This story was written by Sramana Mitra.
Sportgenic is a San Francisco-based digital media and technology company that is focused on monetizing sports sites. The company, formerly named Active Athlete Media, was founded in 2005 by Robert Tas. Sportgenic has more than 350 publisher sites in its Vertical Ad Network and 21 million unique users. The company was ranked the #2 sports entity on Comscore as of July 2008. In April 2008, the company was also recognized as the 'Official Honoree' for thetwelfth annual Webby Awards.
Sportgenic is more than a Vertical Ad Network. The company not only brings ads to sports-related web sites but also provides publishers with a tech platformthat includes profiles, photos, event finders, custom search engines, forums, weather forecasts,and other widgets. Sportgenic aggregates sports sites in one place, uses technology to gather user data, and offers advertisers targeted access to users, thereby increasing their ROI on ad investments.
According to eMarketer, behaviorally targeted ad spending will increase to $3.8 billion in 2011 from $575 million in 2007. Sportgenic is one such channel with the potential of cashing in on the trend. The company covers everything from trekking to surfing, from yoga to marathons, from fantasy sports to MMA (mixed martial arts). The ability to deliver deliver niche-targeting capability to the advertisers makes alignment with their passions possible.
Advertisers on Sportgenic include Nike, Gatorade, Ford, AT&T, American Express, Reebok, Degree, and Saturn,among others. The ads show up on publishers including Triathletemag.com, TransitionTimes.com, letour.com, Ironman.com, outdoorzy.com, and mmaweekly.com. In May 2008, the company expanded its reach to Europe and the Middle East.
Sportgenic has raised $11.5 million so far in venture capital:a $1.5 million Series A from Alsop Louie Partners, KPG Ventures, and Greycroft Partners, and a $10 million Series Bfrom Adams Street Partners and prior investors.
The core competency in the Ad Network business is to be able to sell ads across a large number of publisher sites, which very few ad networks have been able to pull off successfully. Thus, recruiting a strong ad sales team is critical to the success of the company.
In August 2008, the company appointed Kevin M. Granath as senior vice president of sales. Granath is a veteran advertising industry executive specializing in sports media and also an Emmy Award-winning television sports producer.
In June 2008, Sportgenic appointed Thomas M. Flynn as vice president of sales, Eastern region and Douglas J. Schirle as vice president of sales, Western region. Flynn, before joining Sportgenic, was the national sales director for Golf Digest Digital and GolfForWomen.com. He was also recognized as the #1 digital media salesperson for VNU Business Media's mid-size web sites from 2003 to 2006. Schirle has more than 20 years of sales experience and was the vice president of advertising sales for PureVideo Networks, Inc.
Looks like pretty decent bench-strength that ought to be able to monetize the 21 million user base.
In January 2008, the company acquired GolfBuzz, the developers of innovative publishing tools and technologies for the golf community. At the time of acquisition, Sportgenic said that it would use GolfBuzz's technology across all channels to expand its sports technology offerings to its publishers and advertisers.
The company declined to disclose revenue numbers, so let's make some assumptions. Assuming that the 21 million users translate into 50 million monthly page views (using a rather conservative ~2.5x ratio of user to page view), and the network acheves roughly 30% sell-through of its inventory, at a modest $2 CPM rate, we're probably talking a $30k/month revenue run rate. Since the sales team is relatively new, these conservative assumptions make sense. As the sales team starts to ramp, both sell-through and CPM rates should go up, and in 18 months, they could achieve 60% sell-through with a $5-$10 CPM threshold, putting the revenue run rate at $150k-$300k/month. In that time window, it is also fair to expect that traffic would increase. Thus, the revenue run rate in 2010 will probably be about $3 million.
Now, there is one other revenue channel that's not accounted for above: Google AdSense. Pretty much all the remnant inventory can be monetized with them at a relatively low CPM rate (under $1). That number, due to the large traffic volume, is sizable, although, in ad networks, this revenue is typically held by the publishers.
At any rate, my analysis of this company is that they should try not to raise any additional financing until they hit their stride revenue-wise. Vertical Ad Networks are taking time to ramp, and only recently have a I seen IDG/Forbes selling my entire ad inventory, and getting a halfway decent CPM (still low compared to the expectations they had set).
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By Sramana Mitra