Video Advertising for the Long Tail: Behind Blinkx’s Acquisition of Burst Media

5/11/11Follow @wroush

How did Burst Media, a Burlington, MA, company that helped to invent the idea of the online advertising server at the dawn of the dot-com era, end up as part of a San Francisco-based video search company called Blinkx? And how will owning Burst’s network of niche publishing sites change the way Blinkx does business? Those are two of the big questions that came to mind when I was first reporting on the acquisition last month, but I wasn’t able to sit down Blinkx CEO Suranga Chandratillake to ask them until last week.

Blinkx paid $30 million in stock and cash for Burst, which, like Blinkx itself, was a public company trading on the London Stock Exchange’s AIM market. The deal officially closed yesterday. Blinkx says it will continue to operate the Massachusetts company under the Burst name; Burst co-founders Jarvis Coffin and David Stein, formerly the CEO and chief technology officer, respectively, will depart the company after a brief transition period.

Blinkx, a spinoff of database company Autonomy that used to be in the desktop search business, now makes money by selling lucrative pre-roll video ads, which play before the Web videos that people find using Blink’s search tools. But right now all of that discovery happens on Blinkx’s own site. Chandratillake says that Blinkx has always had its eye on capturing a larger chunk of the overall cash that advertisers spend on video ads. So the basic idea behind buying Burst, he says, was to bring the company a network of “long tail” websites that may have relatively small audiences on their own but which, in aggregate, are large enough to attract advertisers who would otherwise put all their money toward TV commercials.

“The Web is increasingly becoming ‘deportalized,’” says Chandratillake (which is pronounced Chawn-dra-TILL-uh-kuh). “At least half of YouTube’s views come from videos embedded in sites outside of YouTube.com. What an advertiser cares about is getting an engaged person watching content on a particular topic, and being able to place their message in front of that user. Increasingly, those users are spending their time out in the long tail.”

Assembling advertising platforms consisting of multiple long-tail or vertical sites—think fashion or mommy blogs, for example, which tend to have small but fiercely loyal audiences—is a strategy being pursued by more than a few media companies right now. Bay Area players in this market include Federated Media, Glam Media, and Say Media. But Chandratillake says Blinkx probably wouldn’t have gone down this path this year unless the circumstances had been exactly right—meaning, unless a company like Burst had been available for purchase at a bargain price.

Burst’s story goes back to the mid-1990s, when the Web itself was still new. In January 1996, David Stein developed one of the very first ad server programs that allowed Web publishers to hand control of display advertising such as banner ads over to remote advertising networks. “They were movers and shakers in the early days, and had built up a really solid advertising network,” says Chandratillake. “They chose about 10 years ago to avoid the big sites and compile a collection of smaller sites—the argument being that Valueclick and Interclick and the other ad networks tended to compete for … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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