CoBizMag.com Monday, February 11, 2008 at 8:56:23 AM
By Keith DuBay
One of the reasons I started this blog was to discover how businesses could communicate to their customers in a new but confusing age of media. Large businesses have enough ad budget to cover almost any channel to communicate to potential customers. They are going to try everything, from mass audience advertising to targeted display to search. But what about the small business?
In my view, the most powerful new customer communications tool for small business – other than referrals from current customers – is search, and Google dominates that segment because it has such a good search engine. But what if a company wants to advertise online and raise its overall profile, i.e. non-search branding, to a targeted audience? This is the area that a Westminster company called SpotXchange plays in, and it just received a round of financing from a blue-ribbon cast of angel investors to forge ahead in the online video advertising area.
What is SpotXchange?
My best description is that SpotXchange is a sophisticated campaign planning and ad-buying software, ASP-style, for online video advertising. SpotXchange puts together publishers/websites with advertisers. Judging by the online demo that CEO Michael Shehan walked me through, it looks pretty easy to use. All the small businessperson needs is a video ad saved in any one of six common video formats. Then you’re off and running. You can place your ad for jewelry, books, old guitars, accounting services or just about anything on sites that can be targeted by publishing category (say, sports), city, state, region, income demographics, age or just about any other category. The ad runs alongside a site’s video player and is not spliced into the file; this makes it easier to automatically feed into a site’s system.
SpotXchange also counts how much money you’ve spent, tracks how many of your ads have been downloaded and will even place banner ads.
Because it is online advertising, it can be pretty cheap. Shehan gives the example of one client, a motivational speaker who has booked some hotel space in Las Vegas for some seminars. He spends 1 cent per impression, ($10 per thousand). Thus, Shehan said if the speaker got 20,000 people in Las Vegas to view his seminar ad and five of them paid the $200 seminar fee, he spent $200 for $1,000 worth of business.
SpotXchange depends on revenue shares with publishers to get paid. The general idea is that for a 50/50 split, publishers can sell their unsold inventory of ad space through SpotXchange.
“We’re democratizing the whole process to allow all advertisers to advertise, no matter how small,” Shehan said. “We work with Ford, Overstock, Miller Lite, but I’d say we have more local advertisers than big brands, the guys who will spend $10 a month, $500 a month, people who don’t have an agency. It’s perfect for people who can’t afford a TV commercial.”
Apparently publishers are OK with the idea of selling their surplus space. The 300 who have signed up with SpotXchange represent 10,000 websites, Shehan said. He’s not out to steal the advertising relationship, he said: “We bring the advertisers to them. We’re an exchange. We set up a marketplace that allows anyone to participate.”
SpotXchange was founded just more than a year ago. To date it has 100 “clients,” advertisers such as Mapquest, Gaiam, Brookstone, Vitamin Shops and Little Tikes. Other partners include Voxant, Blinkx, Internap, LiveVideo.com, NeoEdge and United Press International.
How it got started
To date, more than $5 million has been poured into developing SpotXchange. Most of the early funding has been from its former parent company, Booyah Networks.
“We started looking at online video and realized it’s a mess of a space. There were very few standards and all these different players. From a media buyer’s standpoint it was horrible,” Shehan said.
Recently, SpotXchange announced an undisclosed amount of angel financing from Alex Bogusky, chief creative officer of Crispin Porter + Bogusky advertising; Laurence Change, Mike Lu, Kent Moore, Blaine Rollins and Claire Young, all former Janus fund managers and Tim Hudner, former operations and technology manager at Janus. With backers like that, I think it’s safe to assume SpotXchange’s technology is pretty damn good.
Elephant in the bedroom
Every software company will tell you that what they do is unique, just like it is inevitable that all used cars are “certified” and that every single company in the history of companies that write press releases about themselves is a “leading” company. Shehan said he has competitors, but that they work more as reps who “work manually.”
And then, there’s Google, the company that wants everyone to do business through it and owner of 500,000-plus advertiser relationships.
“On the video side, Google obviously has a lot going for them, but they don’t have this on the video side today,” Shehan said. “As a small company you always hope you can move faster.”
Right now SpotXchange is in a race to add as many advertisers as it can. There’s no doubt in my mind that SpotXchange is being set up to be sold. What would make sense? How about a Dex-type online yellow pages, which already has the advertiser network SpotXchange seeks? The company does not disclose revenues, but says it has 40 employees. The usual way to measure technology companies is to multiply the number of employees by $100,000. That would give this company about $4 million in revenue, but this company is still in the start-up stage and would not likely have that much revenue.
There are still some things to work out for online video advertising. An advertiser still has to produce a video ad. Quality digital video production is becoming cheaper and more available to the masses. Smaller, leaner agencies or single practitioner services are sure to follow. Yup, business owners may try to do their own videos and there’s going to be some real bad video advertising produced.
It’s just the price of living in a democracy.
Keith DuBay (email@example.com) is online editor of ColoradoBiz.
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