Cameron Diaz paused for a camera in Moscow, and because no ho-hum celebrity moment can go undocumented, the evidence landed on the gossip site Just Jared. She looks good as always, especially in those jeggings from—well, hey, who did make those things? Mouse over the photo and the answer appears: Seven7. And they're all yours for $27.99.
This insight comes courtesy of Pixazza*, a leading startup (backed by Google Ventures) in what may be the next wave of web advertising: photo tagging. It's a familiar idea—no different from tagging friends on Facebook—applied to the gaping commercial space of the Internet, which plays host to an estimated 3 trillion photos. Photo-tagging firms either take a cut of the sales from consumer purchases or share cost-per-engagement earnings with publishers such as Yahoo and Us Weekly.
There's money to be made here. U.S. marketers will sink $31 billion into U.S. online advertising this year but know much of it is ignored. "There are just too many meaningless ads out there," says Joanna O'Connell, a marketing analyst at Forrester Research. But photo tags take the pressure off ads; editorial content leads the way. "That's why top-tier advertisers are embracing this," says Pixazza CEO Bob Lisbonne. "We're letting them promote their brands at the moment the consumer's curiosity is piqued."
The challenge, of course, is scale. There's no magic algorithm to spot a Michael Kors dress, so companies can't move as fast as camera shutters can. Each company has a different method of trying. Pixazza employs 150 freelancers to tag photos. Another firm, Stipple, funnels licensed photos to advertisers, who do the tagging themselves.
Already, an estimated 150 million users see a tagged photo each month. But as more types of advertisers sign on, companies will have to find creative ways to place them without clutter—or risk becoming as sidelined as a banner ad. "Photos are not an excuse to ruin the user experience," says Stipple CEO Rey Flemings. " 'Here's a picture of Gwyneth Paltrow, now go buy some Kelly Clarkson concert tickets.' What do they have to do with each other? Nothing!"
Then again, if someone does buy those tickets, could he resist a cut?
*After our September issue went to press, Pixazza changed its name to Luminate.
A version of this article appeared in the September 2011 issue of Fast Company magazine.