The tricky business of online advertising got another shot in the arm recently when Eyeblaster collected an $8 million round in venture capital funding.

New York-based Eyeblaster provides the framework for the delivery and management of so-called “rich media” technology for Web sites. Using glitzy graphics, audio, video, and interaction, rich media ads cut through the monotony of the traditional and text-heavy format. (A recent AOL marketing campaign designed with Eyeblaster, for example, runs a Madonna video clip inside an expandable advertising banner.)

Eyeblaster hasn't always had it easy. Founded in 1999, the startup initially peddled its technology to companies like Amazon.com. The idea was to deliver rich media ads and information to shoppers, based on the books, CDs, or other targetable items they were thinking about buying. When that strategy fell flat, Eyeblaster shifted gears in 2000 and developed a hosted Web site where publishers, ad content creators, and media sales departments can collaborate while building online advertising campaigns.

“We’ve shifted the model and the plan,” says CEO Gal Trifon, who counts Yahoo, MSN, Lycos, and ESPN among his customers. “We’re sticking with the same technology but looking for the best way to utilize it.”

That was enough for Insight Venture Partners, which on January 26 announced $8 million in late-stage funding. For Insight, it is a step back into the Internet advertising game. “We didn’t make a lot of investments in the area in 1999 and 2000,” says Deven Parekh, a managing partner at Insight. ”We didn’t see a lot of business models that made any sense.”

Insight, which has a $740 million fund, focuses on later-stage investments in companies offering business software and services. Before choosing to work with Insight, Mr. Trifon says he interviewed the CEOs of Insight’s portfolio companies and was impressed by the level of involvement Insight had in its companies. “They don’t spread investment across many areas,” he says. Plus, he adds, “They have money to invest in us going forward.”

Mr. Parekh says he believes online advertising spending is rebounding, creating sound new opportunities to integrate rich media and search technology in advertising. (Insight invested an undisclosed amount recently in paid search startup Kanoodle.)

The numbers indicate an online advertising rebound, albeit modest. Last year, online ad spending totaled about $6.3 billion, a 10 percent increase from 2002, according to business research firm Jupiter Research. Spending is expected to increase to $7.6 billion this year, as big corporations like McDonald’s and Johnson & Johnson move more ad dollars to the Web.

Rich media accounts are also increasing. Eyeblaster rival DoubleClick, for one, reports that nearly 37 percent of all ads served in the third quarter of 2003 were rich media, a 15 percent increase from the previous quarter. Other Eyeblaster rivals include PointRoll and Unicast.

Eyeblaster takes a comprehensive approach to the ad management process. A media agency can use Eyeblaster's password-protected Web site to pick the number, type, and frequency of ads in a client's campaign. The creative team uses the site to preview and edit ads if a client, say, wants the ad to move more slowly or appear smaller. Clients can generate reports that detail how the ad was served online, and how often viewers clicked on the ad. Brand awareness surveys are another feature, helping clients gauge a campaign's success.

Those running ad campaigns pay Eyeblaster $1 to $5 CPM (per 1,000 ad impressions). For example, if ESPN runs 10,000 ads and chooses an ad unit at $3 CPM, it owes Eyeblaster $30. Last year, Eyeblaster served 1,400 ad campaigns, with more than 600 campaigns running in the fourth quarter, a 171 percent increase over the same period in 2002. Additionally, the company delivered more than 2 billion total impressions in 2003, a 335 percent increase over 2002 levels. While the company willnot disclose its finances, it reported 87.5 percent revenue growth, and similar profit growth in 2003.

A graduate in economics and computer science from Tel Aviv University, Mr. Trifon worked in research and development at vidoeconferencing company Vcon before founding Eyeblaster. He started the company with Amir Hardoof and Ofer Zadikario, who remain Eyeblaster executives. The company received $2 million in pre-seed and seed funding from private Israeli investors, and its total funding to date is $10 million.

The company’s research and development arm remains in Israel. It opened new offices last year in Germany, Chicago, San Francisco, and Sao Paulo, and is expected to expand its workforce from 50 to 75 by the end of 2004.

Mr. Parekh calls Mr. Trifon a “tremendous resource allocator” who has been able to weather stormy economic times by managing growth and costs “in a way I haven’t seen with many companies.”

Mr. Trifon says the company is focusing on expanding geographically, while working on new technology. He will not rule out an acquisition, if the deal is right. With Eyeblasters’s early struggles more safely in the past, it can now call the shots.