Targeted ads sharpen their focus

The spat over Facebook's hypertargeted advertising was just the beginning.

In case you missed it, Facebook users were outraged that the social-networking site was mining user data and experimenting with new types of ads. Last week the founder apologized and promised to let users opt out of the system.

But don't think it was another privacy goof or that it's limited to social-networking sites. Facebook gave us a clumsy preview of the next wave of targeted advertising, a trend that could make Google's contextual ads seem quaint.

Instead of tracking your searches, page views and e-mail to guess what you may buy, companies are rolling out new technologies to know precisely what you need and when. It'll be scary for people already concerned about their privacy. But it's a boon for digital wildcatters, including a few standouts around here.

They're like mining companies following the prospectors, bringing in heavy equipment now that the gold rush is on. That's what Microsoft is doing with aQuantive and even Facebook, which draws on Microsoft's ad technology.

Then there are startups like Protelus, a Bellevue company deemed the "most promising" startup at The Indus Entrepreneurs (TiE) annual funding forum last month.

Protelus found the mother lode of personal data — mortgage-loan applications. Not only that, mortgage companies pay the firm to sort their files and build databases so they can deliver targeted ads.

They know what customers need and when, so they can offer homeowners insurance exactly when your mortgage closes. They may also suggest life insurance, because you've got kids and a spouse who can't afford the mortgage alone.

"There is no more complete set of consumer information than a mortgage application ... you can't get more accuracy than this," explains co-founder Craig Chelius, a veteran of database and customer-relations software companies.

Chelius and Chris Nordby, a former executive of financial-services giant ING, started Protelus in 2004 and now have 11 employees.

Even with the housing slump, more than 50 million mortgage applications are floating around, and 10 million more will be created next year, they say. Protelus, meanwhile, expects sales to double in 2008, up from $1 million this year and reaching $68 million in 2010.

I used to think federal loan forms, like medical records, were confidential. But the Protelus founders note that people consent to share that information when they sign "opt-in" forms from loan companies.

Most loan applicants probably don't know what they're signing, just as social-networkers don't read user agreements when they register for the free services.

Chelius and Nordby say that unlike Facebook's ads, Protelus provides valuable information, such as deals on insurance. "When you're buying a home you need these things," Chelius said.

Protelus isn't the only startup digging for new value in old places. During a conference in Seattle last week, Rob Ketterson, managing partner of Fidelity Ventures in Boston, said a trend to watch for is "data services" — companies gathering data for customers, then sorting and packaging it in a useful way.

Ketterson may be too late to get a piece of Protelus. Chelius said local venture firms that reviewed his TiE pitch have since asked for multiple presentations, and Intelius Chief Executive Naveen Jain asked for a meeting with his team.

Brier Dudley's column appears Mondays. Reach him at 206-515-5687 or bdudley@seattletimes.com.