Can this company help small, local advertisers?

Like any good business, local broadcast and cable companies set goals to increase revenue by at least 20% each year. This can be done by two ways, either gaining incremental dollars from agencies or local direct advertisers, or seeking new local direct accounts to make up that difference. Account Executives have a tough task though of walking into a local flooring company, health care facility, day spa, restaurant, attorney's office, etc. etc., and asking them to spend upwards of $5K per month on an advertising campaign. It can be a tough sell to a business who has managed to keep doors open each day without spending this money on something they get nothing back for right away.

If that Account Executive can convince a local business to sign that media contract then the dreaded production needs to begin. Not only can this be a tough task from the standpoint of hitting deadlines and getting the proper message across that will make the phone ring 50 times per day, it can also be extremely expensive. While many local production companies charge in the neighborhood of $1,500-$2,000 for a :30 ad, it still is an extra, up-front added expense that gets tacked onto the bill in the end. Instead of looking at this as an investment, they look at it as a start-up charge.

Never the less, a new company has come along that is going to solve all these problems. Or are they? They are called Spot Runner. A startup located in Los Angeles and backed with over $60 million in VC funds. Founded in 2004, they already have over 150 employees and were recently featured in Business 2.0 as 1 of the Top 25 new "Startups to Watch." You can check out their company profile on Business 2.0 here at http://money.cnn.com/galleries/2007/biz2/0702/gallery.nextnet.biz2/19.html

You can also see their web site here at http://www.spotrunner.com.

But before you go ahead and check them out, let me give you some background on them. Spot Runner did their resarch in deed. They obviously have good intentions with their products. Remember that 20% increase thing I discussed earlier. Spot Runner knows that the local market is a great way to not only generate that revenue for local broadcast and cable companies, but they want a piece of the pie for themselves.

With their $60 million in VC funds, they hired a team and began producing generic commercials. At least 4,000 to be exact. Everything from an ad that would fit the pizza shop on the corner, to ads that would work well for an Italian restaurant. They have a very extensive library of generic advertisements that you can browse and order from today. They simply slap your tag line on the end of the advertisement and there you go, a cheap advertisement that is completed without all the hassles of a production crew coming to your shop, and a producer writing and re-writing script for you. The cost, roughly $500 per spot depending upon how many advertisements you buy, etc.

Their expansion into local markets is revolving around a media partner program that will work with local AE's from several markets. The AE gets a local sale, needs an ad, they set up the account with Spot Runner and an ad is ready to go in a short period. However, this is where I begin to dislike it. While Spot Runner is doing a great thing by giving the local guy an opportunity to be on big broadcast or cable television, they are robbing the AE of 15%. Spot Runner has no problem selling these ads for $500, as long as you allow them to become the agency. You've all heard the term "loss leader," well a $500 advertisement is Spot Runner's loss leader. The real money to be made is off the placement of the advertisements over a specific period of time.

While I was intrigued by Spot Runner when I first heard about them, I wanted to learn more so I set up a phone call with a Media Partner Representative at Spot Runner. The conversation was going great until I learned they wanted to act as the agency for each of these advertisers. From my standpoint it's a bum deal, but if you're Spot Runner then it's a beautiful model that will be sure to bring them some money over the long term. However I have to wonder how the pizza shop on the corner is going to feel about never actually meeting their agency and only dealing over the phone. Now you have asked for $5K per month, and the person who is handling most of these duties is located in Los Angeles and you two never shake hands.

Time will tell about Spot Runner and how they will succeed. I think it's a brilliant idea, but sometimes ideas don't always translate into big dollars. I'm going to stay neutral on my prediction because they didn't get $60 million just for a good idea, or did they?