By Nat Worden
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Technology consulting firm Accenture Plc (ACN) is making an investment in a Web marketing start-up that aims to funnel dollars spent by major advertisers away from traditional media companies as the economy recovers.
The firm said Tuesday that it's forming a partnership with Adchemy, joining the Mayfield Fund and August Capital in a $31 million round of venture financing for the five-year-old Silicon Valley startup.
Adchemy has launched a new "audience relationship platform" product to help major advertisers tailor search and display ads to online consumers based on information the firm is able to piece together about their Web activity through advanced computing techniques like machine learning, statistical inference and advanced data mining.
"Many big advertisers aren't spending as much as they would like to on digital because they have a difficult time understanding the contribution of their digital spend," said Matthew Symons, head of strategy for Accenture Interactive. "Adchemy provides a unified data model for digital marketing that we think will accelerate the migration of ad spending to digital."
In the deal, Accenture has taken a minority equity stake in Adchemy, and Tim Breene, Accenture's senior managing director of strategic initiatives, has joined the company's board of directors. Meanwhile, Adchemy's technology platform will be combined with a similar platform owned by Accenture to form what they tout as a comprehensive solution to digital marketing.
Accenture shares closed down about 1.5% Tuesday at $38.15.
This year, eMarketer estimates that just 12% total advertising dollars will go to digital outlets, but most observers expect that number to grow rapidly in the coming years. Forrester Research expects interactive marketing to make up 21% of total ad spending in five years.
It's a sore subject for many as ad markets slump across the media landscape amid a deep recession. With a recovery being priced into stocks, investors are struggling to gauge how much of the ad-revenue declines suffered by traditional media companies are cyclical and how much of them reflect permanent loss of market share to new media players.
Murthy Nukala, founder and chief executive of Adchemy, said Accenture's relationships with major companies will help the firm tap into the traditional ad market. One of the biggest ad spenders in the world, consumer products giant Procter & Gamble Co. (PG) became the anchor client of Accenture Interactive last month under a multiyear agreement.
"They'll bring the customers, and we'll bring the technology," he said.
More than half of the Adchemy's 130 employees are engineers, reflecting the technical, mathematical approach to marketing that's being popularized on the Web in stark contrast to the traditional methods used on Madison Avenue.
Adchemy already has more than 300 clients, including Nationwide Mutual Insurance Co., Hotels.com and TransUnion. Nukala said his company offers them a pay-for-performance model that increases accountability and ensures an attractive return on investment. One client, beauty products marketing firm Intelligent Beauty Inc., says it was able to reduce its marketing costs while increasing online customer conversions using Adchemy's technology.
"We don't do well unless our customers do well," said Nukala.
-Nat Worden, Dow Jones Newswires; 212-416-2472; nat.worden@dowjones.com