Until now, I have consciously avoided writing anything about the recently filed WPP lawsuit (fraud, breach of contract alleged) against Spot Runner or the outlook for “the embattled company.” But there are enough stories piling up to justify comment.
Today, AdWeek covers the suit from the WPP angle and asks whether it was wise for WPP to invest in Spot Runner in the first place.
Here’s the complaint itself if you’re inclined to read it:
AdAge summarizes the alleged facts in the complaint and its potential impact on the company:
Earlier this month, after nearly three years as an investor, WPP dropped the equivalent of a nuclear bomb on Spot Runner that could well vaporize any potential it has left. WPP filed a lawsuit claiming Spot Runner founders and venture-capital backers perpetrated a “pump-and-dump” scheme in which the founders used WPP’s prestige to bring on additional investors while they took $54 million out of a company that managed to lose $80 million in 2007 and 2008, bringing in just $14 million in revenue.
In suing for $13.2 million, WPP is attempting to recoup only its initial investment — $11.8 million from two rounds of funding — but by attempting to do so in court, WPP certainly prevents Spot Runner from raising additional funds and threatens what appears to be Spot Runner’s last shot at the kind of game-changing product its investors initially hoped for: an automated TV- and video-ad-buying platform and exchange dubbed “Project Malibu.”
I had contact with Spot Runner from before the company’s initial launch. Spot Runner was full of smart people who seemed to know exactly what they were doing. But they did not; they gravely underestimated the challenges of cracking the SMB market, had no custom production capability (a la TurnHere) and took too long to offer online video, among other things. Reportedly the company has now bet the farm (what’s left) on TV-video buying platform “Project Malibu.”
However the distractions of the litigation will sap the company’s momentum to the extent it has any left. If there’s a settlement, it will siphon needed cash. But if the case continues through trial, it will represent an ongoing dark cloud over the company that will scare almost everyone away — including any potential suitors. In addition, key employees who sense that the company is foundering may depart, further weakening Spot Runner.
It will require something just short of a miracle, it would appear, for Spot Runner to recover.
Screenwerk 
April 27, 2009 at 6:23 am
Turn Here does more “vanity” type productions for the web. They are not true direct sales type ads and do not seem suitable for TV. There are many alternatives, though. But, pre-made, pre-produced or template ads are a dead end as the Spot Runner debacle now proves beyond any reasonable doubt.
April 27, 2009 at 4:43 pm
@Planner
I don’t know if the whole template ad thing is completely a dead end though, but not in the broad market sense that SR went after. One of the few things that worked well for us was in working with regional and corporate players rather than going after the mom and pop store on the corner. Situations such as a franchise operation wanting to create a small library, say 8, of pre-approved templates that each franchisee could then customize and tailor w/ their phone numbers, address, picture of the store front, etc.
That niche alone does not an advertising business make however, and thus began the great diversification at SR where suddenly we tried to be everything to everyone, which Greg somewhat alludes to–culminating in distractions for all and ultimately not a whole lot for all the effort.
April 28, 2009 at 1:01 am
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April 29, 2009 at 9:56 pm
These guys have always struck me as fishy from the minute I heard about Spotrunner I thought it sounded like a pump and dump scheme because of the way Grouf talked about the company.