Advertising’s matchmaker
It’s tough to break into the energy drink market, even with a beverage containing nine herbs designed to enhance libido.
Delmond Newton, chief executive of Fever Beverage USA, could shill his drink on the radio and plaster ads all around town. But he recently discovered that sales of his energy “stimulation drink” skyrocketed with a mere mention in a music video featuring rapper Ludacris.
Now, rather than spend money on TV commercials and other traditional advertising vehicles, he’s relying solely on product placement: having the Fever drink appear in movies, television shows and music videos.
And he’s turning to Los Angeles-based NextMedium, which hopes to standardize the product-placement marketplace.
Product placement has been around for decades, but it is becoming an increasingly common way for companies to get their brands in front of viewers who tune out or fast-forward through TV commercials.
NextMedium, which has 30 employees, wants to play matchmaker between those brands and television shows, music videos and other product-placement outlets. The company created an online marketplace called Embed, where advertisers can find shows, music videos and movies on which to appear, and producers can find advertisers willing to pay for placement. So far, the company has signed up 120 productions and hundreds of advertisers.
About 62% of marketers believe that traditional TV ads have become less effective during the last two years, according to a Forrester Research study, and 87% of advertisers say that so-called branded entertainment will be key to TV advertising this year.
Other studies have found that TV viewers remember products featured during shows more than in TV commercials, said Jay Newell, an assistant professor of advertising at Iowa State University.
While working as a partner in a North Carolina venture capital firm, Hamet Watt saw the rise of product placements and came up with the idea behind NextMedium. He did some research and noticed that the way products typically landed in shows -- through personal relationships or ad agencies -- was clunky.
“I thought, if someone could bring some efficiency to the market, we could help a lot of folks,” Watt said.
He raised his first round of funding in 2005 to hire engineers to build its website, and in total has raised $9 million from venture firms Globespan Capital, Ascend Ventures Group and Bessemer Venture Partners. His engineers have since spent 50,000 hours developing the Embed platform, which includes an algorithm that sends clients appropriate shows and relevant products.
Using data compiled by Nielsen Media Research, the platform tracks how long a product appears on screen, whether it’s in the background or foreground and whether it’s mentioned in dialogue. Embed then takes into account how many viewers were watching the show to assign a value to how much a placement is worth.
For instance, Fever CEO Newton told NextMedium that he wanted his drink to be featured in shows, music videos and mobile campaigns with “bar and bedroom scenes.” NextMedium looks into its database of productions that are seeking products and sends Newton weekly e-mails listing shows in which Fever could appear and the estimate cost. After a placement, NextMedium issues a report saying how many people watched the show and remembered seeing the product.
Newton is considering featuring Fever on the BET Networks show “Hell Date,” and in a Blair Underwood movie. He still isn’t considering buying commercials.
“When you have 30 commercials during a show, enough is enough,” Newton said. “But if a product is in the show, I don’t have a problem with that.”
The cost of placements varies depending on the prominence of the product on the screen and the context in which it is mentioned, but NextMedium spokesman John Ellis said placements are generally less expensive than TV spots because it is still an emerging market.
The matching service doesn’t come cheap: $25,000 a year to use NextMedium’s Embed. But NextMedium makes most of its money through transaction fees. For example, if an advertiser pays $100,000 for a placement, NextMedium takes a cut and gives the rest to the TV network, film studio or record label.
Research firm Dun & Bradstreet estimates NextMedium’s annual revenue at $1.5 million. Privately held NextMedium said that figure was inaccurate but wouldn’t elaborate.
Ad agency Deutsch Inc. is a NextMedium partner. Deutsch Chief Media Officer Peter Gardiner said most marketers wouldn’t use NextMedium to replace their ad campaigns, but rather as a way to place products on movies and TV shows.
Gary Mezzatesta, CEO of advertising agency UPP, which specializes in product placement, said NextMedium might have trouble getting producers, networks, and advertisers to submit to an online system. Working a brand into a plot takes tremendous coordination between writers, directors, producers and networks, he said.
“There are so many different considerations and issues, it’s hard to standardize it,” he said.
But for television networks, NextMedium may offer a new way to keep advertisers engaged. The Embed platform helped Viacom Inc.’s BET Networks land Fever and other new advertisers that otherwise might not have had the cash to spend on a national advertising campaign, said Alvin Bowles, senior vice president of integrated marketing for the cable channel.
NextMedium CEO David Bluhm said making product placement more efficient and available to smaller advertisers could help TV networks offset the shift of advertising dollars to the Internet.
“TV needs this model very badly to pay for the cost of television production,” he said.
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At a glance
Business: Los Angeles-based NextMedium has created an online product-placement marketplace where advertisers can find TV shows, movies and music videos to showcase their brands and producers can find advertisers with money to spend on placement.
Founder: Hamet Watt
Employees: 30
Revenue: $1.5 million a year, according to Dun & Bradstreet; privately held NextMedium disputes that figure but would not elaborate.
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