aggregrateknowledgelogo2.bmpAggregate Knowledge, the company that tracks Internet user surfing patterns within a site, has become one of the hotter start-ups in Silicon Valley.

It is about to raise $20 million, and rumors are circulating that interest by venture capitalists is pushing the company valuation north of $50 million (before the investment). This is significant because the company launched less than a year ago, and is already raking in millions of dollars.

We wrote the announcement by Overstock, which said using Aggregate Knowledge boosted its sales significantly over the holiday period. In Overstock’s case, Aggregate Knowledge works by watching the patterns of users on, i.e., what sort of things they end up buying after visiting certain pages and clicking particular links. Aggregate Knowledge can then make quicker purchase recommendations or promotions to users who follow and who show similar patterns — or at least that is what claims, and what Overstock is confirming.

Notably, the accuracy of Aggregate Knowledge’s discovery and recommendation engine could enable it to monetize internet users at above-market rates. The big bet here could be that if the company can monetize others sites’ traffic better than sites themselves, there is a large opportunity here, with potentially significant network effects.