Companies developing new marketplaces

While product placements have long been common in TV, film and videogames, a host of startups hope to make them as easy to buy and sell as Pez dispensers on eBay.

Several companies are developing online placement marketplaces in hopes of cultivating a market for smaller deals. The markets could push product into every conceivable corner of showbiz.

“We see that landscape as incredibly valuable but incredibly inefficient today,” says Hamet Watt, a former investment banker and founder of NextMedium, which has developed software designed to both place and track product placements.

These are not the multi-million-dollar high-profile deals like ABC’s “Extreme Makeover: Home Edition” and Sears or “Friday Night Lights” and Toyota. Those deals are done on the CEO level, involve many facets and much hand-holding.

Instead, they are targeting smaller deals for products within shows. With networks decreasing ad inventory, advertisers shifting away from the 30-second spot, and both networks and production companies looking for additional revenue streams, product placements are becoming more important to the networks and advertisers.

What has so far kept the field becoming as lucrative as the 30-second spot is the lack of any kind of standard for transacting placements or a unified way of measuring what they’re worth.

Historically, pacts have been inked on an ad-hoc basis by agents, production companies, or included as added value for big corporate-level deals cut at the network upfronts. They have tended to cover props such as the cell phone in the hand of a main character, or almost any recognizable product used on the set.

Because the dollar values are low and the deals often complex, the smaller pacts were simply not considered worth the while of product placement execs at the networks and some of the larger production companies.

But Watt says those deals represent “a significant source of incremental revenue” and his firm, helped along by $10 million in venture funding, had developed a digital marketplace to streamline those deals.

Watt sees the value for pure product placements at $2 billion, but this figure doesn’t include the largely untapped market of smaller deals in the range of $10,000 to $100,000. Many of these are simple prop placements within shows rather than the big multi-faceted program sponsorships like Coca-Cola and “American Idol.”

Overall, product placement and branded entertainment is one of the fastest-growing sectors of the ad business; ad industry analyst Jack Myers expects it to grow 35% in 2007 to $7.35 billion from $5.4 billion in 2006.

“This has been consistently one of the fastest-growing segments of the media world but it’s largely unmeasured and difficult to track,” Myers says. “The ability to bring some structure to it I think is overdue.”

Last spring NextMedium pacted with Nielsen Media Research’s PlaceViews service, which monitors placements and rates them on a scale ranging from a prop on the set to a central role in the storyline. It integrated the data stream into the company’s “Embed” software, which allows advertisers to search for placement opportunities and to look at the overall exposure their product is getting on TV.

This allows brand managers to take the temperature of their products’ visibility on television, which could play into a decision on whether to invest more of their marketing budget on placements.

But there isn’t one standard for measuring the value of a placement. Nielsen records the time of the placement, the audience watching, and assigns a value based on criteria such as if it is mentioned in dialogue or used by a main character.

An independent company launched by product placement pioneer Frank Zazza, iTVX, measures the quality of placements by analyzing the time spent on-screen on a frame-by-frame basis. The result is an assigned Q-ratio that compares the value of a placement to a 30-second spot.

Zazza has an exalted place in the annals of product placement.

First off, he started doing it 25 years ago, when only a handful of execs were doing deals. Then he engineered the deal that would become the template for the modern-day film-product tie-in: when Elliot befriended E.T. with a handful of Reese’s Pieces.

Zazza launched his measurement firm in 2002 to create a currency for the value of placements. “Before anything can happen in branded entertainment someone has to ask, ‘What was the quality of that integration?’ That’s where it all starts,” he says.

Now he’s in talks on a possible link-up with a year-old firm called Media Matchmaker. It lists a number of placement opportunities on shows like “Martha,” MyNetworkTV’s “Desire,” and WE Network’s “Get Married.”

A third company, Magnetic Alliance, was founded three years ago as ePropshop to match producers with advertisers willing to supply them with brand-name products.

Sports producer Jerry Solomon used Media Matchmaker to land a sponsor for “Countdown to Draft Day,” a nationally syndicated show that aired before the NFL draft in April. Quickdrop, a company that sells products on eBay, ended up sponsoring the show and getting various integrations within the programming.

“For independent producers it makes it a lot easier to identify companies that have already expressed an interest in getting involved in certain types of programming,” Solomon says.

But flagging partners isn’t the same as pacting with them, skeptics warn. Since every placement deal depends on shifting variables — especially whether the product, actor or program stays “cool”– some doubt whether the business lends itself to uniform measurement. Zazza, who says he has closed 100,000 placement deals, still has his doubts.

“No product placement is just done on paper, it takes management and hand-holding to make it happen,” Zazza says.

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