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Spot Runner Raises $51 Million To Expand To New Markets
The first rule of Startup Club is take the money when you can. Spot Runner CEO Nick Grouf understands that, which is why he just raised $51 million in a C round from a group of strategic investors that include the Daily Mail and General Trust (DMGT), Grupo Televisa, Legg Mason Capital Management, and Groupe Arnault/LVMH. And that’s on top of the $60 million in venture capital he raised in 2006 from a laundry list of A-list investors (Battery, Index, Allen & Co., Capital Research and Management, CBS, and Lachlan Murdoch), some of whom ponied up again this time. Surely, he didn’t burn through his cash already? Grouf says:
No, we were not running out of cash. This was an opportunity for us to build out a bit of a war chest that we will look to use in investments to expand our platform beyond just television and online but into other media, as well as expansion overseas, and acquisitions.
Basically, the money was there, so he took it. Grouf wouldn’t specify Spot Runner’s valuation, but when I asked him if it was higher or lower than the $250 million guesstimate that Silicon Alley Insider recently put out, he laughed and confirmed that it was higher. I’d hope so, with $110 million invested, it should be closer to a $500 million valuation.
If Grouf wants to expand to markets overseas, this group of investors should be able to help. The Daily Mail and General trust is one of the largest media companies in Britain, with papers, Websites, and radio stations. Grupo Televisa is one of the largest media companies in Spanish-speaking countries, with TV channels, cable and satellite services, magazines, and radio stations. And Arnault/LVMH owns one of the biggest collections of luxury brands in the world (Moët & Chandon, Hennessy, Louis Vuitton, Givenchy, Donna Karan, Sephora and TAG Heuer).
Spot Runner automates and the buying of regular TV ads for bothe local and national businesses. Both the creation and placement of the ads is all managed online. Grouf wants to expand beyond TV advertising. Last March, he bought Weblistic, which helps small, local businesses run online ad campaigns. Grouf is already dabbling in radio ads, but wants to ratchet that up, and move into print ads as well.
He’d better move fast because Google has some of the exact same plans—although Google admittedly doesn’t yet have much to show for its TV, print, and radio efforts. Grouf wants to scale up before Google gets serious.
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Google’s AdWords for TV Comes Out Of Beta, But Is Still Hamstrung
Since last June, Google has been piloting a test with advertisers in private beta to put regular 30-second video commercials on TV in an automated fashion through AdWords. Today, Google is opening that program up to all advertisers and even offering a $2,000 promotional credit towards creating a professional TV commercial.
I love how Google fails to mention anywhere in the announcement that these ads will only appear on the Dish satellite TV network, the only TV service that will allow Google to put its tracking software on its set-top boxes. The cable companies don’t want Google touching their set-top boxes, which is why they are collectively funding their own competing Project Canoe to the tune of $150 million.
Meanwhile, advertisers can already create and buy cheap TV ads across practically any cable network or local TV station through startup Spot Runner. Creating TV ads on Spot Runner is much cheaper, sometimes costing only a few hundred dollars. Google still has a lot of catching up to do in this arena, not just in reaching more TV homes but in better ad targeting. As Spot Runner CEO Nick Grouf told me about a month ago:
Google is not selling targeted ads now on TV. It is selling national ads through the smallest company in the satellite space. We expect them to become more aggressive, but have not seen it yet.
Give them time, Nick. They’ll get there.
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Blodget Says Facebook Is Only Worth $9 Billion, Hypothetically Speaking
Putting a value on private companies is hard enough for insiders and venture capitalists who have full access to the company’s financial statements. When outsiders try to do it, even well-informed ones, it is nothing more than a guessing game. But it is nonetheless perhaps one of Silicon Valley’s favorite parlor activities.
Today, Henry Blodget & Co. at Silicon Alley Insider try to peg valuations on 25 private Web companies. Facebook is at the top of the list, but it is valued at $9 billion instead of the $15 billion that Microsoft’s investment put on the company. Why? Because everyone knows that the $15 billion is too high, so SAI decided to apply a 25X multiple on Facebook’s 2008 revenue forecast of $350 million. Does that make its valuation correct? Probably not. But in the absence of any true market pricing, anyone can go ahead and make a guess.
The same goes for any of the valuations on the SIA 25 list, which puts Wikipedia’s worth at $7 billion, Craigslist’s at $5 billion, Mozilla’s at $4 billion, LinkedIn’s at $1.3 billion, Ning’s at $560 million, RockYou’s at $325 million, and Spot Runner’s at $250 million. Note that three of the top five (Wikipedia, Craigslist, Mozilla) are essentially not-for-profits sitting on very valuable assets. The valuations for those three are based on what they would be worth if they were run differently with an eye towards maximizing revenues—which, of course, could impact how consumers interact with them, which in turn would impact their valuations.
Another 25 startups make up the contenders list, which includes Federated Media ($245 million), Yelp ($225 million), Meebo ($220 million), Mahalo ($150 million), Digg ($125 million), Etsy ($115 million), Powerset ($80 million), and Twitter ($75 million). A full list that changes dynamically every 20 minutes, based on changes in the Nasdaq, can be found here (although, exactly how the valuations are linked to the Nasdaq is never clearly explained)
Some of these valuations have more merit than others. Some have none whatsoever. For instance, SAI gets at its $125 million valuation for Digg by “splitting the difference” between a $200 million buyout rumor we reported and the $60-to-$80 million that Kara Swisher came up with. Splitting the difference between two rumors is not exactly the height of financial analysis.
But what are you gonna do? At least SAI acknowledges that the list is an imperfect work in progress. Don’t get too caught up in the actual numbers. It is more useful really as a starting point to think about relative valuation between different startups. Is Meebo really worth three times as much as Twitter? Is Ning worth as much as Slide? Let the parlor game begin.
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How To Bring Internet Advertising to TV—The Long View
Over the past couple days, conversations I’ve had with two different video-startup CEOs—Suranga Chandratillake of blinkx and Nick Grouf of Spot Runner—has got me thinking about what needs to be done to make TV advertising as relevant as video advertising. We have a long way to go, but it boils down to two things: 1) replacing 30-second commercials on TV with relevant ad overlays that pop up at exactly the right moment during a show, and 2) automating the buying, creation and placement of TV ads to make it more like buying search ads.
Yesterday, blinkx CEO Suranga Chandratillake dropped by my office and we got to talking about video ads. Blinkx is a video search engine, but it is also building a video ad network called AdHoc that attempts to place contextually-relevant, clickable text ads in a bar above the Web video being watched. For example, in the screen shot of the soccer video above, you will see a text ad for shoes. YouTube is doing something similar with its new AdSense for Video ads. The ads themselves don’t have to be text. They can be banners or logos that pop up, or even new videos-within-a-video under the control of the viewer. The point is that they exist within the main video itself, not after or before it. And they appear briefly at relevant points during a show.
Determining whether an ad is relevant for a video is done with some of the same techniques used on Web pages. Both YouTube and blinkx look at the tags and text surrounding a video, but blinkx actually goes beyond what YouTube does. It uses powerful speech-to-text translation technology to create a transcript on the fly and then matches relevant ads to the words. The ads appear as those words are being spoken. Suranga showed me the transcript-creating capabilities of blinkx, which are not visible to users on his regular site, and it was impressive. He clicked on a word in the transcript and that point in the video started to play. Once you can do that, inserting relevant ads is trivial. He says blinkx can also match ads to related concepts extracted from the transcripts.
What would it take to run ads like this on regular TV? Even if the ads are not clickable, simple banners or graphical buttons that appear in sync with what you are watching would grab your attention. Imagine a Nike logo popping up when you are watching basketball, or cruise ship when someone in a movie mentions the Bahamas. It could be annoying, but not if used judiciously. And it would certainly solve the problem of people fast-forwarding through ads with DVRs.
The big issue would be separating the ads from the underlying video so that new ads could be placed when the show goes to cable or is shown in reruns. Right now, all of those graphics you see on TV are pretty much baked into the video. Suranga said it would basically require new TVs with powerful chips and Internet connections. The computer chips alone would add about 50 percent to the price of most TVs, so it will still be a while before that happens. The other option, of course, is set-top boxes. But the cable companies don’t have any incentive to allow ads they don’t control to be seen on their set-top boxes (which is why they are trying to figure this out themselves).
On the other side of the equation is placing the ads. What is needed is something like Spot Runner’s system, which lets businesses create ads and plan media buys across cable and network TV. These ads are targetable by demographics down to the neighborhood level. Google also has its own experiments with regular TV ads through a trial on the Dish Network, where it has software on Dish set-top boxes. But Google could be doing a lot more. Says Grouf
Google is not selling targeted ads now on TV. It is selling national ads through the smallest company in the satellite space. We expect them to become more aggressive, but have not seen it yet.
These two conversations keep ringing through my head. I can see a day not too far where ads on TV start to look like the text and graphical overlays we are beginning to see with YouTube, AdHoc, VideoEgg and others. But you also need an automated placement and creation system like Spot Runner’s, which today only deals with regular 30-second TV spots. Combine the two together, and there’s the future of TV.
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Just In Time For Campaign Season, Spot Runner Gets Into Politics
Political campaign season is upon us and that means one thing: really bad political ads on TV. There are 50,000 public elections every year in the United States. And an estimated $3 billion will be spent on political TV ads alone in 2008. Spot Runner wants to get in on the action, and maybe even raise the quality of the ads a little, by turning its self-serve TV advertising platform over to politicians. Today it is launching a political section of its site, where both national and local political campaigns can create TV ads for as little as $500 and run them in highly targeted cities and even neighborhoods. It has also assembled a high-powered political advisory board that includes former Senator Bill Bradley and political strategists Mike Murphy, Dan Schnur and Bob Shrum.
Spot Runner so far has focused mostly on making it easy for local businesses and national franchises to buy TV ads on both cable and network TV. To keep costs down, the company shoots different ads which can be modified by each customer, and lets them target the ads by neighborhood. The ad selection and media planning is all self-serve and automated over the Internet. Now the company wants to help level the playing field in political campaigns, especially local ones that may not have as much money for TV ads. CEO Nick Grouf tells me:
One reason we started Spot Runner was during the 2004 campaign we found out you can do better targeting using TV than the Internet. The two big barriers were the cost of creating an ad, and challenges around the fundamental media buying and planning that need to occur.
He believes Spot Runner has begun to solve those challenges. To start with, Spot Runner has created 22 generic ad templates that can be further modified, which cover issues ranging from taxes and education to immigration and leadership. Campaigns add video images of the candidate and tweak the script any way they like. Spot Runner will record the voiceovers. And if new footage needs to be shot of the candidate on the campaign trail or working hard in Congress, Spot Runner can supply the camera crew (in January it purchased GlobeShooters, a network of about 1,500 video professionals).
And then when it comes time to pick where to show the ads, Spot Runner has developed a sophisticated media map of the U.S. that lets campaigns target ads by age, gender, income levels, voter affiliations, and even history of campaign contributions. A campaign manager can choose to run the seniors ad in older neighborhoods and the education reform ads in neighborhoods with a lot of young families. Spot Runner also lets campaigns create fund raising ads that can be e-mailed to supporters.
To get a sense of what these ads look like, here is an ad for Peter Tesei, a Republican in Greenwich, Connecticut who won a recent local election for Selectman:
Here is the generic ad before it was customized:
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Spot Runner Acquires Weblistic, Seeks Synergies Between TV and Online Advertisements
Spot Runner, an online service that helps local businesses develop and run professional-looking advertisements for TV and radio, has acquired Weblistic, a company that helps these same businesses run online advertising campaigns.
The all-stock deal intends to produce profitable synergies between traditional and new media. As part of the announcement, Spot Runner is citing a Jupiter Research study claiming that TV advertising is the “number one impetus for people to search for a particular company or product online.” So the idea is that the acquisition of Weblistic will allow Spot Runner to set up more complete advertising campaigns for local businesses, ones that don’t overlook the Jupiter findings but rather ensure that TV and radio advertisement audiences find the follow-up information they seek online.
The team behind Weblistic has been working in the local online advertising space since the late 1990s and was actually responsible for YellowPages.com. Spot Runner co-founder David Waxman is confident that the company’s acquisition of Weblistic will give it a unique opportunity to serve local businesses. As he puts it:
We are going to be the first one to be able to offer an integrated marketing campaign to these local guys. When you marry television with online, television can substantially increase lift online.
Given Google’s predominance in the online advertising space, and its interest in television advertising, this acquisition should make Spot Runner an even more attractive acquisition target for them.
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Advertising Giant WPP On The Prowl For Acquisitions: Spot Runner, VideoEgg Rumored As Potential Targets
Advertising conglomerate WPP is looking to increase its Web advertising revenues through more acquisitions. Last year it purchased 24/7 Real Media for $649 million, and is currently making a run at Nurun, a Montreal-based interactive ad firm. But it may try to boost its Advertising 2.0 cred even further with more small acquisitions.
The NY Post, not always the most reliable source but pretty good when it comes to Madison Avenue, reports that possible acquisition targets include Spot Runner (cheap TV ads for local businesses), VideoEgg (video ads and a Facebook play), or JumpTap (mobile ads). WPP is already a minority investor in both Spot Runner and VideoEgg. Quick, sell those ad startups before the recession hits.
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