How small-cap Inuvo is rescuing the $200 billion advertising market amid cookie clampdown
The small-cap Inuvo has devised a way to rescue brands and the advertising market from restrictions on cookies. For years, cookies have been the primary means for companies to gather user data and target ads. Inuvo offers a technology capable of creating consumer profiles without cookies. On the back of this, analysts believe its stock could more than triple.
The core issue
“You watch a Renault commercial, and then your screen is taken over by Twingos. You put a dress in an online shopping basket, then it’s stalking you across the internet,” wrote the Correspondent in 2019, describing how ad targeting works.
Targeting has been a cornerstone of online advertising. Today’s consumers expect brands to deliver a contextual, consistent, and personalized approach, wrote Girish Ramachandra, founder and CEO of Shopalyst, in a column for Forbes. A study by McKinsey supports this, with 71% of consumers expecting personalized interactions and 76% feeling disappointed when those expectations are not met. This has real financial implications too: Companies that offer the right ads to the right audience generate 40% higher revenue than their competitors.
For the last three decades, personal information about consumers — such as age, income, parental status, interests — has been a hot commodity in the online advertising market. A list of plumbers who make $50,000 a year, for instance, would be a valuable resource for advertisers.
To achieve personalized advertising, sellers have historically relied on both first-party and third-party cookies. First-party cookies track users’ activity on a brand’s own website, such as revisits, page views, and browsing patterns, along with personal data like location and language preferences. Third-party cookies, meanwhile, gather data from other sources — for example, through banners on external websites that do not belong to the advertised brand.
For years, advertisers have depended heavily on third-party cookies, Shopalyst’s Ramachandra noted.
However, everything changed recently with new regulations requiring websites to obtain user consent for collecting and sharing their data. Such regulations have been implemented in the EU, while the U.S. lacks a federal law, though states like California have put in place cookie-use rules. Companies have also introduced their own measures. In 2020, Apple removed support for third-party cookies in its Safari browser and, a year later, allowed users to choose whether to permit cookies at all. This summer, Google announced plans to offer a similar opt-in feature for its Chrome browser.
These changes prevent sellers from getting that “list of plumbers.” This means they can no longer construct detailed consumer profiles, ultimately leading to less effective ad campaigns, which often cost millions of dollars.
Inuvo, with a market capitalization of just over $34 million on the NYSE, has devised a solution to this problem that complies with privacy regulations.
Inside the brain
Inuvo’s key innovation is IntentKey, a tool capable of targeting relevant audiences without cookies.
First mentioned in the company’s 2017 annual report, IntentKey is described as a consumer intent recognition system. It’s an AI-powered technology that, according to the company, targets audiences by answering the question of “why” rather than “who.” Essentially, it analyzes consumer behavior during online searches and uses AI to map their decision-making processes without collecting confidential data. In a November 2024 SEC filing, the company described itself as the only company in the world to commercialize large-language generative AI for audience identification, targeting, and measurement in advertising.
The technology underlying IntentKey was developed in the machine learning lab at the University of California, according to the SEC filing. Inuvo acquired the patents (the price is undisclosed), developed a tool based on the technology, and adapted it for the advertising market.
“Online advertising is set up much like stock trading, where there is a buyer (advertiser) and a seller (the website),” the company explained. “Inuvo has integrated its AI into that bidding environment and consequently processes and evaluates roughly 150 billion transactions daily.”
Inuvo AI is described as being built around a model of the brain like a giant library, where the interconnected neurons are books, and the brain can determine and adjust all the probabilities between the books.
For example, the AI “knows” there is a connection between Theranos and the Wall Street Journal. Recall that Theranos, founded by Elizabeth Holmes, claimed to revolutionize diagnostics by identifying numerous diseases, including cancer and diabetes, from a single drop of blood. However, in 2015, the WSJ broke the story that the company was a fraud and that Holmes had misled investors. Inuvo’s model could identify a consumer’s potential interest in subscribing to the WSJ due to their curiosity about Theranos, the company explained.
Another example: while developing an AI model for a noise-canceling headphone brand, Inuvo kept coming up with “dog ownership,” specifically small dogs, company President Barry Lowenthal told AdExchanger.
“It was kind of weird because the connection between small dogs and headphones isn’t obvious. You’d expect things like ‘music’ or ‘airplane travel.’ But then, as we dug into it, we started to make more specific connections. Because many small-snouted dogs, like pugs, have breathing problems and snore, their owners have a hard time sleeping with their pet, which is why they’re interested in noise-canceling solutions,” Lowenthal explained.
Inuvo’s technology operates on a self-serve model: clients access the platform, allocate their campaign budgets, and pay per thousand views.
Similar self-serve models are employed by platforms like LiveRamp (market capitalization: $2.00 billion), Viant ($1.28 billion), and long-time Disney partner Magnite ($2.50 billion).
Challenges in the digital world
Inuvo has been in business for nearly 40 years. It was founded in 1987 and went public the following year. Initially, the company provided services to the oil and gas industry, AdExchanger reports. When this business became unprofitable, Inuvo ceased operations for four years (1993-1997) before shifting its focus to advertising. While it’s unclear why the company chose this sector, it noted the promise of the online advertising market in one of its reports.
Advertising beyond Google and Facebook is a $200 billion market where hundreds of companies depend on consumer identification. With its technology, Inuvo believes it can capture market share and set the standard in advertising technology.
The transition from oil and gas to advertising did not happen overnight: Starting in 1997, Inuvo acquired 17 companies related to its new sector over the course of a decade.
In the third quarter 2024, Inuvo reported $22.4 million in revenue, down 9% year over year but up 23% quarter over quarter. The net loss grew nearly 67% versus the previous-year period to $2.0 million, partly due to a $600,000 noncash impairment charge tied to a terminated marketing agreement. Revenue for the first nine months of the year was up 8.5% year over year at $57.6 million.
The company is close to breaking even on an adjusted EBITDA basis, it reported recently, expecting to generate sufficient revenue to cover the $25 million in quarterly costs associated with developing, maintaining, and supporting its AI products.
Its clients reportedly include “some of the world’s largest technology, retail, and auto companies.” Partners listed on Inuvo’s website include HBO Max, ESPN, Disney+, Hulu, and satellite TV provider Dish. According to Insider Monkey, Google is among its largest partners, and the tech giant’s plans to give users more control over cookies bode well for Inuvo.
To grow its client base, the company must overcome clients’ “fear of change,” CEO Richard Howe said during the third-quarter earnings call. He also noted that “conferences have been effective for networking… which has boosted our visibility.”
According to MarketWatch, the three analysts covering Inuvo have “buy” recommendations. Their average target price of $0.95 per share is more than three times the current share price.
