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Like These Songs? Then Maybe You'll Like This Ad

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For years, The Echo Nest has helped music services from Rhapsody and Rdio to SiriusXM and Clear Channel's iHeartRadio provide personalized music streams, suggesting new songs based on music people have already listened to. Now, in hopes of dragging online radio advertising into the 21st century, the "music intelligence" company is turning its smarts toward targeting ads.

Today, The Echo Nest is launching a new service it calls Music Audience Understanding, which uses detailed data about music preferences to identify particular audiences likely to be interested in a brand or product. Advertisers can then target anonymized profiles of people by age, gender, and lifestyle categories such as foodies and gamers as well as specifically music-oriented characteristics such as which of more than 700 music genres they like and whether their music preferences veer toward the mainstream or the fresh.

With the new service, says CEO Jim Lucchese, the company is going from "What's the next song you want to hear?" to "What ads are you likely to respond to?". "All of these streaming music services have free ad-supported offerings," says Lucchese. "But they're stuck in the 100-year-old radio selling model. Saying you're reaching hip hop fans doesn't cut it anymore."

Essentially, The Echo Nest is trying to provide online music services--along with other customers such as MTV , Twitter, Nokia , and brands such as Coca-Cola and Intel --the means to do the kind of data-driven, real-time automated or "programmatic" advertising they've been doing on the rest of the Web for years now. Instead of placing ads on sites that promise to provide the audiences they want, they'll be able to target the audiences themselves--but using music profiles to do it.

The company's technology combines analysis of songs' key, tempo, and other qualities with analysis of song and artist descriptions on the Web to give each of 34 million songs by 2 million artists a unique signature. Likewise, it creates millions of online music profiles, which the new product can organize into audiences attractive to particular brands. The first customer is digital audio ad network TargetSpot, which serves ads to about 85 radio groups and online music services, including several thousand music, news, and other channels.

One ad agency plans to give the company a call. "What Echo Nest is doing is really smart," says Ryan Aynes, cofounder of the music-oriented creative agency EDGE Collective. "It's now providing brands the opportunity to move into the music space but target people better there."

The Echo Nest's system doesn't use cookies, instead targeting based on anonymized music profiles. That could give it an advantage as Web cookies come under fire from privacy advocates, as Google and others devise alternative tracking schemes, and as services are accessed increasingly on smartphones and tablets where cookies don't work.

The Music Audience Understanding service is basically the online radio equivalent of a Data Management Platform, such as those run by the likes of BlueKai and X+1, that provide data to online publishers and advertisers so they can place real-time bids for ad space on millions of websites and apps. Lucchese says the analogy is roughly accurate, though he says one difference is that the company works with music services, ad networks, and even branded apps and services from the likes of Coca-Cola and Reebok, so it's not selling data or cookies to advertisers directly.

The Echo Nest has already been moving well beyond determining inclinations beyond music preferences. The company can use music tastes to predict people's politics and what movies they like, for instance. The new service has been in the works and in testing for two years.

The Somerville (Mass.) company gets about two-thirds of its revenues currently from its music discovery and personalization services, the rest from music data. Lucchese won't hazard a guess on whether the Music Audience Understanding service will beef up the latter business, but clearly it's intended to provide a significant new revenue stream.

The new service may end up competing with companies such as Gracenote and Rovi that also sell music data. And of course, there's the streaming music service Pandora, which has compiled its own massive database based on 200 million users' listening habits and its analysis of the music itself.

The company has raised $26.5 million in funding, the most recent round in July 2012 for $17 million, led by Norwest Venture Partners.