Adauction.com Nets $7M Private Round –

SAN FRANCISCO – Adauction.com in December closed its first venture capital round of financing, landing $7 million from a group of venture firms led by Convergence Partners of Menlo Park, Calif.

The company also received equity commitments from Geneva Partners, b/z Partners, Band of Angels and Ben Rosen. Silicon Valley Bank provided a bank loan and made an equity investment, said Diane Chamberlain, director of marketing at Adauction. Investors received a combination of common and preferred equity.

Adauction operates an auction site where online publishers list ad space that becomes available the following month. The advertisers, or their representatives, then bid for the space. Ms. Chamberlain said the company advises its publishers to reserve approximately 20% of ad space for the auction site, which lists the lead bidder for each item with a blind name, assuring buyer anonymity.

When an auction closes, Adauction receives a 30% commission, and the publisher gets the balance of the revenue. The company has established partnerships with various online publishers including Netscape, Red Herring, Biztravel.com, Xoom.com, HotBot and Etrade. The company advises publishers to change the location of the space being offered in order to create some uncertainty about what will be available to the bidding agencies, Ms. Chamberlain said.

Adauction intends to use proceeds from the financing to promote its service and to increase staffing levels, particularly in sales. Some capital also will be used to expand into more traditional media.