New York City startup Image Space Media is one of a handful of companies working to monetize the last largely ad-free square inches on the web: images.

Display ads have long surrounded the content on most web pages. More recently, ads have worked their way into the content itself, with in-text ads from networks like Vibrant and Kontera and transparent in-video ads on services like YouTube. But, oddly, the vast majority of images on the web are ad-free.

ISM lets publishers place ads that appear on images when users mouse over them; the ads, like the one shown below, are essentially the same as what you see in many YouTube videos: a transparent overlay which can be X'ed out. ISM uses data about the image, its tags, and the surrounding content to match images with ads that are contextually relevant.

ISM had been running largely under the radar until relatively recently, relying on word of mouth for its growth. In January, the company announced $2.9 million in series a funding from New Atlantic Ventures and Limelight's Mike Gordon. In February, it brought on former Sphere/AOL exec Jeff Yolen to head up sales, before relaunching itself publicly at SXSW last month.

ISM generated over 570,000 clicks last month, and now serves ads to 46 million unique monthly visitors, according to Quantcast. Growth has been strong, and companies in this space have room to expand quickly, since they're buying up unmonetized space, rather than competing with existing networks.

The big concern here, of course, is that if the biggest ad networks, especially Google, get into this space. They could probably do a lot of damage to ISM's growth in a hurry. There hasn't been any firm sign of this yet, but Google invested in Pixazza, an ISM competitor, last year.

Jesse Chenard, ISM's CEO, says there is plenty of market to go around. But margins and growth will no doubt start to look a little bleaker once the biggest players get involved, so ISM's best shot is to get very big very soon.