SAN FRANCISCO (Business 2.0 Magazine) -- The Disruptor: NextMedium

The Innovation: Automated product placement in movies and TV shows through an online exchange

Hollywood hero: Watt has Tinseltown buzzing with his startup's system for matching marketers with producers.

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The Disrupted: The 30-second spot, producers of TV commercials, and advertising agencies

In a story in our last issue ("The 20 Smartest Companies to Start Now," September), we noted that VCs would line up to fund anyone who could create an online marketplace that automates the sale of product placement for Hollywood studios. We were onto something: NextMedium is just such a startup, and it's turning heads in Silicon Valley and Tinseltown alike.

Founded by former North Carolina venture capitalist Hamet Watt, NextMedium arose in response to a problem bedeviling entertainment companies. The value of the mainstay 30-second TV spot is eroding. The roughly $50 billion spent last year on TV ads is at risk because of the advent of commercial-skipping digital video recorders, as well as the lure of the Internet and videogames. David Cowan of Bessemer Venture Partners wants to take advantage of all this turmoil. "We see technology playing a role to enable new business models to displace the market that previously existed for the 30-second spot," says Cowan, who has invested in NextMedium.

NextMedium automates and standardizes the process of product placement in TV shows, movies, and videogames. Estimated at $2 billion, product placement today is a relatively small, ad hoc segment of advertising. Too often it relies on Hollywood agents cutting back-lot deals to sneak their clients' products into a shot. But on the NextMedium Web site, movie studios, TV networks, and videogame producers can upload excerpts of scripts or specific product placement requests -- say, a black SUV for Jack Bauer in an episode of 24. Advertisers can search through the requests to evaluate and bid on the available placement opportunities. Before a deal is done, NextMedium's site also allows for the director or other creative professional to approve and sign off on each placement. Then, in collaboration with Nielsen Media Research, NextMedium will measure the exposure of that placement by determining how many people saw it and how a brand's total exposure compares with that of competitors.

The beauty of product placement, a.k.a. brand integration, is that viewers can't TiVo past it because it's part of the show, and it lives on in any reruns or DVDs. "The reason that brand integration has been such voodoo," Cowan says, "is that brand marketers couldn't predict what the exposure would be like or do it multiple times." With NextMedium, marketers can, say, make a dozen placements for every hour of television. "Product placement," Watt says, "can erupt as the most powerful medium in the world."

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