The new behavior advertising upstarts: Aggregate Knowledge and Wunderloop

The eye-opening performances claimed by new behavioral advertising start-ups Aggregate Knowledge and Wunderloop are sure to grab the attention from online retailers and publishers.

Take the little announcement by the nine-month-old Menlo Park company Aggregate Knowledge yesterday at DEMO: It drove more than 20 percent of all of the holiday purchases at major discount retail site Overstock.com. Considering that the annual revenue of Overstock is in the range of $700-800 million, our rough estimate is that Aggregate Knowledge pushed at least $100 million in sales. Aggregate Knowledge wouldn’t comment, but if we’re right, this is downright impressive, considering Overstock is just one customer. AK gets paid for boosting sales (we don’t know exactly how much). We do know that it was making millions even before the holiday period (see our earlier coverage).

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The easiest way to understand Aggregate Knowledge is that it takes Amazon.com’s feature, “People who bought this book, also bought these books,” and applies it across the Web. For example, if you are browsing at a retail site, and looking at a particular gift basket for Valentine’s, AK proposes other gift baskets that others like you have ended up buying. It does this for news articles, and even advertisements.

No wonder Aggregate Knowledge is getting competition. Germany’s Wunderloop has been working steadily on a similar technology since 1999, but had stayed small and conservative through the downturn between 2001 and 2003. But now, with online retail flourishing, it is going for the big-time too. It has just raised cash from Klaus Hommels, of Benchmark Europe, Howard Hartenbaum, an early investor at Skype with Draper Richards, Skype founder Ziklas Zennstrom’s investment group, Atomico, and the European Founders Fund.

Hommels told VentureBeat last week the investment was in the “single digit” millions. That’s comparable to the $5.5 million invested in AK by Kleiner Perkins and others.

Hommels says Wunderloop has the most advanced behavioral technology in Europe. Like AK, Wunderloop assesses the clicks you make in real-time, making judgments about your tastes, without ever knowing who you are. Then it lets a travel insurance advertiser, for example, target the user profile that Wunderloop has determined to be at least 25 percent interested in finance, and 25 percent interested in travel. It can deliver ads, videos or content, dependent on the user’s tastes. The price of the average shopping basket bought by customers at Web sites using Wunderloop is 48 percent higher than without Wunderloop, Hommels said. Wunderloop serves several large European customers, including AOL, T-Online, Tiscali, Lycos and Freenet. Wunderloop has closed 100 percent of the customers it has started negotiating with, Hommels said. The new chief executive has revamped the Wunderloop management team, he said. It has about 30 employees.