Game Changer? Federated Media Lands Key Deal with WordPress

Right now, at the Web 2.0 Summit in San Francisco, two local companies, Automattic – which powers the popular blog platform WordPress — and the digital media and ad network Federated Media, are taking the wraps off a major partnership.

Their big news: That the more than 24 million blogging sites to use WordPress (including peHUB), can now access  “advertising representation rights” in an opt-in program that will ostensibly allow both the sites – and the advertisers who want to reach their specific audiences – to engage more easily than ever.

One of those ways, argues Federated, is by allowing advertisers to “become a seamless part” of the sites by finding ways to integrate sponsored posts as unobtrusively as possible into a site’s pages. Another is through “conversational targeting,” which uses Federated’s semantic search technology to target conversations instead of just key words.

The last feature comes to Federated care of its acquisition earlier this month of Boulder, Colo.-based Lijit Networks, an advertising analytics and tools firm. Federated didn’t disclose how much it paid for the five-year-old company, but Lijit had raised around $28 million, including from Foundry Group, Highway 12 Ventures, and High Country Venture.

Whether the news is meaningful for the publishers themselves remains to be seen, but the tie-up is a big deal for both companies, particularly Federated, says digital media analyst Greg Sterling.

“For WordPress, the impact of this deal really depends on what their [undisclosed] revenue share will be,” says Sterling. “For bloggers, if you cross certain kinds of traffic thresholds in terms of page views and unique visitors, it could be meaningful, but I don’t know what those are.”

For Federated – and its investors – the partnership is a major coup in Sterling’s view. “Federated now gets to make claims about its reach that are dramatically expanded by this partnership. It can say, ‘We have all these content-specific verticals with all these engaged audiences that we can target now.’”

Adds Sterling, “I don’t know if it’s true that Federated now has the scale to rival Yahoo, AOL, and Google,” as Federated is today claiming. “But the fact that they can quasi-credibly make that claim will get them into doors they may not have been able to” walk through before.

WordPress began as an open source project by Matt Mullenweg, who remains the software’s primary developer. Its parent company, Automattic, oversees numerous Web services, including Polldaddy, VideoPress, and Askimet.

Automattic has raised roughly $30 million since 2005, most of which came three years ago in a $29.5 million round from Polaris Venture Partners, the New York Times, Radar Ventures, and True Ventures.

Federated Media, also founded in 2005 in San Francisco, has raised $57.5 million over the years, including from Omidyar Network, the New York Times, Oak Investment Partners, and individuals including Tim O’Reilly.

In addition to Lijit, other previous acquisitions include BigTent, a platform that local groups with shared interests like their neighborhood to connect online. Terms of the deal, which took place last November, were not dislosed. Federated also acquired another semantic search startup last year in August called TextDigger. Terms of the deal were not disclosed.