In a sign of the Internet's rapid transformation of the advertising industry, Web-based agency Spot Runner Inc. has raised $40 million from an investor group that includes broadcasting giant CBS Corp.
The new investors in the Los Angeles-based company also include two of the world's largest advertising holding companies -- WPP and Interpublic Group -- as well as investment banker Allen & Co. and Lachlan Murdoch, the eldest son of News Corp. Chairman Rupert Murdoch, company executives said. The deal is expected to be formally announced today.
The investment comes 10 months after the company launched. The deal will enable Spot Runner, which employs about 125 people, to aggressively expand its services to online video and other emerging platforms, executives said.
"It's a huge validation of our business," said Nick Grouf, who co-founded Spot Runner with David Waxman. The Internet entrepreneurs took PeoplePC Inc. public in 2000 before selling the company to EarthLink Inc. in 2002.
Privately held Spot Runner uses the Internet to create low-cost, well-produced ads. Local business owners tap an online library of thousands of stock commercials to customize and schedule their own TV spots. The company then places the ads on local cable and network TV, charging a fraction of the fee a conventional ad agency would collect.
Spot Runner's TV ads cost as little as $499, compared with tens of thousands or more for a conventional commercial.
The prospect of luring new advertisers is appealing to broadcasters, which have seen advertising dollars migrate to the Internet and as the growing use of digital video recorders makes ad-skipping easier.
"Spot Runner's technology provides broadcasters the opportunity to expand the demand for local advertising by providing clients with a quick and easy way to promote their businesses in ways they never thought were available to them," said Joseph Ianniello, chief development officer for CBS.
Like other networks, CBS has forged partnerships with such companies as Google Inc. and Yahoo Inc. in an aggressive effort to distribute news and entertainment on the Internet.
Although Spot Runner's service began by catering to small businesses, it has also attracted national brands eager to customize TV ads to local markets. Clients include Century 21 Real Estate, Coldwell Banker Real Estate Corp. and ISold It.
WPP, which owns advertising agency Ogilvy & Mather, said Spot Runner would enable its clients to more effectively target ads across media at the local level while maintaining a consistent brand message.
Greg Sterling, an Oakland-based analyst who tracks Internet advertising, said he wasn't surprised WPP and others had invested in Spot Runner.
"They're innovators," Sterling said. "They've brought some of the efficiencies of Internet advertising to the traditional media world of cable and broadcasting."