Digitalsmiths is announcing a $12M Series B round this morning, led by .406 Ventures, with participation from existing investors The Aurora Funds and Chrysalis Ventures. The company started life focused on video search, but now appears well on its way to successfully morphing into a tier one video management/publishing platform with indexing and analytics serving as key differentiators. I caught up with Ben Weinberger, Digitalsmiths' CEO yesterday to learn more.

Ben explained that Digitalsmiths has been landing customers like TheWB.com, TMZ, Essence.com and others TBA by focusing heavily on helping these content providers monetize more effectively. Monetization is driven by Digitalsmiths' metadata creation and indexing technology that can transform high value content into easily navigable and searchable frame-by-frame segments (this can be seen at TheWB.com).

Improved monetization is the number one challenge for the entire broadband video industry as I've been saying for some time now, and the economic meltdown has only accelerated its importance. The simple fact is that the industry has to learn how to drive more consumption by moving users beyond simple linear playback, and then achieving an ever-higher ROI against each one of these streams with more inventive ad units.

Digitalsmiths is helping accomplish these objectives by first ingesting the whole video file, then running its indexing algorithms against it, and finally generating the individual segments. These segments are then more discoverable within the site's own search, but also, importantly, by the outside world, through improved SEO (note there are some relevant comparisons between Digitalsmiths and EveryZing and Gotuit, two other companies I've written about previously). As non-linear, user-friendly experience is the result.

Ben said that Digitalsmiths' market acceptance is also being fueled by an innovative, success-based business model that ties its customers' actual gains in video consumption and monetization effectiveness to the company's own compensation. This approach obviously helps instill customer confidence, all the more so in current difficult economic times.

I also spoke briefly yesterday with Maria Cirino, the partner at .406 Ventures who led the round. Of course, it's cliche that VCs think their portfolio companies are the be-all and end-all, but I thought a couple points Maria (who's a heavy hitter in the Boston technology scene due to her success as CEO/co-founder of Guardent, acquired by VeriSign in 2003) made were quite salient.

Specifically, when I asked her about concerns she had regarding the notoriously crowded field of video management/publishing companies that have been around for far longer, she recalled the once similarly crowded web search space, dominated by well-entrenched names (Yahoo, Lycos, Excite, AltaVista, etc.). Google entered late, but broke through by offering a demonstrably better product directly addressing users' key pain point (better search results and user experience). To be clear, Maria was not inferring Digitalsmiths is the next Google (!); rather her point was that "2.0 products" can gain significant traction by tightly focusing on the market's up-to-date needs, especially if they have game-changing technology.

For Maria, Digitalsmiths' proprietary metadata/indexing capabilities, tied directly to improved monetization, are its key ingredients. That's not to say there aren't other competitors bringing their own differentiators to the table, or that content providers' motivations are monolithic, or even that there won't sufficient business to go around for a while. However, in Maria's mind, the key to Digitalsmiths' current success has been to hone in on the market's most critical decision-making driver (i.e. better monetization) and deliver against it.

I'm practically a broken record on the video management/publishing space, as I continue to marvel at the sheer number of competitors and the amount of money invested in the space as indicators of the broadband video industry's ascendance. This space has a lot more room to run and chapters to be written. It's also inevitable that the big boys will eventually follow Comcast and Yahoo (which have acquired thePlatform and Maven, respectively) in, by making their own acquisitions.

What do you think? Post a comment now!

(Note: Digitalsmiths is a VideoNuze sponsor)