HSI Productions Inc. knows that national advertisers are serious about pumping money online. The Culver City-based television and video production company makes big-budget commercials and music videos for Pepsi Co., Nike, Miller Brewing Co., Gap Co. and AT & T; Corp. Last week, the company announced that it had formed a new media division, called Kayoss, that will focus on Web design and development.
The private company wouldn’t discuss its financials or say how much it was investing in the new media division. While the move probably doesn’t involve a large investment, it comes at a time when most local Web developers focused on online advertising have been scaling down.
So why would HSI, a leader in its core offline production business, move into the crowded, messy and long-eulogized online advertising market?
“We believe in the notion that everyone is going towards cross-platform integration,” said George Linardos, HSI’s head of new media.
Cross-platform ads are typically created for television but are also designed to move seamlessly to the Web and other print and broadcast media, such as interactive television. The goal is to offer advertisers a more complete solution and one that gives advertisers whatever demographic they want.
It does seem like everybody is doing it lately.
Consider Procter & Gamble Co.’s recent deal with Viacom Inc. P & G; will pay the media giant $300 million in what the companies called a “cross-platform marketing partnership” that will promote P & G; brands across 12 different Viacom properties, from MTV to Black Entertainment Television.
Bayerische Motoren Werke AG has won accolades for short films featuring BMW cars, which the company has been promoting offline and showing online to registered users at BMWfilms.com.
Then there’s Nike, which has merged online and offline advertising for its new basketball shoes that sales of the shoes spiked after the launch of Nikebasketball.com. One of the other recent campaigns included innovative television commercials that lured viewers online for conclusions to the “stories” that began to unravel during the commercial.
“Online advertising, when it works the way it’s supposed to work, is going to be the advertisers’ dream come true, primarily due to targeting and to richer and richer media,” Linardos said.
More bandwidth is needed to fulfill that dream, but deep-pocketed advertisers like Nike aren’t holding back their dollars.
“Everyone understands that this is a great way to have a more direct relationship with consumers,” Linardos said. “It’s about using good media to get the consumers’ attention and draw them deeper.”
Into a new pair of shoes.
Moving Up the Coast
Digital Coast Partners, the Santa Monica-based investment banking and venture firm, is doing a little consolidating of its own. The firm, run by brothers Michael and James Montgomery, has pulled its Digital Coast Ventures group closer to home, moving the three person venture team from its posh digs on the ground floor at Wilshire Boulevard and Third Street to Digital’s even posher headquarters at Wilshire and Ocean Avenue.
The migrating staff leaves behind a 7,000-square-foot space formerly a Cal Fed branch that Digital spared no expense to remodel. Digital had planned to share the slick offices with some of the start-ups it was nurturing but has since scrapped the idea, because the firm “didn’t want to be in the real estate business,” Michael Montgomery said.
Digital Coast Partners was founded in September 1999 by James Montgomery to provide investment banking services and venture capital to early stage technology companies. It was formed by the merger of Michael Montgomery’s investment bank, CEA Montgomery, and his consulting firm, Montgomery & Assoc.
For its fund, Digital Coast Ventures drew down $16 million from a much larger sum that was committed by investors. It invested in companies like Corus Pharma Inc., Azuma Wireless, and EncodeThis. Thomas Heymann, former head of Disney Stores Inc., the retailing unit of Walt Disney Co., is managing director of Digital Coast Ventures, which has “has not invested much in the last year” because of inflated valuations, Michael Montgomery said.
Instead, mergers and acquisition activity has kept the Digital Coast Partners office bustling. “The Dow has stabilized and it’s not going down or up, which is helping buyers and sellers become more confident,” Montgomery said.
There has also been a renewed interest in later-stage financing for early-stage companies, Montgomery said. “If the companies have revenues and are near profitability, then there are a number of funds interested in financing,” he said. “They’re not the typical early stage funds that dominate the press. But there is a lot of capital looking for companies that are already proving something.”
Staff reporter Hans Ibold can be reached at [email protected] or (323) 549-5225 ext. 230.
