• by Susan Kuchinskas , February 22, 2008

Why not take a Web 2.0 approach to contextual advertising? Get Web surfers to do what they're already doing, but apply it to targeting and voilà: consumer-generated ad relevance.

The game-changer is AD-Butterfly from Etology, launched in December to cater to Japan's red-hot blogging scene. Instead of advertisers buying keywords to match ads to content, they buy tags. Because bloggers and readers supply the tags, they tend to be more accurate and avoid some of the hilarious mismatches of regular contextual advertising. Bloggers and their readers can rate how well the ads fit; then that data feeds back into the system, further improving relevance.

Founded in June 2005, Etology brings together bloggers and advertisers in a self-service marketplace that the company claims can make advertising on the Internet's back roads more efficient and effective.

Advertisers consult an online dashboard that monitors how ads perform, and which reports on text ads and other standard units like banners and skyscrapers. Much inventory comes from Asia, South America and Eastern Europe, nations that get short shrift from most advertisers. For that reason, it's cheap - but Etology CEO Brock Purpura thinks this oft-dismissed content deserves a look. "The key tactic for advertisers tackling this mass-volume long tail is to be as self-service and automated as possible," he says.

A few thousand advertisers - a mix of agencies, marketers and mom-and-pop Web sites - already use the exchange to buy remnants on Amazon, uk.msn.com, Technorati, Facebook and MySpace, as well as on lower-profile content. There's plenty of room on that long tail; Etology serves 2 billion ads a day.