Thursday, February 02, 2006

SpotRunner Worthy of Buzz - Harder Look

There's been a huge buzz around Spotrunner in thr broadcast industry, but most people miss the mark on the opportunity. The SpotRunner model could open the door to millions of dollars in new revenue for TV stations. What’s more, the existing model could potentially be extended to actually improve the efficiency of the production model, increase profits, and take money away from Google, which is making forays into our local markets.

A brief market analysis shows that the TV industry is suffering from squeezed margins. Advertisers are moving money to new platforms, including the Internet. Meanwhile, Google is taking money out of the pocket of local TV stations and newspapers. Google Adsense allows very small businesses in the local markets to purchase advertising simply and cheaply. What is most egregious is that many TV and newspaper Web sites run the Google ads on their sites, which actually helps Google build relationships with local businesses and take money out of the market. As a result, Google took millions of dollars out of local markets in 2005. SpotRunner’s business and production model sheds light on how local TV stations might fight back, using Google’s strategy against Google.

Currently, SpotRunner allows anyone – including very small businesses -- to create and air a TV ad for a fraction of what it would cost to hire an advertising agency and production house. The business simply chooses generic ads from an online database and customizes it with a company logo, a new voiceover or some different images. As a result, businesses that normally could not afford to buy on-air schedules can now do so. Stations benefit by (1) getting revenue from local businesses that normally do not spend money on-air, and (2) developing personal relationships with new local businesses.

The model could be improved to (1) increase efficiency, (2) offer a differentiated product, (3) find new money in the market and (4) combat Google’s forays into local markets. Here’s how:
1. Open video production to peer networks. Similar to how Grab.com allows users to develop/create and share games, offer a solution or service that allows users to create generic spots (based on set standards) and offer them to other users. Producers of spots get a nominal royalty every time someone uses their generic spot.
2. Allow businesses to purchase on-air schedules as well as online schedules for their spots. Similar to Google ads, but it uses video, this allows small businesses to get an online and on-air presence and do so with moving video, the most compelling of formats.
3. If TV stations were to implement a similar technology and strategy, it would allow TV stations to recapture ad dollars from small local businesses currently going to Google and Yahoo and recapture relationships with those businesses.

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