Crowdsourced SEM “Marketplace” Trada Raises $5.75M From Google Ventures & Others

Trada announced a $5.75 million “C” round this morning. It was led by Google Ventures and early investor Foundry Group. Trada CEO Niel Robertson told me yesterday that the money will be used for to get into display (and eventually video and mobile), as well as to expand into non-US markets and develop new tools for agencies.

What is Trada? you ask. Trada is a relatively new “crowdsourced search marketplace.” It brings together freelance search marketers and advertiser campaigns and gets multiple people to work on those campaigns. In fact the company says that it has an average of 24 search marketers working on campaigns, both collaborating and competing with one another.

The target advertiser that Trada works with is one spending between $5,000 and $50,000 per month on search — the “middle” of the market according to Robertson. He added that Trada manages “tens of millions” of dollars in search ad spending and is growing rapidly.

Robertson told me that the target client is also one that doesn’t want or can’t afford to hire people in house to manage paid search. He added that many agencies are also starting to use Trada. Agencies in some sense are also Trada’s competitors.

When I asked about competitors Robertson said the crowdsourced SEM model was unique but mentioned Clickable as a company vaguely in the same segment. Clickable works with third party sales channels on SMB search campaigns. Trada, however, is not yet in a position to work on the same kinds of relatively small SMB search campaigns.

When I first heard about Trada a few months ago, I was quite skeptical. A number of questions immediately entered my mind:

• Why would a competent search marketer want to get involved with Trada?
• Wouldn’t there just be a bunch of junior people and marginally skilled part timers working on campaigns?
• How can multiple people independently and effectively collaborate on SEM campaigns; doesn’t the campaign suffer?
• How does the company ensure quality and continuity?

I raised each of these questions with Robertson who answered them effectively.

Robertson said that the company tests and certifies search marketers and requires third-party certifications to ensure that they’re qualified.

In terms of why an SEM might work with Trada, Robertson offered a number of “real-world” scenarios. He said that Trada offers SEMs freedom that they may not get at agencies, though he said that some of his SEMs were agency people “moonlighting” at Trada. Some Trada SEMs are people that may operate their own small agencies and are looking for additional business. And some are freelancers that just like working on paid search but don’t want to hassle with sales, billing or administration.

He also said that SEMs get to choose the types of campaigns they work on: large or small, vertically specific or varied. Robertson further explained that there was also the opportunity to make “real money” with Trada. That leads us into the question of how Trada and its SEMs make money.

Trada search campaigns can either be optimized on a PPC or CPA basis. Trada and its SEMs make money on the spread between what the customer-advertiser is willing to pay and the ability of the SEM to get clicks or “actions” for a lower amount. I immediately called this “arbitrage.” But Robertson argued that everything is transparent at Trada, unlike traditional arbitrage.

Robertson told me that advertisers have full control and can review and reject any ads or campaigns that its SEMs create. (Trada calls SEMs “optimizers.”) There are also optimizer profiles and a leader-board so that advertisers can see who’s working on their campaigns and how they’re performing.

Traffic is coming from Google, Yahoo and Bing (rather than alternative sources that may offer lower CPCs). He explained that the system motivates SEMs to find efficiencies or new keywords that are more cost effective.

Trada claims that CPA costs go down an average of 10 percent for its advertisers. He said that agencies like Trada because there are no additional fees or markup and so they can preserve margins. If they’re working on multiple ad types (display, social, etc.) they can use Trada to outsource paid search without adding any cost for the advertiser. In this model Trada is the “wholesaler” and the agency is the “retailer.”

Growing its agency business is one of the things Trada is doing with the funding. Robertson said that agencies have requested a number of tools that the company is now developing.

Trada SEMs don’t work directly in AdWords or adCenter, rather they work on a proprietary platform that Trada has developed. So none of the Trada SEMs get direct access to the advertiser account.

It has all been pretty thoroughly worked out it appears.

Robertson told me that roughly four months ago the company had only 30 customers and now it has 200. That would seem to validate the model.

[youtube]https://www.youtube.com/watch?v=MYgHxjkdq_U&feature=player_embedded[/youtube]

Postscript: There’s the issue of Google’s potential “conflict of interest” in investing in a company that manages paid search campaigns. In my view there isn’t a conflict unless Google were to buy the company or provide it with special treatment. But otherwise I don’t see a problem with the investment in the abstract.

Postscript II: Andrew Goodman has a lengthy and thoughtful take on Trada and what it can and cannot do.