By Jon Fortt
June 3, 2010

Remember browser toolbars? They’re back — and surprisingly powerful.

Adam Boyden’s startup just might have the next big idea in online marketing — and it’s got nothing to do with search or banner ads.

Boyden heads U.S. operations at Conduit, a company that is challenging the conventional wisdom about how to get and keep people’s attention online. Rather than use Google’s column of blue links or Yahoo’s image-rich brand advertising, Conduit claims a different piece of real estate: the old browser toolbar.

Using Conduit’s platform, content publishers build and distribute their own branded custom toolbars for Internet Explorer, Firefox and Safari, giving them a way to get in front of users as they surf across the web. Other digital marketing tools bring customers to you once; Conduit aims to keep them coming back regularly.

Some big names have bought in. Zynga has a Conduit-based toolbar that alerts Farmville devotees when it’s time to give their crops some attention. EBay (EBAY) has one that delivers auction updates. All told, Boyden says Conduit has about 220,000 toolbar publishers and more than 100 million active toolbar users, which is enough momentum to put the company at #29 on Google’s recently-published list of the top 1,000 sites on the Internet, just behind and ahead of Hotmail and Flickr.

When I met Boyden earlier this week in San Mateo, he was scouting out new office space for the company, since he plans to double his staff of about 150 by the end of the year.

The browser toolbar concept has been around for quite a while — Yahoo and Google have been distributing them for the better part of a decade — but Conduit’s approach is unique in a few key ways:

1. It’s a platform. This isn’t a single product you download; it’s a set of tools that anyone can use to make their own version.
2. It’s dynamic. Content publishers can push layout changes to their toolbars, keeping them fresh.
3. It’s a marketplace. Toolbar publishers can pay each other to distribute content or marketing messages, giving the platform a potentially powerful economic engine.

The economic angle is what really makes this interesting. Coca-Cola (KO) used Conduit for a marketing campaign around its Coke Zero soda and the movie Avatar, paying Conduit to promote a toolbar ad to its community of publishers. Even though the publishers themselves weren’t paid to promote the brands, they happily did it anyway; Boyden says the Coke Zero campaign spread to 1 million PCs in a day, and 8 million in 10 days.

Besides campaigns like that, Conduit makes money in two ways: from its cut of the payments publishers offer each other to promote their messages, and from the Google search widget it puts in every toolbar. Conduit’s own accounting suggests this is working well. It hasn’t had to tap the $8 million it raised from Benchmark Capital in 2007. It now boasts 100 million users who fire up a browser toolbar at least once a month.

The big question is whether Conduit can continue to scale up on its own. Smartphones and tablets are gaining in popularity, and those platforms aren’t as toolbar-friendly as the PC. Important publishers are toying with the idea of putting more of their content behind pay walls; and if they do, that could eventually crimp Conduit’s growth, which is largely based on the promise of freely available information.

And then there’s the revenue issue: Probably the most important factor influencing revenue growth is the distribution of toolbars, but Conduit relies on its publishers to create demand. I asked Boyden why Conduit doesn’t have its own basic toolbar with the most popular content to get people started; he said that’s something the company has talked about but has decided to avoid for now.

In the meantime, let’s see how long Conduit can keep this going. Either way, I bet it won’t be long before folks like Google (GOOG), Yahoo (YHOO), Microsoft (MSFT), and Amazon (AMZN) start to recognize the potential power of Conduit’s engagement model, and perhaps start courting the company.

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