Mobile ad network Todacell raises $2 million

Start-up generating $400,000 in revenue a month, up 400% from last year

Todacell announced Wednesday that it's raised $2 million in new funding from AfterDox, a group of investors from telephone billing solutions company Amdocs, as well as other investors. The new funds brings total financing to $4.35 million and comes at a time Todacell has quadrupled its monthly revenue.

The company is now generating $400,000 in monthly revenue, up from $100,000 monthly last year.

"Revenue in 2012 has already doubled all of 2011," said Mark Lehmann, CEO who joined Todacell in August 2010, in an interview with me. "Year-over-year growth is 400%."

Todacell is one of the many start-ups going after the nascent mobile advertising market. Todacell's value add is that it has optimization software that can improve an advertisements performance over time, said Lehmann.

Already the company boasts hundreds of large blue-chip advertisers through its relationships with advertising agencies, and thousands of direct relationships with publishers. While Lehmann wouldn't disclose any names on either side, he did say that publishers are typically generating more than 20 million mobile impressions a month. 

From the advertiser perspective,  in one example Todacell worked with an e-commerce company to target over 50 college towns and sell electronics and apps. Todacell was able to run geo-targeted ads to Andorid devices across different publisher sites. The result was that Todacell was able to increase click-through-rates by 5x and increase sales by 3x, said Lehmman. 

Todacell plans to use the new funds to expand in Europe from its London office, where billings have tripled in 2012 over last year.  

Todacell's new funding comes amid a boom in mobile usage. Mobile Internet traffic exploding. Mobile accounts for 10% of Internet traffic in 2011, up from 1% in 2008, according to Kleiner Perkins. Additionally, there's material upside for mobile advertising spend. About 10% of media consumption is spent on mobile devices, but only 1% of advertising is spent on mobile ads. Unfortunately, the eCPM (effective cost per thousand impressions) is 75 cents on mobile vs $3.50 on desktops, according to the same Kleiner research. 

But with this opportunity in mobile comes a lot of competition. Just last month, LifeStreet Media, which embeds advertisements in applications across social media sites or mobile, raised $66 million in financing from Nautic Partners. While not competing with Todacell, Mogreet raised $4 million for mobile video ads in April. 

Recently, Adelphic raised $2 million for its mobile advertising service. Last September, Adfonic raised $7.5 million for its mobile ad platform while InMobi, another mobile ad network, raised $200 million from Softbank.

Let's also not forget the major players Apple and Google in the space, both of whom bought their way into the mobile ad frenzy. Back in January 2010, Applebought Quattro for $275 million. This came a few months after Google bought AdMob for $750 million at the end of 2009.