Affiliation Networks Hits $25M Mezzanine Round

If marketers pursue younger demographics online as relentlessly as they have in traditional media, Affiliation Networks Inc. could emerge as a dominant Internet player.

The San Francisco-based company, which spun off from Imagine Entertainment in February, programs four Internet networks that target an audience of 12- to 29-year-old users. Advertisers pay a premium to reach younger demographics based on the belief that these viewers are more difficult to locate and are more inclined to change brand affiliation.

“This audience is developing first-level brand-awareness on the Web,” said Chief Executive Mark Jung. “They live in a Web-centric world where their first stock account or beer they drink will be introduced to them online.”

Earlier this month, Affiliation raised its first, and likely only, institutional round of venture financing. Leading the $25 million Series A round was The Walden Media and Information Technology Fund (WMIT), part of the Walden Group of International Venture Funds. Weiss, Peck & Greer, Whitman Capital and Worldview Technology Partners were the round’s other institutional investors. No placement agent was used for the deal.

Jung said he anticipates an initial public offering within the next 12 months. “Our company is strong enough to go public today,” Jung said. “The round was oversubscribed; the property is strong enough to sell itself.”

The four Affiliation networks attract more than 4 million unique visitors each month, comprising 7% of the online population. Jung noted that Affiliation reaches a larger audience than other Internet properties that have recently gone public, including iVillage.com.

In addition to producing much of its own content, Affiliation operates a network model where it distributes properties from independent producers. Jung said Affiliation may eventually seek an equity stake in these properties.

Proceeds from the investment will go toward sales and marketing and hiring a larger staff. Since spinning off from Imagine, Affiliation has hired 62 employees.

Walden consultant Rick LeFurgy will join the Affiliation board. LeFurgy is chairman of the Internet Advertising Bureau. Worldview General Partner Michael Orsak and Robert Reid, CEO of Listen.com, also received board seats.

“The way you view media properties is via reach,” said Steve Eskenazi, a Walden general partner. “Affiliation is already enormous and will grow much larger.”

WMIT is a $62 million fund that invests in new media companies involved in advertising, e-commerce, entertainment and education. Eskenazi said the fund is a little more than one-half invested.