NEWS: Ad network strives to make coupons more meaningful

By MICHAEL LIEDTKE 
AP Business Writer

SAN FRANCISCO (AP) -- While most forms of advertising are getting better at targeting likely customers, coupons rarely hit the mark. To wit: U.S. consumers redeemed less than 1 percent of the estimated 285 billion coupons issued last year for groceries and various packaged goods.

But a small Silicon Valley company is striving to improve coupons' aim with a new online distribution network based on a contextual concept that helped turn Google Inc. into the Internet's most popular - and profitable - advertising vehicle.

After several weeks of tests, Mountain View-based Coupons Inc. plans to unveil its "Brandcaster" system Monday.

Finding online coupons now typically requires consumers to make a special trip to Coupons Inc.'s site, coupons.com, or similar destinations like smartsouce.com, ppgazette.com and coolsavings.com.

If Brandcaster works, Web surfers should start seeing more offers to print out coupons for products that have a contextual connection to a topic that piqued a reader's interest in the first place. For instance, someone looking at a Web page about healthy food might be offered a coupon for organic milk.

It's the same idea behind the text-based ad links that Google displays alongside search results and other information at hundreds of thousands of Web sites.

Coupons Inc. even recruited one of Google's advertising masterminds to become an adviser for the Brandcaster system.

Gokul Rajaram, who left Google late last year, said he wanted to help out because he views Brandcaster as a logical extension of Google's "AdSense" - a system he helped launch in 2003 to distribute relevant advertising links to other Web sites.

Since then, AdSense has attracted more than $15 billion in advertising revenue.

Coupons are "one of the big bastions" of advertising that still hasn't made a significant move to the Internet, Rajaram said. "I think this is can drive large amounts (of coupons) online."

If Rajaram's right, Brandcaster could drain even more revenue away from the beleaguered newspaper industry, which has been cutting staff and other expenses to cope with advertising's accelerating shift to the Internet.

Advertisers paid newspapers to distribute nearly 90 percent of the coupons issued last year for packaged goods, according to NCH Marketing Services, which helps retailers turn in redeemed coupons to manufacturers.

Just 0.4 percent of the packaged goods coupons were printed out on the Internet last year, NCH estimated.

Steven Boal, who started Brandcaster a decade ago, doesn't have any delusions about approaching Google's ad volume.

But he believes Brandcaster will play a pivotal role in achieving his goal of generating $400 million to $500 million in annual revenue, paving the way for a possible initial public offering of stock. He declined to reveal privately held Coupon Inc.'s annual revenue.

To start, Brandcaster will distribute coupons from about 200 brands to about 3,000 Web sites. The advertisers sending their coupons through Brandcaster include General Mills Inc., Kimberly-Clark Corp., Kraft Foods Inc. and Clorox Co. Within a year, Boal hopes to have 35,000 Web sites showing coupons through Brandcaster.

Like Google's advertising system, Coupons will share revenue with the Web sites participating in Brandcaster. Advertisers will only have to pay when a consumer prints out a coupon...