Parsing product placement.

Since broadcasting's earliest days, advertisers have wiggled their way into entertainment by sponsoring an entire season of a dramatic series, offering prizes on game shows, or having their product on the set of a sitcom. But no one has figured out a way to measure the effectiveness of this type of marketing--much less create a marketplace for it--until now.

Enter NextMedium Inc., a Los Angeles company that has developed just such a gauge and developed EmBed, an online market where entertainment companies post their inventory of product-placement opportunities and advertisers or their agencies can purchase them.

"It's a marketplace for entertainment companies to monetize their brand integration and advertisers to access the inventory of alternatives to the traditional 30-second TV spot," said Hamet Watt, chief executive. "Recently we've been fueled by interest in alternative inventory."

Interested parties include investment bankers and venture capitalists. In late July, NextMedium secured $9.5 million in second-round equity financing in a deal led by Bessemer Venture Partners, a Silicon Valley-based venture capital firm. The original investors in NextMedium, Ascend Venture Group and Globespan Capital Partners, also participated in the new financing.

David Cowan, a partner at Bessemer, has invested in seven other companies involved in solving "the massive disruption in video advertising," as he described the current media market. With his investment, Cowan earned a seat on the NextMedium board next to Darryl Walsh, managing partner at Ascend Venture, and Jonathan Seelig, general partner at Globespan.

"Technologies like Tivo, iTunes, pay-per-view and Web streaming empower personalized consumption of media, rendering the 30-second spot obsolete," Cowan declared. "So how will brand advertisers reach their target markets with high-impact visual ads? And who will fund production of the Hollywood content currently subsidized by $70 billion per year of 30-second spots? Entertainment integrated with brand exposures is a win-win-win for the sponsors, producers and consumers, and NextMedium is developing the kind of reliable, measurable platform to enable this market."

For advertisers, the EmBed system starts with access to a special NextMedium Web site. There, they see a screen on their brand and its metrics related to product placement. The numbers include audience demographics and frequency that the brand appears in entertainment contexts.

In collaboration with Nielsen Media Research, NextMedium has developed Place Views, a measurement system to monitor brands on primetime network TV. The company also provides an Entertainment IQ for specific brands. It functions as an index, taking into account the exposures of a brand in programming, the demos reached through those exposures and audience size. The system originally covered only television, but Watt said coverage would expand to films, video games, and music videos.

After reviewing their brand's performance, advertisers can move to the market section of the NextMedium site. Here they see available opportunities for brand placement, posted by entertainment producers. Again, the software tries to limit the guesswork on the part of the advertisers by including demographics and other statistics.

If an advertiser finds a compatible opportunity, the site offers a standardized deal, although the price and payment arrangements, as well as the physical shipping of a product, is determined by the entertainment company, according to Watt.

"We have seen the patterns of negotiations that take place and the software facilitates some of that back-and-forth and memorializes the terms," lie said. "The most important terms are audience and the nature of the product placement."

For entertainment companies, the system helps monetize their product placements. Just having a central place to list their inventory of opportunities and having access to multiple buyers allows producers to quantify what has been a mixed bag of piecemeal deals, especially at large studios and networks. According to Nielsen Media Research, brand integration and product placement was worth $2 billion in 2005.

Behind NextMedium lies the assumption that entertainment drives consumer demand. Watt even maintained that as people understand the Entertainment IQ measure, it might come to serve as a proxy for market share. "Art imitates life, and life is full of real brands," he said. "That is basically what we're selling."