FreeWheel Raises $16.8 Million for Video Ad Tools

FreeWheel has raised $16.8 million to develop its video ad tools for media sellers.

San Mateo, CA-based FreeWheel’s platform allows broadcasters and online media companies to serve and optimize interactive video ad placements. Its tools are specialized to meet the requirements of major brand advertisers – for instance by guaranteeing no competing ads appear when a broadcaster negotiates an exclusive category sponsorship for a sporting event.

“It’s very important to advertisers they can have in place the level of control they want,” said Jon Heller, co-CEO at FreeWheel. “That’s been an old need. It’s just often been difficult to execute with the dynamicism of online. That’s our focus – high-end media companies selling in ways advertisers like to work with them.”

Four investors participated in the round, including Turner Broadcasting System (TBS), a FreeWheel client. Others included Steamboat Ventures (affiliated with The Walt Disney Company), Battery Ventures, and Foundation Capital.

FreeWheel intends to use the money for product development (it runs an R&D base in Beijing) and international expansion, beginning in Western Europe.

The latest version of FreeWheel’s Monetization Rights Management (MRM) system is equipped to handle the nascent “TV Everywhere” concept championed by U.S. cable company Comcast. If it comes to fruition, TV Everywhere will bring subscription television content to Internet and mobile platforms, creating a more complex ad operations chore for broadcasters. MRM also handles inventory forecasting, yield optimization, and other sell-side ad functions.

The size of online video ad buys has steadily increased in recent years. Yesterday, AdAge reported that home products company Reckitt Benckiser has pledged to spend $40 million in video ads this year across a wide range of media placements. According to the report, that sum represents the most ever spent on the channel by a single company. Meanwhile, much of R-B’s inventory will be bought at bargain prices, often under $2.

But considering FreeWheel’s model, it may not be accurate to say $40 million would be the most ever spent in a single year on Internet video advertising. “As a pure play online video [investment], it seems big,” said Heller. But the actual spend associated with big online video campaigns may be impossible to estimate, especially when those buys are negotiated as part of large cross-channel sponsorships.

While FreeWheel serves video portals and other pure-play online ad sellers, he said the company’s “center of gravity” resides with broadcasting clients like TBS.

In fact, FreeWheel recently formalized relationships with two major online video publishers, Discovery Communications and ESPN Internet Ventures. Discovery will use FreeWheel’s technology for ad insertion and decision making on sites including AnimalPlanet.com and TLC.com, while ESPN will use it on properties such as ESPN.com and ESPN3.com.