A VC View of Video Ads

VC blogger and (recovering) entrepreneur David Stern on his blog The Commute offers insights on the emergence of video advertising and small to medium business, (SMB). David is also keen on small business as they see online advertising.

"...Even though we consistently hear how wonderful Google is for the SMB market, the lion’s share of the SMB advertising spend isn’t online. For them, Google is still a mysterious black box. For them, online marketing still isn't tangible enough to adopt right now as a compliment for or replacement for their current more traditional spend. This is an emotional objection, not a rational one, clearly. But it is real nonetheless. This class of advertiser does already advertise in the Yellow Pages and many of them have done a local television ad or two. But for them, it is more important to be able to SEE their ad run, or certainly see their ad run on something that is accessible and known to them or something like it. It is an emotional response, full of vanity, and fear. Having something tangible is important and it is the gating factor for many in determining whether to advertise online. .....

I believe video advertising has the promise of being able to lure not only the early adopters of online advertising, but also and more importantly, the largest portions of local SMB advertising dollars, the portion that has resisted text-based online advertising, online. I believe that this is the next big trend in advertising that has the potential to produce venture scale returns for investors...."

He's right about Google being a black box for the small business advertiser, they can't find Google on their own and even when they do get to the platform they see the directions but can't read them, it's braille or Russian.
Those who have maneuvered through the obstacles in rare air enjoying little competition. My job is translating the braille on Google, Yahoo!, MSN and Superpages for small business and opening their eyes to "this other one half" of the advertising pie.

VC's like David point their firm's money to businesses focused on delivering the product that will bring his firm the best return. The term "follow the money" comes into play here. As David and the venture capital people point to the direction of the future those of us providing service to small business must take note. MediaPost's article on the growth of video advertising supports David's view with exciting figures.

"ONLINE VIDEO AD SPENDING WILL register its greatest year-over-year growth in 2007--rising 89% to $775 million, forecasts eMarketer. Even more significant, the researcher says, the growth rate will remain near or above 40% through 2011, when video ad spending will reach $4.3 billion.

Next year (2008) will be a watershed for online video as more than 50% of the U.S. population--155.2 million people--will be watching it, eMarketer forecasts."

The only directions the SMB operator needs for video is show them where it will be seen and tell them how much it will cost. again, early adopters will be richly rewarded. Where does the small business go to get started? Turn Here is a good place to start.

The Venture Capital people are not in the business of placing the SMB online. They seek out the companies providing the platforms and distribution channels. On that front I have one company in my portfolio in that arena, Roo. (RGRP.OB)

Definitive Online Marketing Blog List

The Power 150 Online Marketing Blog List is the most comprehensive online marketing blog list on the web. Other marketing blog lists I have seen are generally biased and the assigned blogs are in many cases added to curry favor or to raise the list organizer's own status.

Not this one.

About the list Author Todd Andrlik.

Industry News; Digg.com Chooses Microsoft For Ads

Yeah I know this has nothing to do with local search but as our business evolves to providing blogging services the scope of what I watch is widening. As such search industry news relating to blogging tools and shifts in industry winds become more important to follow.

Digg is in the blogging tools arena. Used correctly Digg.com can bring a ton of traffic to a site.
In Digg.com news, Microsoft will serve ads for Digg. This seems to be another loss for Federated Media who may yet still be a part of the site delivering ads on some side pages.

With the apparent loss of Wikia to LookSmart and now Digg you have to wonder how badly the scandal brought to light by ValleyWag.com in June and summarized by the NYTimes, (who uses use the word payola) when describing the practice employed by FM and some of their Bloggers hurt their reputation.

Update; FM Responds

Quick News On The Local Search Front

Local.com (LOCM) buys PremierGuide for a fire sale price of $2 million.

"Premier has directories on over 350 sites including Community Newspaper Holdings, Inc., GateHouse Media, Inc. and Washington Post."

Valley Yellow Pages goes digital in 2007 with the launch of MyYp.com. I have to say this is a terrible debut for the company already late to the digital table. The search is clunky, the layout is terrible and look at this messy page. It looks like they simply scanned their own pages. Simply amazing this is the best they could come up with. Disappointing frankly and makes me think they should consult with the people at Local.com?

Wikia Chooses LookSmart AdCenter, Tech

I've been busy with clients and my hobby blog and also following my investments and this one caught my eye.

Wikia Chooses LookSmart ad Serving Platform for management display and text based advertising.

TMC Net writes;

"Wikia will use the ad platform to grow and manage both display and text-based advertisers in its wide-ranging collection of communities. Breaking new ground for LookSmart, Wikia is the first implementation of the company's ad technology for managing and serving display ad units which utilizes CPM-based pricing...."

""We did a lot of due diligence to find a flexible and intuitive ad serving technology that nets the highest revenue and yield," said Gil Penchina, CEO of Wikia. "We discovered in the process that LookSmart's platform and services not only provide dynamic optimization of both our advertisers and backfill networks, but the white label aspect of it fits perfectly with our brand strategy.""

The market has not caught wind of the significant impact this news will have on LookSmart stock.

Recall it took almost a week before the market became aware of the patent news that shocked Local.com (LOCM) stock awake.

Update: After cruising Wikia I attempted to place an ad and was directed to Federated Media, who currently sells banner ads for Wikia. I wonder if FM will continue to feed Wikia or will this LookSmart contract place them on the sidelines.

Hyper-Local Backfence Closes Down

Search Engine Land reports Backfence is closing down;

Quote from Backfence (Reston community site),

"Backfence Says Goodbye to Reston
We are sorry to announce that Backfence (insert city)will be ceasing operations within the next few days. We have been honored to have been members of this vibrant local community over the past several months. Thank you for your interest and participation in Backfence. Hopefully, we'll see you around the neighborhood.
Posted by Backfence; updated 07/05.."

Shame really, perhaps they are a few years ahead of their time or maybe expanded too quickly?
The failing underscores how hard it is to break in to this genre. It seems more and more social networks giants like Facebook, Bebo and MySpace will form and define local community in cyberspace. Given that I do believe spots like super hyper-local Fresno Famous will always find a corner in the room to hang a hat on.

More On Local.com (LOCM)

The stock market finally took notice of the patent award announcement on June 25th due to a blog post on Seeking Alpha on June 29. The stock responded by rising roughly 80% .

Today the company announced they were awarded an additional patent that may hold a deeper meaning for the financial future of the company and indeed all paid local search.

Pay attention to the last line below;

Quotes from Local.com CEO Heath Clarke via From Sys-Com Media;

"In our view, the burgeoning free 411 marketplace is being underwritten by a variety of advertising supported models. Our patent 7,200,413 is directly related to a referral advertising model such as pay-per-click or pay-per-call listings, which are delivered to consumers as a result of an enhanced directory assistance inquiry or local search, where the results can be provided to consumers via many mobile channels, including voice," said Heath Clarke, Chairman and CEO, Local.com.

"Our recently announced patent 7,231,405 was related to the methods used to deliver our highly relevant organic search results. Patent number 7,200,413 is complementary to our local search patent in that it provides us with intellectual property coverage for what's now a widely accepted monetization method -- pay-per-referral -- within the directory assistance marketplace. Local.com believes that ad-supported directory assistance is the future of 411 services in the U.S., and we look forward to working with a variety of companies to deliver innovative new products and services to the marketplace," continued Clarke. "We encourage directory assistance and free 411 companies that are interested in using our intellectual property to enter into licensing agreements with Local.com."

That could be industry changing. The stock responded today by moving up another 55% as of this posting.

Oddly none of the prominent local search marketing industry writers have chimed in with opinions on this second patent yet.