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If ads want to go where the eyeballs are, Chicago-based Feedburner is betting that they’ll be setting a course for the blogosphere sometime very soon. And Feedburner, which got its start three years ago as the software platform that helped publishers push their content out to readers, intends to sell advertisers on tickets to that same destination.

It’s getting to be quite a crowded spot. At press time, Nielsen BuzzMetrics BlogPulse had identified about 32.9 million blogs on the global Internet and counted about 850,000 new posts in the course of a single day. Back here in the U.S., the Pew Internet and American Life Project found in July that 12 million U.S. adults write to blogs and 57 million read them.

But it’s not just bloggers who’ve taken up RSS, the Really Simple Syndication platform that lets users subscribe to have content delivered to their browsers automatically as it’s posted. The biggest news organizations in the world—The New York Times, Gannett, Reuters, Hearst and the Wall Street Journal—now offer RSS feeds of their content to subscribers, and in most cases offer several different feeds sorted into topics.

And perhaps due to the entry of these ad-savvy media companies, advertising in blogs and RSS content has gained a lot of acceptance, both among readers and publishers. Bloggers once turned up their noses at the notion of running ads on their content in return for a share of the revenue; now all but the most resolute seem reconciled to the idea—if the price is right and the ads are appropriate.

Feedburner handles news feeds for many of those big commercial publishers, including Gannett, Reuters, Newsweek, BusinessWeek, USAToday.com and Wired. But it also manages syndication for the content of some of the most widely read blogs on the Internet: Boing Boing, Daily Kos, Gawker, Wonkette, Tech Crunch and the Huffington Post, among others. All told, the company says, it manages 370,000 feeds for 230,000 publishers, reaching more than 20 million subscribers. (Oh, and don’t forget 63,000 podcast and videocast feeds.)

In its early days—read “2004”--the company was very publisher-focused, and of necessity that meant targeting bloggers. That in turn meant helping them optimize their content for delivery over a wide range of RSS aggregators in different formats and helping them analyze their traffic to figure out who their audiences were, how they were consuming content, and which articles they particularly liked or disliked.

During the last year, now that it has both bloggers and commercial RSS publishers on board, Feedburner has been aggressively setting its sights on making feeds a congenial environment for advertisers, too. The company had originally planned to resell ads from Google, Yahoo! or some other third-party network such as ValueClick into the content it managed. But last year the decision was made instead to launch its own ad network and invite its publisher clients—bloggers and commercial enterprises alike—to join a two-way split of the ad revenue.

It’s a big challenge that brings the company into competition with the external Web site networks amassed by some of the marquee names in online advertising. But Feedburner thinks it has some built-in advantages over its big-brand rivals.

For one thing, says Brent Hill, Feedburner’s vice president of business development, there’s the fact that the company has been servicing its clients well for years, while relations in the Google and Yahoo! publisher networks have tended to the stormy, both for publishers and for advertisers.

But Feedburner also believes it has a technological edge in the same platform that lets it provide analytics to its blog and feed clients. That platform was developed to monitor user behavior in feeds and answer the not-so-simple question: Who’s clicking on what?

Blogs and feeds have gone through some evolution over the last few years, and one twist has been the rise of the full-text format. Some early efforts offered only headlines or partial text with links readers could click through to reach a Web site. Commercial publishers in particular favored this approach, since it helped them sell Web site advertising. Unfortunately, readers didn’t; Hill says Feedburner’s data suggests that 95% of the RSS audience wants to see the whole story in a feed without links or cuts.

That then presents its own problem. Blogs and feeds are highly vertical, with later posts stacked on top of earlier ones. Users navigate using their scoll wheel more than their left mouse button. Without clicks, how do you know what someone’s reading in your feed? You can tell a reader has clicked to your feed; but it’s tough to determine whether he read the first post or scrolled down to read something that you put up last week.

Feedburner developed proprietary analytics that let it report to client bloggers and feed publishers on what specific items readers have consumed and where they came from to get to the content. They can also offer historical data to trend popular choices in either stories or authors, if a blog has more than one writer, and to show which items have been tagged to social bookmarking sites such as Digg or Del.icio.us.

Solving those issues has given Feedburner a big lead in delivering ads into blogs and RSS feeds, Hill says. Since the ads are being sold on a cost-per-impression model, advertisers want to know who’s seen their ads. Feedburner links its ads to specific posts; wherever the post appears, the ad appears, in a blog, a news aggregator or an e-mail daily update. So it can say with some certainty that the ad was seen because it can tell whether the item was read.

Another accommodation the company made to grow an ad network was to organize its publishers into topical channels that advertisers could buy into easily. Feedburner had critical mass in enough categories to aggregate into a dozen or so vertical channels-- automotive, current affairs, news, health and wellness and the like—that advertisers would want to appear in.

“We knew advertising in feeds was going to be new to a lot of the media planners who drive the ad dollars,” Hill says. “So one way we could make it look a lot more familiar was to allow ad targeting of the kind that third-party ad networks have been doing for a while.” Besides permitting targeting, the channel approach made ad buying easier with a single insertion order.

Because third-party ad servers weren’t up to the specific challenges of serving ads into RSS feeds, Feedburner went ahead and built its own, which is now used to power its own Feedburner Ad Network. When the network launched about a year ago, it did so with mostly text-based ads, usually repurposed by advertisers from paid search. But now, Hill says, many of those advertisers have migrated to something more graphic that looks like a “vintage 1999 banner ad”, with logos and product images.

The ads appear in the main content channel of the feed, right at the end of the story they’re packaged with, a placement that Hill says ensures that they’ll appear without surrounding clutter. “Even the interface that some of the Web-based aggregators use don’t place other ads, so the ad that came with the content from the publisher makes it through,’ he says. They perform just like any other interactive ad: They’re clickable, can be tracked, and deliver the user to a landing page where they can make purchases or take action.

To give publishers some needed control over the look and feel of their property—remember, many of them are bloggers, and therefore protective of their work--they can tell Feedburner whether they want ads to appear after every story, every second story or every third.

In May, Feedburner launched a further development of its ad network: the ability to place its ads on publishers’ Web sites as well as in their RSS feeds. Many Feedburner clients were already taking sponsored listings from Google or Yahoo! on their sites; some were members of a third-party ad network or, in the case of the largest, were selling Web ads on their own. But Hill says they also told Feedburner that they were interested in finding a single unified solution that would take some of the management burden out of monetizing their sites with ads.

Again, Feedburner’s core business of feed management allowed it to step up to the job. “We already have a good representation of the structure of what’s on those sites from managing their feed,” Hill says. “So it was easy for us to develop the code to place ads on the Web sites.”

Feedburner Web site ads are delivered right after the story, just as they are in the feeds. That gives them a big visibility lift from not being where the other ads are, at the top of the page or on the right rail. They appear at the end of the story unit. “We stay in the middle of the page between the posts-- where the eyeballs are,” Hill says. “We run where the content is.”

As with feed ads, Web blogs have some constraints on form and placement to deal with. As posts get added to a Web site, the Feedbuner ads will disappear below the fold—where Web users are notoriously conditioned not to go.

“Most [standard] Web sites don’t have much action below the fold,” Hill says. “There’s not much content there, there’s very little advertising, and what ads are there are very low dollar because people don’t see it. But a site like Boing Boing may stack 20 items in a day, so you have to scroll down to get caught up.” It’s still too early in the deployment of Feedburner’s Web ads to say what effect this will have on advertising, but Hill says the company will monitor the performance of ads as they drop down the page.

He points out that Web blog sites also get a benefit from organic search that their feed counterparts don’t enjoy. Some popular blogs get read almost every day, either from an RSS feed or on the home page. But these days the search engines are competing to offer the fullest indexing of blog content and to serve up relevant individual posts on their results pages. So many Web blogs get a large volume of traffic from searchers linking deep into their sites. Advertisers may want to treat those two traffic streams differently, Hill says, and the Feedburner ad platform can take care of that.

“If you’re reaching a regular reader of a blog, you may want to use an image ad that emphasizes your brand,” he says. “But someone who’s coming to the post through search may be further along in the purchase funnel, so you might want to run a more transactional ad for that iPod Nano or whatever.”

It’s still early days for the RSS ad market, and possibly too early to tell what types of ads work best in either feeds or blogs. To date, Hill says, text ads in feeds have outperformed display ads on clickthrough rate. On Web sites taking Feedburner ads, most of the early campaigns have involved brand advertisers opting for display ads rather than text; so the company doesn’t have enough varied experience to compare. “I think they’ve been happy with the clickthrough rates there, but again, it’s early, and we haven’t yet run the Web ads in all our content categories,” Hill says.

Inserting ads into blog Web sites should also even out the appeal of blog advertising for direct marketers, Hill theorizes. Ads in RSS feeds are a stable audience buy; advertisers are reaching readers who return to the content frequently, and their message comes before relatively few new readers. “The newspaper gets delivered to the same driveways every day,” he says.

But blog Web sites get their traffic from both long-time readers and new users being referred through search, so there’s a better chance that an advertiser can access new eyeballs and motivate them to the sale or the sign-up.

Is there a risk of running out of new blog/ feed inventory? Not hardly, Hill says. “Blogs are a classic long-tail business, in that there are lots of blogs that reach reasonably large audiences but may not have the commercial opportunity by themselves. They need the right partner to help them commercialize that content faster or in a bigger way than they could on their own. The challenge for us is to find those publishers that make a difference in people’s lives every day and put them together in a way that advertisers can be comfortable tapping into.”