• by Laurie Sullivan , Staff Writer, January 5, 2011

Investors seem to keep feeding cash into companies supporting behavioral targeting despite the privacy concerns of Capitol Hill and privacy advocates. Earlier this week [X+1] became the latest online ad firm in the space to get a big chunk of cash. The company plans to use the $10 million raised from the second round of funding to help promote the growth of its digital marketing hub.

Intel Capital, the chipmaker's investment arm, led the funding, with participation from existing investors Advanced Technology Ventures, Blue Chip Venture Company and Hudson Venture Partners.

Some industry insiders expect increased investment activity this year throughout the online advertising industry. In the past month, several online ad platform companies have secured funding. AdKeeper raised $35 million in Series B funding led by Oak Investment Partners; eXelate secured a second round of funding, $5 million, bringing the total to $16 million; and Media6Degrees raised $17 million in its second round of venture capital funding.

All this funding should prompt additional innovations, so expect increased optimization in the display advertising space. J.P. Morgan analysts believe display ads need to be better targeted toward consumers through use of behavioral targeting and interest-based ads. That's according to a report, Nothing But Net, published earlier this week.

As the report suggests, behavioral targeting is not new, but it has been talked about as a solution to declining CPMs. "Marketers appear to value targeted advertising as demonstrated by Google's well-targeted search ads generating revenue per query (RPQ) more than double Yahoo's," according to the report. "We expect that this same principle will apply to graphical advertising and note that AudienceScience estimates a 15x CPM premium for behaviorally targeted ads."

Analyst and venture capitalist may want companies to develop ad targeting platforms to become more effective at scaling campaigns, but as the report points out, advertisers must find a way to deal with privacy issues.