• by Mark Walsh  @markfwal, January 15, 2009

Product placement ads have long been the province of Hollywood movies and hit TV shows. Startup Tadcast aims to grab some of that glitz by creating a product placement marketplace for online video. The site would match marketers looking to place brands with independent video producers seeking to monetize content.

"We want to prove that user-generated content and independent filmmakers are worthy of having product placements," said David Parker, a Harvard Business School student who co-founded the company as a field project last year.

When launched, here's how its product placement exchange would work: Advertisers will post information to Tadcast on a product, requirements for videos, and what price they will pay per thousand views. Video producers will browse the list of campaigns posted, choose a product that can be organically incorporated into the video (at the highest CPM), and then submit the video to Tadcast.

Parker envisions the system spanning various levels of video producers from companies like Michael Eisner's Vuguru at the high end to "a guy in his basement making videos." Over time, independent producers would establish standing based on criteria such as viewer quality ratings and the popularity of their videos.

Tadcast would also track videos once released to ensure that they continue to comply with marketers' guidelines for how products are presented.

To get things rolling, the company is starting a contest next month in which participants create videos incorporating at least one of three brands--Coca-Cola-owned Honest Tea, cymbal manufacturer Zildjian and chocolate company sweetriot. The top prize of $5,000 goes to the producer whose videos generate the most views on YouTube or any other video site.

The idea is to demonstrate to advertisers that video makers will comply with their guidelines and help build their brands. Honest Tea, for instance, requires that its "bottle should appear cold or refreshing" in videos, while sweetriot instructs that its chocolate-covered cacao nibs "be consumed in small portions (not all in one gulp)."

What about independent producers' concerns with selling out? "Filmmakers want to find a way to make money for what they do, and if they can find a new revenue steam, they will be willing to do that," said Parker, who himself made the award-winning 2006 documentary "One Per Cent."

Still, the biggest hurdle is likely to be on the advertiser side. "Agencies are very worried and very wary about user-generated content and you have to show them the content isn't going to embarrass them," said Mike Hudack, CEO of video site blip.TV.

In a post about Tadcast this week on Mashable, editor Adam Ostrow also noted that product placement in traditional media is intended to associate brands with the cachet of movie stars or other personalities.

But Parker believes that brands will value placements in online video as a more direct--and lower-cost--way to reach their biggest product enthusiasts. "I think there are a lot of brands out there that want to be associated with it to bring products closer to their community of users," he said.

With viewers' aversion to video pre-roll ads, product placement also gives marketers a more user-friendly option for video advertising that users are less likely to ignore.

With the company's product placement contest set to wrap up in May, that's also when Tadcast hopes to launch an automated online market for placements. In the meantime, it's working with advertisers and producers directly to begin matching placement orders. "We think this business model is fairly solid," he said. "Once we get the first dozen advertisers or so, we'll be cash-flow positive."