Confirmed, finally: Online ad company Federated Media raises $50 million

This story will be very familiar to VentureBeat readers. Federated Media, a company that sells and runs ads on more than 200 blogs and other web sites, including this one, has raised $50 million from private equity firm Oak Investment Partners.

We’ve been reporting the gist of this story since last month, when a source told us that Sausalito, Calif.-based FM was closing a round with the pre-money valuation of $200 million. A second source confirmed the valuation just the other week, although FM wouldn’t confirm it when they briefed me on the funding news last Friday. Note: My second source incorrectly but understandably heard the investor to be Oak Hill Capital Partners, another private equity firm.

FM says it has been profitable since last year. Our first source told us that it made revenue up to $23 million last year (to be clear, that’s revenue, not profit), and was on target to make up to $60 million this year.

The paradigm for making money on the web has been direct-response advertising, led by Google and its click-based ads, but Federated Media envisions bringing brand advertisers online. As large media companies already know, brand advertisers care just as much about what content their names are associated with as they care about click-based conversation rates. To this end, Federated Media’s core strategy since its founding in 2005 has been to work with high-quality sites that have a clear relevance to certain, niche audiences — say, sites that write for investors and entrepreneurs. I has also more recently started helping large companies like Dell and BMW integrate marketing campaigns inside of third-party applications on Facebook.

It’s “insanity” to think that brand advertisers won’t move more of their advertising dollars from traditional media to the web, Chas Edwards, FM’s chief revenue officer tells me, despite the skepticism sometimes expressed by others about this potential.

Edwards says that even with a recession and a corresponding dip in adveritising spending, the migration to the web is unavoidable. “It’s not a matter of whether or not we’ll do more revenue in 2008 than 2007,” he says, “the question is, will we double, triple or quadruple it.”

Federated Media will use the money to expand its services for publishers, to flesh out its efforts on social networks and on other social web properties, and to work more closely with large advertisers.

Oak Investment Partner’s Fred Harmon, who led the round, will join FM’s board of directors.