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E-Classis has developed innovative approaches to online advertising, but can this tiny startup survive competition from the big boys?

CEO Taketoshi Miyashita

Now a Tokyo-based startup thinks it's developed the next-generation model.

Established last March, E-Classis says 90 percent of its business comes from its "Custom Click" service. What Custom Click allows advertisers (or ad agencies) to do is become very picky about where and how they advertise online. Using a tool called Ad Navigator, advertisers access a special Web page to set the parameters for how and where they want to advertise. For example, they can select which sites they want to advertise on, as well as their desired targets, days, and time-of-day they want their ads to appear. Once they submit this information, Ad Navigator shows which advertising slots are available for the parameters selected.

What's unique about the service is the level of customization and control it gives advertisers. "There are many per-click services out there," says CEO Takatoshi Miyashita, "but advertisers usually can't choose which sites to advertise on. Maybe they can ask for 'business sites' or a few other categories, but we have about 20 big categories and 300 subcategories. Advertisers can be as picky as they want."

Miyashita claims some clients get remarkably high click rates. The industry standard is around 0.2 to 0.25 percent, but "some of our customers change the setting quite often to get higher clicks, and the rate sometimes gets up to more than 1 percent," he says.

But some competitors say the click-through model is on the way out and that the future belongs to results-based offerings. Miyashita responds that his venture plans to move in that direction.

In the meantime, E-Classis needs to get as many ad spaces as possible. At the moment, the company has contracts with over a thousand sites and is trying to increase the number dramatically. "This is where we put a lot of our effort," says Miyashita. "Unlike our competitor, Cyber Agent, we don't have our own salespeople to sell the ads. Instead, we focus on collecting sites that have ad space."

One way to accomplish this has been to contract with companies that control a large number of sites, like ISPs and Web hosting companies, offering them a portion of the click-through fees. "Now 90 percent of our ad space comes from this service," Miyashita says.

E-Classis hopes innovative ideas like these will help it survive in an ever more competitive landscape. "We're not the first mover, so we had to come up with some special features to differentiate ourselves," Miyashita says.

But with the online advertising market in Japan worth some ¥50 billion in 2000 and an estimated ¥110 to ¥130 billion next year (according to Yano Research Institute), big boys like No. 1 ad agency Dentsu have smelled the money and are moving in. Whether innovation alone is enough for this startup to survive remains a question mark.