Durham’s ReverbNation spins out new advertising services company

Fast-growing ReverbNation has spun out a new 21-employee online advertising services business that expects to at least double in size this year.

The newly independent AdWerx, which is being unveiled Tuesday, is headed by Jed Carlson. Carlson co-founded ReverbNation and was its president prior to the spin-off.

Carlson projects AdWerx will add “somewhere between 20 and 40” new workers over the course of this year. He also said new company, which is ensconced in separate offices in downtown Durham, anticipates seeking an infusion of outside capital — more than $5 million – in the second quarter.

“We gave the company enough cash so it didn’t have to raise capital until it chose to,” said ReverbNation co-founder and CEO Michael Doernberg, who is remaining with that business.

ReverbNation, which expanded from $3.2 million in revenue in 2010 to $17.5 million in 2013, has about 85 employees after the spin-out. The ReverbNation website and its software products help music artists connect with their fans, promote themselves and distribute their music online.

Doernberg and Carlson said splitting the two businesses will enable each to maximize their potential by focusing 100 percent on their very different target markets and business models.

At the same time, investors that backed ReverbNation “get ownership in two great companies,” said venture capitalist David Jones. Jones is a partner in two Triangle venture capital firms, Bull City Venture Partners and Southern Capitol Ventures, that have helped fund the businesses.

AdWerx is a digital advertising platform designed for very small businesses that have marketing dollars to spend but don’t really have a specific marketing budget.

“At its core, what we are trying to do is connect all the amazing ad technology that is available out there to people that haven’t yet been able to really access it,” Carlson said.

The AdWerx platform is an offshoot of ReverbNation’s successful Promote It product, which is designed to make it easy for music artists to promote songs, concerts and albums online.

“It’s a hyper-simple way of doing advertising for them,” Carlson said.

The AdWerx brand was created in 2013 to test the technology’s potential outside the music industry.

AdWerx initially targeted real estate agents and has attracted more than 10,000 agents nationwide since November 2013, which is when the product was finalized.

AdWerx also has established relationships with a number of real estate agencies, including Century 21 and Long & Foster. Their agents, who typically are independent contractors, receive advertising discounts; in exchange, the agencies market AdWerx to the agents.

AdWerx aims to make it easy for real estate agents to post basic online awareness ads that highlight the agents and their contact information, typically including a photo and a slogan.

AdWerx provides “big boy advertising at small business prices,” said Chris Combs, a real estate agent based in the Brier Creek office of Keller Williams Realty.

Combs signed up with AdWerx in October after hearing good things about it.

“You get access to some of the most-looked-at websites in the country, and you don’t have to pay through the nose to get access to them,” Combs said.

Denise Brewer, a Tulsa, Okla., real estate agent and an AdWerx customer, said that if she tried to duplicate the exposure she gets from AdWerx on her own, “I would have to do it 24/7, and I still wouldn’t do it very well.”

Driving awareness

Both Brewer and Combs said setting up their online advertising through AdWerx was easy.

“If you are a real estate agent and come to AdWerx,” said Carlson, “all you really need to tell us is your name, where are are located, and which ZIP code you want to target.”

AdWerx will create the ad, although real estate agents can modify it to their liking or use ads they’ve created if they prefer. Then AdWerx uses “behavioral targeting” – that is, targeting individuals based on their online browsing. In this instance, individuals within a zip code that are, say, searching real estate listings or using an online mortgage calculator, would see the ads “wherever they go on the Web,” Carlson said.

Agents pay anywhere from $120 to more than $1,000 per quarter for the service.

Competition includes traditional offline marketing via postcards, billboards and newspapers as well as direct-response ads placed with search services such as Google that aim to get consumers to click them immediately.

“AdWerx has a different ultimate objective,” Carlson said. “Our product is about driving awareness and affinity for an agent, to increase the probability that the home buyer or seller will choose to work with that agent when they are at the natural moment of making that choice. Its not all that much different than what Coca-Cola is trying to do by showing ads on TV during a football game. Their goal isn’t to drive direct response.”

AdWerx plans to expand into at least one additional market beyond real estate agents this year, Carlson said.

As for ReverbNation, although it isn’t disclosing its 2014 revenue, Doernberg said the business is doing “really, really well” and anticipates adding more than 25 workers this year.