Omar Tawakol

In these tough economic times, not many startups are raising funds, especially at higher valuations than previous venture capital rounds. But Bellevue-based BlueKai, a 13-person startup led by online advertising executive Omar Tawakol, has pulled in a hefty $10.5 million second round from Battery Ventures and Redpoint Ventures.

"We hear that it is bad out there and it certainly appears that way. But our revenue is growing at a very fast pace," said Tawakol, who previously held leadership roles at Medio Systems and Revenue Science.

BlueKai attracted interest in part because it helps advertising networks, Internet portals and publishers more effectively target advertisements to active online shoppers.

Launched earlier this year, BlueKai operates in a newly-emerging area of online marketing, one that Tawakol dubs a data exchange. Essentially, it compiles anonymous customer data from leading travel, automotive and retail sites. It then creates an online auction where advertisers bid on that data.

"Instead of focusing on simple addresses or demographics, we focus on 'these smart people are about to buy a Mercedes; these people are about to go to Las Vegas; these people are interested in a flat panel TV,'" explains Tawakol. "It is true intent, not just a demographic. It is very valuable data."

Tawakol declined to name partners, though he said BlueKai is working with some of the country's top automobile, travel and retail sites.

"if you take the top 5 commerce sites in travel, we have several of them. If you take the top retailers, we have several, " he said.

Advertising networks, he said, like the concept (and will pay top dollar) because they can target people who have expressed a real interest in buying a specific model of car or a flight to a select vacation destination. BlueKai compiles all of those shoppers into select groups that it then auctions off, say "Hawaii travelers" or "Ford Escape Hybrid" shoppers.

In a way, Tawakol said that information can be much more valuable than search results because advertisers know exactly what people are buying. And the way Tawakol sees it, the online advertising industry is going through a "disaggregation" much like the computer business did when it split into hardware, chip and software makers. Because of that, Tawakol sees opportunity to be the data supplier that sits between the advertisers and the commerce companies.

While it is a fairly new field,\it is a big enough opportunity that "several people will probably come after us," Tawakol says. There is no stopping the commerce companies from forming individual relationships with advertising networks such as Yahoo, Google or others.

But Tawakol said there is a lot of value created by setting up an online marketplace where the advertising titans have to outbid one another to get access to the data from the commerce companies.

"Everybody has to compete. That is the beauty of the marketplace and that is why it works," he said.

In September, BlueKai also unveiled an online registry where consumers can see what data marketers have collected on them, edit their preferences and earmark funds to go to charitable causes of their choice. BlueKai doesn't plan to make money on that system, but Tawakol said the goal is to make the online data collection process more "transparent" to the consumer.

"If the bar doesn't get raised for the consumer, then the FTC is going to get involved and raise it," Tawakol says.

As part of the investment, Satya Patel of Battery Ventures is joining the board. Tawakol said the company entertained multiple offers before closing the round last week. Total funding now stands at about $13.7 million.

The most recent cash infusion, which should get the startup to profitability,  will be used for product development and to expand into new areas such as small business, finance and other pockets of retail. It also plans to bulk up its sales and marketing efforts since Tawakol said they can't handle current inbound requests from advertisers.

"It's a good problem to have," he said.