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Think it’s tough getting local advertisers to embrace Internet advertising? Try TV advertising. The complexities and cost of producing a video and buying air time are too daunting for most small business owners. Spot Runner, a start-up that comes out of its closed beta today, is aiming to change that. It’s developed a unique self-serve, web-based ad-buying system for TV. Think AdWords, but for TV ads.
The service works like this: The local business owner goes to the Spot Runner site, picks a business category and then chooses from among thousands of generic, pre-taped video ads. Each ad comes with pre-written voice-over text that can be customized (see screen shots below). Once the business has picked an ad, it tells Spot Runner how much it wants to spend on air time and which media markets it wants the ad to run in. Spot Runner comes back with a media plan. It then completes the production work of the customized ad, buys the air time and gets the video into the hands of all the pertinent networks. Later, it sends the advertiser a report of where all the ads ran and when.
Co-founder David Waxman says the advantage of Spot Runner over a regular ad agency is lower cost and the speed and ease of the self-serve site. The professionally produced ad costs about $500, compared to several thousand dollars otherwise. The airtime itself is extra, of course, and Spot Runner takes a commission. Waxman envisions the service opening new doors for small businesses that maybe never would have considered TV advertising before.
“There’s too much friction for a local business to get on TV,” he told us yesterday. “We wanted to make TV available and let these guys compete on TV. Our mission is to use the Internet to put the power of TV in the hands of everyone.”
Waxman says the ads can show up anywhere that a regular ad agency can place them, such as reputable cable networks Discovery Channel and ESPN. “It’s definitely not second-tier stuff,” he says. “There’s no media that is inaccessible.”
The business model is straightforward. SpotRunner charges for each ad video and takes a commission on the media buy.
The commercials are slickly produced, and offer a quality that would otherwise be unaffordable for many businesses. But the cookie-cutter template concept may not appeal to everyone. Waxman notes that customers can seek to have exclusive use of an ad in a certain market - you wouldn’t want your pizza parlor ad to look the same as your competitor’s. Outside of their markets, businesses shouldn’t care if a pizza parlor across the country is using the same general ad.
We asked if businesses would be able to supply their own video. Not now, Waxman said. But he implied that would come. (UPDATE: Turns out companies can supply their own video.)
The company is based in LA, although Waxman is based up here in the East Bay. His co-founder is Nick Grouf. The two of them built and sold two other companies, People PC (it went to Earthlink in 2002) and Firefly Network (sold to Microsoft in 1998). SpotRunner has taken a $10 million round of funding from Battery Ventures, Index Ventures and an unnamed third investor.
14 Comments
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BlogContestSite.com said:
Interesting execution. How come Google is still not actively in the game though we hear buzz about Goog entering the print media?
jane -
Gopi said:
Very interesting startup i see after a long time …I expect a acquistion by google pretty soon!
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lady said:
cool site I see an aquistion too as well as with other companies such as 411sms.com
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Zaw Thet said:
Two commments:
1) It would be interesting if spotrunner also allowed these pre-packaged TV ads to appear on the web which would enable sites like YouTube or Google Video to earn additional revenue.
2) C’mon! Is 411SMS really every going to purchase spotrunner? What blatant comment spam! -
steve said:
um, aren’t we not discussing the only thing that really matters for this newco? that is, the cost of the airtime they are reselling? this idea makes sense only if their is a big markup available on the airtime… which is extremely unlikely. why? because if the airtime is valuable, the newco wont be able to afford it. and if its not valuable, the newco’s customers wont want it. final result: tiny margins on small revenues.
btw, there are tons of successful companies doing this already: informercial firms that buy 30, or more often 60, second spots. and lead generation aggregators for class action litigators. but those folks do national media plans and are willing to pay huge bucks for leads and customers, becaus their ultimate margins are so huge. but the local pizza joint? somehow i doubt it.
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Raoul Marinescu said:
Zaw Thet - as far as the margins, any advertising agency that places business with any traditional media outlet (tv, cable, print, etc.), qualifies for a 15% agency commission. Depending on their business model, SpotRunner.com has two easily identifiable revenue streams. One is the revenue from the sale of the customizable spot and one is the commission they will be getting when placing buys on behalf of their SMEs.
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Julian E. Gude said:
I’m wondering why Spot Runner didn’t launch with an online video ad creation offering as well? I recall reading Justin Hibbard of BusinessWeek back in August, 2005 that mentioned Spot Runner “building a platform for managing online and off-line advertising campaigns.” With the online video ad space so hot right now I’m really surprised. You can read more on my thoughts on Spot Runner on my post about them here http://www.exceler8ion.com/2006/01/13/see-spot-run/
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Mike Corneille said:
The value or lack there of is not the big question here. Plenty of local smallish companies or branches/divisions/subs of larger companies place many ads today. SpotRunner is simply changing the way the ads are created, planned and purchased. Advertising agencies make hefty fees and take a margin on the media.
The model seems to be low-end creative for a low end price, mixed with killer media placement for the same fee an agency charges.
The agency model is going through lots of changes right now. One of which is the realization by clients that lots of what an agency does can be easily automated. Of course since agencies charge time any automation is at odds with the core business model (”What do you mean charge less hours for the same service??”).
With regards to the Google purchase comment. Does Google’s approach hold up when they don’t own the media? Is it more likely that they become a media aggregator as apposed to an advertiser aggregator? I would think it’s more likely that Google will buy digital billboards and sell micro time-slots than them buying an advertiser aggregator.
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Mike said:
This is an interesting model, but I’m not sure how they can secure inventory on all those media outlets. On the site you can build a media schedule with prices from all US cities. How can they do that, do they have a deal with every station and cable interconnect in the country? I don’t understand how they can quote prices when local prices change all the time. Someone please shed light on this. Thanks.
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Michael Bazeley said:
Steve: There’s lots of airtime available, much of it at affordable prices. As with any ad agency, Spot Runner buys it at the going rate for the advertiser and charges a commission.
Mike: I asked the question about changing rates and securing inventory. As Spot Runner explained it to me, they have people constantly calling the stations/networks getting the most up-to-date rates.
However, that doesn’t answer the question that someone else raised with me. And that’s this: Buying airtime isn’t always cut and dried. There is often a negotiation that takes place, wherein you may not be able to get what you want at a preferred time slot, so the station/network will cut a deal and comp you spots at other times. Spot Runner seems to remove this type of transaction, possibly at the disadvantage of the advertiser. In other words, a Spot Runner user is probably not going to get a negotiated deal.
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Mike Corneille said:
The issue raised about the volatility and at times the arbitrary nature of media buying is correct. But this is not fundamentally different than other media. They are all currently people driven processes. Even online media ads are still driven by $5k minimums and phone/fax/email negotiations (all except search words).
In newspaper advertising your rate primarily depends on what type of advertiser you are. Local advertisers vs. national, direct response vs. retail location, travel services vs. financial services, etc.
My guess is that leverage in this model is probably derived from the fact that SpotRunner is buying remnant media space. Given that their client base is made up of small businesses that don’t really care if their ad comes on during, before or after “Friends” they allow the TV stations to fill in the ads where space exists. What is lost in advertiser control is more than made up for in simplicity and price.
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Dave said:
Being somewhat familiar with television production costs, if in fact these spots can be had for $500, it is really a bargain. Looks like Spot Runner has gone extensively into stock footage libraries for the visuals. My question would be whether the talent in these ads are rights managed or not. Costs can go up quickly if the talent is to receive royalties for the markets in which they appear.
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wayne granzin said:
i dont think this is really a good idea? prepackaged TV ads wont work for long in a single market. how many can you run before the whole thing begins looking the same and defeats the whole idea of tv advertising…
we have a studio or two here in town that do that and you hear and see the same production level and although it works initially, after a while it wears thin and the ads stop running…
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Joe said:
I have dissected their business model by reading the fine print on their web site and comparing it to a semi-automated discount ad agency called Cheap-TV-Spots.com. I found that Spotrunner is only disruptive as far as the cosmetics of its user interface, but it is not disruptive qualitatively, nor is there any real savings or value for the potential target low-budget client. In fact, the automated Spotrunner airings cost more than the semi-automated Cheap-TV-Spots.com system. It appears that Spotrunner offers an upgraded ad comparable to Cheap-TV-Spots standard custom ad, but at a price nearly 5 times the Cheap TV Spots rate. Spotrunner does not appear to allow national airings (because of licensing restrictions), and it does not allow a web version of the commercial to be freely distributed by the client. Cheap TV Spots, by contrast, provides both local and national airings, and allows the client to freely distribute a web version via e-mail, social video networks, and other web postings. The most disturbing thing about Spotrunner is that the client is forced to keep purchasing their more expensive air time or Spotrunner will re-sell their ad to the client’s competitor in the same market. So much for branding. Again, by comparison, the Cheap TV Spots system delivers local and national service with maximum flexibility at a cost (including air time) which is less than the hobbled Spotrunner system. Cheap TV Spots also does not insist on long term contracts for air time. The Spotrunner advantage is that it appears easier than talking to a live person (if you want to talk to a live person, it will cost extra). I suppose this could work for a client afraid to interact. But, a client afraid to interact with a live person is destined to fail in business, and there goes the golden goose. Maybe this is why there’s been talk in Silicon Valley about CheapTVSpots.com acquiring Spotrunner. Cheap TV Spots actually has the better system, but to the uninitiated, Spotrunner looks like it has the slicker system. A CheapTVSpots.com / Spotrunner hybrid model is truly disruptive and the real acquisition for Google, Yahoo, or even social networks like YouTube, VEOH or MySpace. Ask.com could be another beneficiary. AOL seems a little too slow to take advantage of these things, although they are getting a bit more into TV. Not that this hybrid will shake Madison Avenue to its foundations, but it will cause more than a few local cable and local broadcast producers to shutter their doors.
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