NEW HAVEN, Conn. — In late 2007, just before the great American financial meltdown began in earnest, Victor Wong turned down a summer job at a major New York investment bank to fire up a tiny enterprise of his own.

For good measure, he dropped out of Yale, too.

The bank was Lehman Brothers. The start-up was PaperG, which Wong, now 22, founded with a friend, recent Harvard graduate Roger Lee.

Today, once golden Lehman Brothers is bankrupt and liquidating, a casualty of America's economic distress. PaperG, a tiny, largely unknown advertising technology business, has raised two rounds of private investment, attracted a corps of well-connected advisers and struck deals with more than 50 companies, including The Hearst Corp., The Boston Globe and MTV's college media network.

PaperG's product — self-service advertising for Web sites — is one effort of many by companies trying to make sense of the fractured mass media ad market, formerly dominated by newspapers and TV. The company bills its Internet-based software as an easy-to-use, low-cost option for advertisers and publishers alike.

PROMISING VENTURE

Most technology start-ups fail. But brains, capital and connections suggest promise for PaperG. And the six-person company's impressive list of paying customers sets it apart from other start-ups. Wong and his colleagues hope they can convert the venture into a 1990s-style payoff.

"Go public or sell the company," he said in a recent interview at the PaperG offices, between an ice cream shop and an art gallery.

PaperG stands for "paper generation," a reference to the struggling industry in which the company has sought its first customers — newspapers. It may seem like a counterintuitive strategy, but there's a method to the madness.

"When you're looking for new opportunities, you want to find customers in pain," said Wong, a California native who started his first money-making Internet business, a video game review publication, at age 14. "They're willing to pay for a solution. That's the perfect time to jump in."

Newspapers live and die by the advertising they sell, and Web sites have taken away a lot of it, even as papers' own sites are attracting record numbers of visitors. But newspaper Web sites still generate far less revenue than their print versions. The guys at PaperG think their "Flyerboard" software can help draw new ad dollars to the Web.

Newspapers aren't PaperG's only target market, but PaperG chose them as a starting point based on their prominence within small, well-defined markets — towns and cities.

"They serve a local audience, and we have a solution for local advertising," Wong said.

The idea is to create an electronic version of the local coffee shop cork board and attract paid ads from small local businesses, event promoters and individuals who might post fliers for free in public places instead of buying advertising.

Using an interface embedded in the Flyerboard area of a host Web site — basically an electronic bulletin board — the advertiser uploads an image of an existing ad and pays for it. It typically appears on the site within an hour, Wong said.

The bet is that a local rock band, for example, might be willing to pay to post an electronic version of a flier for an upcoming gig on a well-known local publication's Web site if the process is quick, painless and inexpensive.

BIG-NAME CLIENTS

National advertisers could also use separate Flyerboards to tailor ad campaigns for local markets, Wong said, noting that Disney, H&M and Nike have all posted ads using Flyerboard.

In theory, the advertiser benefits by gaining exposure to the publication's local audience without having to create a new advertisement from scratch. The publication benefits by attracting new advertisers, and without requiring the labor of the sales staff (though a sales staff can also use Flyerboard as a tool).

PaperG is developing a second software product that could automatically generate ads for local businesses using information about them already on the Web.

Wong said, "This is the new classifieds."

The Flyerboard software also allows Web site visitors to share ads electronically, potentially endowing each ad with the power of social networking.

The Boston Globe, an early and prominent PaperG customer, began using Flyerboard on its site, www.Boston.com, in early April. So far, it has Flyerboards on each of 10 "hyperlocal" pages of the site, each of which is focused on a specific town.

Wong initially was introduced to www.Boston.com through the Web site's first publisher, Stephen Taylor, whose family sold The Globe to The New York Times Co. in 1993 for $1.1 billion, and who is now reportedly trying to buy The Globe back. Taylor teaches a course in the business of new media at Yale School of Management.

Other PaperG investors include Mark Potts, a co-founder of www.WashingtonPost.com, and Brian O'Kelley, a former top executive of Right Media, Inc., an Internet ad technology business bought by Yahoo for $650 million in 2007.

NEW MARKETS

Bob Kempf, vice president for product and technology at www.Boston.com, said PaperG appears to offer a way of attracting advertising from small and medium-sized local businesses, "a market segment that we haven't served particularly well as a newspaper Web site."

"Many advertisers are small, they only want to reach a subset of what www.Boston.com reaches," he said. "It's overkill for a small, local advertiser who only wants to reach Newton or Wellesley."

Wong said standard pricing is in a range of $35 to $80 a week, depending where on the site the ad appears. www.Boston.com's current offer comes to just under $50 a week.

Kempf said he could not discuss www.Boston.com's sales through its Flyerboards. PaperG typically shares ad revenue with its customers. Wong also would not disclose PaperG's revenues to date, but said they are "in the six figures" for the six months that Flyerboard has officially been on the market.

One day last week, many of www.Boston.com's Flyerboards had no ads at all, which Kempf attributed to their recent introduction.

Still, Kempf considers Flyerboard promising and said the technology might also help draw ads to www.Boston.com pages that are focused on interest-group communities, such as mothers, as well as to geographically focused pages.