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Summary:

EQAL has bought out investor Spark Capital, just has the company has stepped away from its original strategy of becoming a web video production house to pursue a strategy around helping others create and distribute their own web videos.

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EQAL has bought out investor Spark Capital, just two years after the venture firm led a $5 million investment round in the web video startup. The buyout comes as EQAL, which put itself on the map by creating web video hits such as Lonelygirl15 and Kate Modern, has stepped away from its original strategy of becoming a web video production house to pursue a strategy around helping others create and distribute their own web videos.

EQAL co-founder and CEO Miles Beckett explained that when the company first raised its funding, it was focused on the web studio production model, which was what attracted Spark to invest. But when the economy shifted, it made more sense for EQAL to focus on its technical capabilities and distribution model, unveiling a hosted social platform called Umbrella to help other web series creators to distribute their content and connect with fans.

“It was always in our minds to build up the audience as a way of building out our technology product. From there we believed we would be able to take our infrastructure and make it avail to other content creators,” Beckett said. The company just moved in that direction a lot faster than it originally expected.

With the change in direction, Beckett said it made sense for EQAL to part ways with Spark, and the companies were able to come to an amicable split. The money to buy out the venture firm came from the EQAL management team, a few angel investors that were part of the original round, including Conway and some new investors, such as Scott and Cyan Bannister, founders of social networking site Zivity.

EQAL’s focus on becoming a technology enabler and distribution partner has been a positive move for the company, as it has worked with a number of clients, such as TV chefs Paula Deen and the Voltaggio Brothers, to build their web video properties and social media footprints, while also helping with ad sales and integrated brand messaging.

The company is also helping to build branded entertainment for marketers such as Kraft Philadelphia Cream Cheese, which teamed up with Deen for its “Real Women of Philadelphia” promotional site. That project, which will run as an online contest, seeks videos of cooks using recipes involving the cream cheese, and Kraft is offering up $25,000 each to four finalists who will be chosen for the best recipe, as well as a chance to host their own weekly online cooking show.

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  1. I think this is a really smart move on the part of EQAL. I think that they realized that the challenges and costs of making and marketing original content (without celebrities) online and across social media is not a very profitable model in the short term. Each new original piece of content requires that you essentially create a brand, an audience, and a community around a show. While they were able to do it twice, there is now alot more content available online and such content is competing for peoples time and eyeballs. To achieve scale at the level that advertisers want, I think there are significant marketing costs that they would need to incur in order to consistently generate enough views and buzz.

    The new model is a smart one. Celebrities, tv production companies, and other traditional media players have recognized that they need to be online and interact with their fans and community. They realize that there is money to be made there and that such efforts directly support their offline efforts. Nevertheless, they do not know how to build out the technology, build the community and attract fans which is the void that EQAL is filling. Advertisers and sponsors are of course going to be more comfortable advertising around already established brands so the sell will be easier. Nevertheless, sponsors and advertisers are demanding more and more analytics around their ads and sponsored campaigns, and EQAL will need to fill this void in order to really take their business to the next level. They need to understand how well they are building a community around each of their clients content both on their site as well as off their site on sites such as Youtube, Twitter, Facebook, Myspace, etc.

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