Kate Bulkley, Media Analyst.

Media Money: The impact of the Blast deal and CPMs and the Net

By Kate Bulkley

Broadcast News

For Broadcast October 31, 2007

What does RDF’s investment in Blast mean for other indies? Plus What about those CPMs, then?

If you are one of the dozens of indies to receive a call from Sue Oriel over the past 12 months, you’ll know she is a bit of a fusspot.

The director of RDF’s Ignite fund is hard to please because she has a short but important list of criteria for where she thinks the super-indie’s £2m investment fund will have the most impact and ensure the best return. Oriel is looking for talent, track record and commitment, with a dollop of vision. “I’m unbelievably fussy,” she admits.

Not many UK indies have cleared her hurdles. In fact, of the 70 or so companies Oriel has spoken to in the past year, only one has so far made the grade: Blast Films. Blast’s managing director, Ed Coulthard, won a Bafta this year for directing BBC thriller Soundproof. Blast makes high-end docs and drama but has ambitions to expand, which will now be speeded up by Ignite’s investment. Blast will also be able to tap RDF’s expertise in rights distribution and the US market, as well as IT support and admin. But, crucially, Coulthard remains in control of his company.

Oriel won’t say how much Blast has got, but RDF Ignite has taken a “significant minority” stake in the company - likely to be between 10% and 25% - and Oriel will join the board as a non-executive director. Oriel takes a three to five-year view on the investment. “You can’t turn these things around any faster,” she says.

For smaller indies, an Ignite investment provides another route to access capital without having to sell out. But be warned: Oriel is picky, she is an active non-exec and if she invests in you, the money is for the business, not to enrich the founders. At least two indies have turned down her approaches this year. Being picky can be a two-way street.

What about those CPMs, then?

In the advertising world, CPM, or cost per mille (thousand), is the benchmark for gauging how much it costs to reach an audience. It’s a ruler the online folks are starting to wield with growing dexterity. So much so that at Mipcom, Mike Volpi, chief executive of start-up internet television company Joost, spent a lot of time talking to content owners about his CPMs versus those on network TV.

Volpi’s contention is that the attention that a viewer gives to online video is worth more than a traditional TV viewer’s eyeballs because the ads can be embedded in the video and can be targeted better to the viewer.

At the moment, the CPM of ads on certain internet video sites is higher than those on TV, but a lot of that is due to lack of online inventory. Volpi admits that although the average CPM on network TV in the US is about $15, versus $20 for Google’s new embedded ads on YouTube, this is largely due to limited supply. But he is adamant that sites like his have the building blocks to make their ads as valuable as TV ads or better once the inventory problem is sorted out.

The UK’s Internet Advertising Bureau forecasts that online advertising will be worth £2.7bn by the end of 2007. The web took 14.7% of all advertising in the UK in the first half of this year and now outpaces newspapers, cinema and direct mail. The IAB says that, on current trends, online ad spend will overtake that of broadcast TV by the middle of 2010.

Why did Microsoft pay $240m (£116m) to take a minority stake in Facebook, valuing a three-year-old company founded by a former Harvard student at $15bn (£7.25bn)? To catch a rising star, of course, and to seal a deal where the software giant is the exclusive provider of advertising to the social network’s 49 million regular users, including 5 million Britons.

With 250,000 new registrations a day, this could be very big CPM business indeed for Mr Gates & co.

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