Digitalsmiths is announcing this morning that Cisco has invested an undisclosed amount in the company. The deal adds onto Digitalsmiths' $12M Series B round from a couple months ago, led by .406 Ventures. Digitalsmiths has been building momentum in the video indexing and content management/publishing space and the Cisco investment is a nice validation for the company, particularly in this bruising economic climate. I talked to Digitalsmiths' (which is a VideoNuze sponsor) CEO/co-founder Ben Weinberger on Friday to learn more.

The deal was shepherded by the Cisco Media Solutions Group, which recently announced the general availability of its Eos (Entertainment Operating System) social media platform at CES. This follows a period of relative quiet for Eos. Almost 2 years ago I moderated an NAB Show Super Session panel which included Dan Scheinman, the SVP/GM of CMSG who was then just beginning to talk about Eos.

As Ben explained it, Digitalsmiths' indexing and video management will allow Eos to offer more advanced, targeted advertising capabilities to its customers. That certainly puts it in line with marketers' increasing desire for maximum context and ROI for their dollar. Improved navigation and a strong focus on monetization have been two critical Digitalsmiths' competitive differentiators.

At a broader level, Ben described how other Cisco groups began taking interest in Digitalsmiths during the due diligence process. In particular, the idea of Digitalsmiths-generated video metadata and indexing could become an interesting fit for Cisco's other products (remember that through its 2005 acquisition of Scientific-Atlanta, Cisco became one of the biggest suppliers of set-top boxes to video service providers. Cisco's also a leading maker of broadband access/routing infrastructure and in-home networks through Linksys).

Still, realizing this value is well down the road and will require working across multiple groups each with multiple priorities. For example, anything involving advanced advertising in the cable industry will also have to align with the growing role that Canoe is going to play in the industry. For now the upside of the Digitalsmiths investment is in how Eos leverages the company's technology.

Eos is a newcomer to the social media platform space, which has evolved considerably over the last two years. KickApps, Pluck and others have made a lot of headway in the media and entertainment vertical Eos is targeting; other verticals like sports, brand marketing and enterprise have also recently started to grow.

I have to admit that even after watching this almost year-old video of Dan explaining Eos, I'm still not sure I fully understand the role of Eos as a standalone offering from Cisco, especially when I read recently that its business model is a combination of a "nominal license fee and an ad revenue split." I mean, is there really enough financial upside in a hosted social media platform for mighty Cisco (fiscal Q1 '09 revenues of $10.3B) to pursue it? It's also worth asking whether Cisco has sufficient core software platform development competencies in this area. Certainly Cisco has plenty of financial muscle to back Eos, but is that enough to succeed in the crowded and scrappy social media space?

Yet another piece of this to consider is how players like Facebook and MySpace fit in at the intersection of social media and video. While neither is offering a white label platform (nor do I expect them to), last week's CNN/Facebook inauguration effort exposed the possibility that some major media companies may simply try to marry their video to these existing audiences. I've been a big fan of making broadband video more engaging through social applications but I'm cognizant that doing so is easier said than done. With resources increasingly scarce, some media companies may need to rethink how social they can afford to be.

For Eos, incorporating Digitalsmiths effectively would be a big help and could lay the foundation for other Cisco groups to benefit down the road as well. If Cisco's truly committed to the social media platform space this story will unfold over many years.

What do you think? Post a comment now.