AdEngage Inc., a marketplace for online advertisers that cashes in on 10,000 ads a month, consisted of five programmers squeezed into the chief executive’s spare bedroom just last year.

“My wife would come home from work and say, ‘This house smells of men!'” said John Marston, whose company has since moved into the top floor of the former Xerox building in El Segundo.

Without venture backing and run by 10 employees, the company is seeing a 15 percent increase in revenue every month and projects $5 million this year.

In the ever-changing world of online advertising, largely driven by Google AdSense, companies like AdEngage are carving out markets unreachable by the Internet giant.

On AdEngage.com, which features more than 3,500 Web sites in categories such as humor, entertainment, games, news and social networking, advertisers can buy a text ad for $30 to $500 a week.

The company acts as the middleman between Web publishers and advertisers, by providing customer service and traffic information, such as the rate of returning customers for the sites and clicks by country. The advertiser can buy and create the text ad on any participating Web site. The text ad is then automatically integrated into the Web site of choice. AdEngage pockets 25 percent of the ad revenue.

The company targets customers who don’t want to bid on expensive keywords on Google AdSense, which places text ads on sites where those keywords appear.

For example, if an advertiser wants to put a text ad on flash game sites, he may bid on the word “flash game” but the ad would appear only for someone who types in “flash game” into the Google search engine, not necessarily for those who are playing games on flash game sites.

For Said Yussuf, a Canada-based Web master who owns a smorgasbord of 250 sites that include entertainment, dictionary and book content, AdEngage streamlines his marketing efforts for specific sites.

“I’m getting a lot more return on my investment these days,” said Yussuf in a phone interview. Last year, Yussuf moved all his ad campaigns to AdEngage from Google AdSense and Microsoft AdCenter. So far, he says he has spent $20,000 on AdEngage.com.

“For obscure keywords, Google may be the better choice because AdEngage’s publisher network is limited,” he said. “But for popular key words, AdEngage has delivered tremendous targeted traffic to my sites.”

For Yussuf, sought-after keywords on Google AdSense may cost about 30 cents every time someone clicks on the ad. That amounts to about a $2,000 monthly expenditure. AdEngage charges about 10 cents per click, which adds up to an $800 monthly bill for Yussuf.

The biggest company capitalizing on a similar business model is San Francisco-based AdBrite Inc., founded in 2002. The company is backed by Sequoia Capital and boasts 632 million page views a day with 30,300 member sites.

AdEngage serves far fewer 3,500 sites but reports 500 million page views a day. Marston said because the company has minimum visitor requirements for a site to join its network, the sites yield more traffic than those on AdBrite, which sets no such prerequisites.

Despite its recent profitability, Richard Laemer, marketing consultant and author of the book Punk Marketing, said AdEngage could be too late in the game.

“Two years ago, this would have been an extraordinary business model,” he said, adding there are similar starts-ups in New York and the Bay Area because the software for an online marketplace like AdEngage is not difficult to put together.

“There’s a lot of easy money now. It’s like Web designing in 1997. As soon as people figure out how to do it cheaper,” the market flattened out, Laemer said.

The only way to survive is to have strong, scalable engineering behind the product and provide “unbelievably pristine customer service,” Laemer said.

“Companies like these don’t really think about the customer,” he said.

Half of the AdEngage staff is devoted to customer service. Every call is treated like a test case to make the online company better, Marston said.

“If I have a problem with a Web site, I don’t call the Web master. I just shut it and go somewhere else. So that one out of the 100 customers who calls is so valuable if you can find out what the real issue is,” he said.

The other half of the company is focused on engineering. At AdEngage, scalable technology is its forte, Marston said. The firm’s chief technology officer, Peter Amiri, was one of the first five programmers who built MySpace on five servers. When he left, the company had 500 servers.

“Peter’s come here with the experience to make a relatively small company and hopefully make it huge,” Marston said.

“Originally, we didn’t think we had a unique business. We thought, ‘Surely, other people have done this.’ But we’ve seen competitors come into the space and in a matter of months, shut down and leave. We’ve been profitable since day one. We believe we have created something special that is hard to copy.”