Southern California Ad Networks & Publishers

ad network and publisher diagram

A stealth internet advertising / publishing renaissance is quietly happening in Southern California 10 years after the dot com bubble burst. Any investor who tells you its hard to build management teams and big companies in Southern California is disconnected from the real markets. Southern California still lacks the big VC and Private Equity funds like Silicon Valley and Boston but entrepreneurs are scrappy here as you see by the list below. Most of these companies bootstrapped themselves and bypassed local SoCal VC firms raising larger rounds with Silicon Valley based mega VC fund after achieving significant revenue growth.

These digital media companies will likely have between $10-250M in annual revenue in 2009 and are great M&A / IPO candidates. The combined list of companies have raised in aggregate of well over $1B of capital and employ 2000+ people in Southern California. These companies will ultimately spawn off new entrepreneurs when liquidity is realized for shareholders. Soon Southern California just might have have a sustainable ecosystem of investors and entrepreneurs to compete with regions like Silicon Valley and Boston. This list is ranked in order of capital raised from investors. and were the source of the investment information. See this list of 13 companies and build your own on - 1333 Second Street, Suite 100 Santa Monica CA 90401 - Owns and operates 1) a network of 65 destination websites 2) a content and social media marketplace connecting content creators, users and publishers on a mass scale and 3) the second largest domain name registrar. Most recently, Demand Media launched in partnership with the Lance Armstrong Foundation.Total Funding: $355.00M Investors: 3i Ventures Generation Partners Goldman Sachs Lance Armstrong Foundation Oak Investment Partners Spectrum Equity Investors - 515 South Flower Street, Suite 4400 Los Angeles CA 90017 - Operates an advertising network, services for parked domain name holders, and a series of consumer focused web sites. The company uses search engine optimization and other techniques to increase revenue from parked domains and other web sites. Total Funding: $150M Investors: Oak Hill Capital Partners 4 Park Plaza Ste. 1900 Irvine CA 92614  is developing technology that helps online advertisers target audiences through advanced behavioral, contextual, eographic and demographic technologies. 200M Monthly Total Funding: $110M Investors: Enterprise Partners, Francisco Partners, Shepherd Ventures 2312 W. Olympic Blvd., Los Angeles, CA 90065 is currently the third largest video provider on the web. The site focuses exclusively on professional content and does not take on YouTube directly as a viral video destination. Hulu videos are played in their own embeddable branded player. Content from at least a dozen TV networks and two major film studios is promised. Initial distribution partners include AOL, Comcast, MSN, MySpace and Yahoo. Total Funding $100M Investors: Providence Equity Partners, Disney, Fox.

Adconion.com1322 3rd Street Promenade, 2nd Level Santa Monica, CA 90401 Performance-driven online advertising and content syndication network. Investors: Index Ventures & Wellington Partners. Total Funding: $80M 10180 Telesis Court Suite, San Diego, CA, 92121 is an Internet TV service that gives viewers the power to easily discover, watch, and personalize their online viewing experience. Total Funding: $69.8M Investors: Intel, Adobe, Shelter, Spark, Goldman Sachs, Time Warner 21700 Oxnard Street, Suite 1600, Woodland Hills CA 91367 Brings order to the fragmented local Internet by connecting advertisers, publishers, and creative solutions providers together on one platform. Wherever customers are online, ReachLocal helps businesses find them with the broadest reach of local digital media, a dedicated force of local Internet Marketing Consultants, and technology that continually optimizes results. Total Funding: $67M Investors: VantagePoint Venture Partners, Rho Capital Ventures, Galleon Special Opportunities Partners, LP 3003 Expositio 1st Floor Santa Monica CA, 90404, (Headquartered in Kansas City, Mo) Performance-based advertising network that utilizes powerful predictive technology to connect advertisers with consumers across multiple channels, including email, search and social networks.Investors: Technology Crossover Ventures. Total Funding: $66.3M 5140 W Goldleaf Circle Floor 3 Los Angeles CA 90056 An online ad sales rep firm represent over 500 leading web publishers and offer integrated media and promotional programs to Fortune 500 brand advertisers. Total Funding: $50M Investors: Great Hill Partners 1925 S. Bundy Drive Los Angeles CA 90025 - Yield Management Optimization platform, REVV for Publishers™, is engineered to accelerate revenue for premium Web publishers. Total Funding: $42M Investors: Clearstone Venture Partners, Mayfield Fund, IDG Ventures and GE/NBC Universal's Peacock Equity Fund Pasadena CA - Ad server for web publishers. OpenX offers a vast community of publishers comprehensive, customizable and free to use ad serving technology. The OpenX ad server empowers a community of more than 150,000 websites across the Internet with the ability to take control of their ads and maximize their ad revenue and relevance. The OpenX ad server products are translated into 25 languages, used in more than 100 countries around the world, and serve more than 300 billion ads each month.. Total Funding: $31M Investors: Accel Partners DAG Ventures First Round Capital Index Ventures Mangrove Capital Partners O'Reilly AlphaTech Ventures Miller, Jonathan 311 North Robertson Dr. Beverly Hills CA 90211 - Break Media is the Internet’s premier entertainment community for men. Break Media consists of wholly owned branded properties such as, Cage Potato, Chickipedia, Holy Taco, Wall Street Fighter, Screen Junkies and All Left Turns as well as a publisher network, the Break Media Network, that counts over 95 member sites. Total Funding: $21.4M Investors: Lions Gate Entertainment 902 Colorado Avenue Santa Monica CA 90401 - Human-powered search engine where results are generated non-algorithmically by a team of profile builders who create pages for search terms. Mahalo includes the most appropriate hand found links and information about for about 10,000 unique queries. Total Funding: $21M Investors: Sequoia 8800 Wilshire Blvd, 2nd Floor Beverly Hills CA 90211 Performance-based ad network that distributes cost-per-acquisition (CPA) and cost-per-lead (CPL) campaigns through online affiliates. Named by Inc 500 as the fastest growing advertising company in the U.S. in 2009.Total Funding:Unknown Investors: Unknown 2141 Rosecrans Avenue, Suite 2020 El Segundo CA 90245 Connexus is an online marketer and pay-for-performance ad network. Result of the merger of Vendare Media and Netblue. Investors: Insight Venture Partners & Oak Investment Partners Total Funding: Unknown

Top Location Based Crowdsourcing Websites

Crowdsourcing has become a hot VC entrepreneur topic lately based on new companies forming and demonstrations I have seen at TechCrunch50 and Demo. This has inspired me to begin building a fluid list (last updated 9/28/09) of my favorite web sites that have become well established in the search engines over the years and already have a constituency of users. These highly specialized web sites all use location based crowdsourcing techniques as a method to aggregate and publish data. There have been many success stories of horizontal based crowdsourcing platforms such as Wikipedia, eHow and Answers. However, this list highlights location based website databases that have a vertical focus and the information contained in them changes frequently. These databases are often syndicated to various partners who help curate and build upon the community database.
1) - Founded in 2004 by two former PayPal employees, Yelp is a local reviews website covering almost 40 states. Users write and read reviews about anything from their favorite hole in the wall restaurant to the worst downtown club. Yelp has raised $31M in venture capital and average 7M visitors per month according to Quantast.
2) - Founded in 2003 to help wifi users find and use local wifi hotspots. JiWire has morphed into a location based advertising platform built upon its worldwide registry of over 281,963 free and pay Wi-Fi locations in 140 countries. Jiwire has raised $22M in venture capital and averages 350,000 visitors per month to its' web site according to Quantast.

3) - Founded in 2001, to enable drivers to help each other find the best gas prices around town. Gas Buddy was a pioneer in the crowd-sourcing space and was one of the first web sites to start the trend back in 2000. You will find Gas Buddy data syndicated to many mobile applications throughout the iPhone store and many smart phone applications. Gas Buddy averages around 400,000 visitors per month according to Quantcast.

4) - Founded in 2009 to help people around the globe find and use public restrooms easier. 66,000+ toilets in the map database and the data is syndicated out to partners. The web site averages 28,000 people per month according to Quantcast.

5) - Founded in 2001 to track locations and fines of red light cameras and speed cameras in the U.S. The database started with 200 locations and has grown at a 30-50% rate per year with now over 7,000 in the U.S. Europe has 40,000 locations and it appears that the U.S. has a long ways to go before this trend is over. The database is free to use for consumers and a geocoded version is licensed to navigation and map partners. The web site averages 19,000 people per month according to Quantcast.

6) - Founded in 2001 to help carriers improve cell phone coverage at the local level. The map now has over 100,000 cell phone coverage complaints for AT&T, Verizon, T-Mobile and Sprint. Femtocells & microcells seem to be the latest solution to help consumers improve coverage in dead zones. If Skype and Google Voice had their way with the FCC consumers would be happily making phone calls via VoIP in common cellular dead zone areas. The web site average 17,000 people per month according to Quantcast.

Please send your suggestions to this list to [email protected] We will update this list with any appropriate suggestions.

Google Side Wiki Search Coming?

I like this feature a lot if it could integrate with Google reader and enable a real time search feature like Twitter.
in reference to: Google (view on Google Sidewiki)

Top 10 Attributes of Successful Southern California VC Investments

Contrary to the common belief that Southern California "should be an easy place to raise money" with all of its' entertainment and real estate wealth, it is a very difficult place to raise Venture Capital for technology start-ups. The bulk of all professional Venture Capital is managed out of offices based in Silicon Valley and most of these fund managers like to invest close to home (except MHS Capital). To make matters even more difficult almost 90% of VCs based in SoCal in 1999 are now gone while our beachhead entertainment companies have a terrible track record at making early stage investments and now typically wait to invest in later rounds.

So how does an entrepreneur based in SoCal get the attention of VC funds today? Over the last ten years I have seen hundreds of entrepreneurs raise VC funding and I have compiled a top ten list of attributes for companies raising Venture Capital in Southern California.

1) The team is articulate, polished and focused in their delivery of their value proposition
2) Frugality reigns supreme and founders have bootstrapped the product development
3) Founders are thought leaders with relevant engineering and marketing domain expertise
4) Founders have chemistry and have established culture with their investors and employees
5) Company has paying customer references with high gross margins
6) Word of mouth marketing and industry references are working
7) The market is still somewhat undefined and growing rapidly
8) Pain relief creates incremental revenue or cost saving opportunities for customers
9) Founding team is raising money through their own personal networks or referrals
10) Company has a clean capital structure and the founders have personally invested

Silicon Valley vs The Gold Coast

The Civil War II has begun but this time it’s not the North versus the South. This Civil War II is about money under management in the financial services industry and it’s the West Coast (Venture Capital & Private Equity) versus the East Coast (Hedge Funds). Let me see if I can paint the picture for you . . .

The bulk of Hedge Fund investment comes from the East coast – principally Connecticut and New York City – which has become the leading location for hedge fund managers. In 1999 there were 500 hedge funds with roughly $500B under management. In 2008 were 12,000 hedge funds with nearly $2.5 Trillion under management. 500% growth!

The bulk of venture capital investment comes from the West coast - principally Silicon Valley. In 1999 there were 1000 VC firms which invested $100 Billion. In 2008 roughly 250 firms invested less than $25 Billion. That is a drop of 75%. Meanwhile Venture Capital accounted for 18% of the U.S. GDP in 2008.

Have you ever asked yourself why VC's or angel investors don't have the ability to sell short (hedge losses) against every private company investment in which 90% go out of business. If VC firms could hedge there would be no job or wealth creation by companies who actually add value to society. VC firms get paid to take risk and are rewarded by 10% of their companies making 10X+ returns. Everyone involved prospers for obvious reasons!

Hedge funds on the other hand profit from short selling and the destruction of capital or stock prices. These funds are primarily responsible for the bulk of the job losses and wealth destruction in the last 10 years and has driven the Stock Market to its' lowest level in 15 years. No one has benefited from this wealth destruction except a few fund billionaire fund managers and investors who I would put in the category of Maddoff even though their practices were legal (today).

Most of the Billions of dollars that have moved away from the Venture Capital sector in the last 10 years has moved across the coast (West to East) into the Hedge Fund investment category and look what it has done. I am very happy that the SEC is considering rules to regulate short selling practices and require funds to start disclosing short positions in companies. Hopefully, this will actually bring money back into the category of Venture Capital and help IPO prospects like Facebook and Twitter.

It is pretty scary when one trader with $12M can manipulate oil futures by $10. I am tired of hearing about traders on TV and want to go back the basics of investing. Futures are for businesses to hedge and not speculation. Stocks are for investing not trading. Some day my wish will come true if Obama stays strong.

West Coast = Venture Capital Funds, Wealth and Job Creation
East Coast = Hedge Funds, Destruction of Wealth and Jobs

Top 10 Investor Questions For Online Video Publishers

I continue to hear the same excuses over and over from start-up online video publishers about their failure to generate sufficient CPMs (Avg. $.25 cents to $1) to survive as a profitable business. Should the blame be directed at advertisers and their agencies or should the blame be directed at the publishers themselves? I believe there is still a huge online publisher problem that has been perpetuated by big media's continued dependence on brand advertisers and phony Nielsen TV audience measurement platforms.

During economic growth cycles advertising terms are dictated by big media publishers who sell impressions and scarcity. This recession is different for big media and may require publishers to become much more sophisticated about accountability, engagement and action. What would GM look like today if they had been smarter about spending billions of TV ad dollar on a performance basis?

This disruption in advertising dollars has created an emerging opportunity for sophisticated publishers regardless of size and scale who can target, segment, engage and create actions for their advertisers and agencies. Here are my top 10 questions I ask of any video publisher . . .

1) Do you produce any unique content for your network to create premium ad inventory?
2) What metrics are you using to sell and measure video engagement for your advertisers?
3) How sophisticated are you at selling your advertising direct versus through an ad network?
4) What techniques are you doing to engage your audience with rich media?
5) Are you segmenting and selling your audience to brand and direct response advertisers?
6) How are you using social media (Twitter, Facebook) to keep your audience engaged?
7) What analytics tools are you using to segment your inventory and sell ads efficiently?
8) How are you selling your remnant advertising?
9) Are you optimizing and routing your inbound viewer traffic?
10) What portion of your viewers / traffic comes from outside the U.S.?

10 Ways President Obama Can Create Jobs

While watching the inauguration today I decided to actually be productive and put some thoughts on paper about how the government might help get us out of this depression (not a recession anymore).

1) Give tax credits for direct investments in private companies not funds or public companies.

2) Give tax credits for companies who make cash acquisitions and create liquidity for shareholders to restart the capital cycle.

3) Open up the IPO markets by reducing restrictions on companies to go public creating liquidity for shareholders which eventually cycles back to new companies.

4) Create a new Securities Exchange Commission that is willing to legitimately combat securities fraud and will bring back old short selling and uptick rules.

5) Give money to smaller regional banks and VC focused banks who can smartly lend money (debt) to companies who are creating innovation and jobs.

6) Encourage more government based Venture Capital funds (equity) to invest in companies who can help government harness the benefits of technology and become more transparent.

7) Give tax credits for hiring U.S. based staff

8) Reduce government regulations on big business monopolistic behavior stifling start-up innovation: Telecommunications, Energy, Biotech, Automotive, Media.

9) Demand more transparency from all financial vehicles who create jobs: private equity, venture capital and those that destroy jobs: hedge funds.

10) Weed out the government bureaucrats and lobbyist who waste tax payer money.

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How About Some QE for Venture Capital?

Media Optimization Firms Are Red Hot In Southern California in 2009

Media optimization is starting to become a headline buzz word in 2009 as the recession drags into the near year. Optimization is one solution to cutting costs that will virtually guarantee a return on your advertising investment if executed properly. If you are a savvy agency, advertiser or publisher and you are not using a platform or service to optimize your paid search, display and landing pages, you are getting behind the curve. Advertisers are demanding accountability and performance in this economic downturn and are increasingly moving toward performance based arrangements or CPA deals. Why, because it hedges some of the risk and the publisher or agency is required to produce results. The old model of buying impressions or clicks and hoping for conversions to sales is GONE for the sophisticated online marketing companies. Here are 4 companies using optimization technology to build competitive advantages in their respective spaces:

Magnify360 - Landing page optimization using predictive data analysis
Adisn - Display advertising optimization for advertisers
Rubicon Project - Publisher ad network optimization – Domain parking ad network optimization

Stay tuned for a list of large publisher advertising networks in Southern California that I am gathering information on: Demand Media, Gorilla Nation, Specific Media, Tsavo.

99% of Angel Investors Don't Know Jack

Angel investing in startups is probably the most challenging form of private equity there is. Having been involved with the Tech Coast Angels for the last 10 years I have seen 150+ companies funded and very few successes. One thing I have learned over that time is that about 90% of the investors in each company "didn't know what they didn't know". Why? Unless you are full time investor looking at business plans all day long or have some particular domain expertise, angel investing will turn into a charitable tax exercise for you. However, the angel successful investments usually had these top 10 elements going for them:

1) Investors had to earn their right to be part of the investor syndicate and invest
2) Investor syndicates typically had less than 5 investors investing $50K-$250K each
3) The investor syndicate only had domain experts in the deal
4) All investors contributed contacts, industry knowledge or competitive intelligence
5) Investment was sourced through contacts and NOT blindly through random submissions
6) Sophisticated angels (like VCs) had looked at many other competitors from around the U.S.
7) Valuation was never an issue in negotiations and understood by both parties
8) The market was in a recession and lacked institutional Venture Capital competition
9) The management team had worked for previous start-up successes and failures.
10) The company had bootstrapped themselves into a beta product and had paying customers

Having investors who are unknowledgable about the game or industry creates numerous issues which I will expand on later.

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