeting is an advertising practice that uses a computer's IP address to deliver targeted ads to users of that network. El Toro, a Louisville, KY-based startup, is taking this one step further by allowing advertisers to target individual homes based on their individual IP addresses and the demographic information of the people living there.
The idea falls under the greater concept of geotargeting. In essence, geotargeting is just what it sounds like, targeting someone or something based on geographic location. IP targeting is not a new concept, but it was typically used to target a region, or a cluster of homes in an area. El Toro's ability to target down to such granular level is novel in that is gives advertisers the ability to target specific familial and socio-economic demographics.
After raising $400,000 from family and friends, the company launched in July 2013. They have been cash flow positive since the end of 2013 and they don't anticipate needing to raise any more capital. They are only eight months old and they are already getting rave reviews.
While this technology could raise concerns about privacy and security, it is interesting to note El Toro's advent story. The company started as with the goal of reducing fraud for internet transactions.
The year of the bull
The idea behind El Toro began taking shape when CEO Stacy Griggs got the startup bug and decided that he needed to pursue something entrepreneurial again. Griggs had been a part of a team that lost hundreds of thousands of dollars to internet ad fraud, and from that tragic situation he saw a need take shape. Some of the team members had been working on this technology for years, but as they looked at the market, they saw a better fit in online advertising. Griggs said they wanted to eliminate the fraud and make make online advertising more efficient.
"The Internet is fueled by advertising, without billions of dollars in ad revenue many of the free tools we take for granted today would no longer exist. Our thesis was that by eliminating fraud and waste from the system we could dramatically increase the efficacy of online advertising and build a great company along the way," Griggs said.
Essentially El Toro maps your IP address to your physical address so they can help advertisers send you targeted advertisements based on the publicly-available data available for your physical address. "In a nutshell, if you provide us a list of addresses, we can place internet advertisements on the computers at those physical addresses based solely on a mailing address," Griggs said.
The IP targeting service offered by El Toro is different from existing services in two ways. First, existing services typically can only target a specific area and not individual homes. Second, some traditional IP targeting services are cookie-based, and El Toro makes use of empirical, offline internal data instead of cookies. According to Griggs, "...we don't keep confidential, sensitive or personal information on web users."
Taking the bull by the horns
El Toro's infrastructure is cloud-based and integrated with a demand side platform to help users better manage accounts. The company's revenue model is straightforward—they charge customers a cost per impression (CPM) rate for every 1000 ads they deliver on their behalf. Griggs said that they have been working with the auto industry, major consumer brands, and universities.
Colleges and universities consistently see much success with El Toro's software when targeting new students. Malone said that is because it helps the schools consolidate their marketing campaigns from two to one. Instead of targeting the parents and students separately, the schools can find data on homes where college-aged students are living with their parents and target those IP addresses. Parents typically help the students make a decision about what school to attend and Malone said the ads are getting up to five times their normal click-through rate.
The data El Toro is using is already freely available to the general public, they are just compiling the data in a way that helps advertisers better understand a demographic in a targeted area. Clients provide a list of people they would like to target and El Toro does the rest.
Robert Guarnieri, a candidate for Judge in Jefferson Family Court in Louisville has been using El Toro to help with his campaign. According to Guarnieri, El Toro has helped him get his message out because, "through their technology they reach specific households through the household's IP address and I am able to deliver my message to voters who reside there and who are known to have voted in past elections."
The ads created through El Toro are made predominantly for traditional computer web browsers. Griggs said they are experimenting with mobile ads targeting tourists and trade show attendees, but they tend to see a much higher ROI with traditional web advertisements, except for ad campaigns that are targeting an audience under the age of 26. At that age demographic, mobile is far more effective.
When asked if he is worried about big companies like Google just copying what he is doing, Griggs said he is actually thinking the exact opposite.
"I guess every CEO of a tech company is worried to some degree about Google and Microsoft," Griggs said, "but I would really turn that statement around. It should be Google and Microsoft that are worried about a startup like El Toro disrupting their market."
Conner Forrest has nothing to disclose. He doesn't hold investments in the technology companies he covers.
Conner Forrest is a Senior Editor for TechRepublic. He covers enterprise technology and is interested in the convergence of tech and culture.