proximiclogo011508.pngProximic, a unique type of contextual ad company, has signed what could prove to be significant deals with Yahoo Shopping and

Starting at the end of this month, Proximic will advertise 20 million items from each company, as well as ten million other items from other advertisers, for a total ad inventory of 50 million. Let’s say you’re reading an article on a web site about landscape photography. Proximic will display books about landscape photography, cameras, and other information, in a widget on the page (see screenshot below).

The problem: Yahoo Shopping and both have millions of items listed on their own sites. They can’t reasonably advertise each item individually through keyword search results, as keyword-based campaigns require at least some manual specification of which words you want your ads to match with on web pages. Even Google’s keyword advertising service on web pages, Adsense, only has an inventory of around one million unique ads at any given time, according to Proximic (determined through its own analysis of Adsense, it tells me).

Also, while Adsense campaigns typically get a click-through rate of around 0.25 percent, Proximic says its tests are showing better results, as high as 1.5 percent. Proximic receives a small percentage from advertisers, based on a cost-per-click (CPC) pay structure.

How does all this work? The Munich, Germany-based company has developed a method of identifying the shapes of all the words on a page, called “proximity analysis.” It matches the body of text on a page with ads that have similar collections of word-shapes (our previous coverage). The company wouldn’t go into further detail on how its technology works, although it was notably masterminded over the past five years by founder Thomas Nitsche, the 1984 world computer chess champion.

One of the other striking aspects of this company is that it got both Yahoo and to go from testing Proximic last October, to signing deals now. Both companies are notoriously slow, especially when it comes to working with startups.

Proximic already offers a widget for publishers so they can display relevant information from around the web on within their sites, although it hasn’t previously applied its technology to advertising. It plans to roll out a self-serve advertising service soon, for other web publishers. It also offers a Firefox browser pluginthat displays similar pages to the page you’re looking at within your Firefox browser. Because Proximic relies on patterns, not words, it can be used in any language.

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