Online karaoke and contest site Bix has signed an agreement to be acquired by Yahoo! Bix CEO Mike Speiser will continue running Bix but will also take on responsibility for product management for Yahoo! Groups, 360, and Photos under the title VP of Community.

Speiser was previously the founder of Epinions. Epinions was acquired by Shopping.com (then DealTime.com) in 2003, which in turn was acquired by Ebay in 2005. Epinions had an estimated valuation of $30 million at the time of acquisition. The terms of the Bix acquisition weren’t disclosed but it was probably for much less than Epinions; Yahoo! was rumored to have paid $15 million for online video editing company Jumpcut last month. Bix probably got a little less than that but Yahoo! got a seasoned social media man to put in charge of a number of product management at the company’s most social products.

Bix is a 16 person company based in Palo Alto. The company was founded in January and went live in August. They report 1 million unique visitors since launch. They have raised $6.77 million from Sutter Hill Ventures, Trinity, and others. The terms of the acquisition aren’t being disclosed. Our previous coverage of Bix is here.

Bix has built a community of users by offering prizes of up to $50,000 in its contests. Contests are set up by the site, but others are created by users. Those contests include not just karaoke but everything from beauty contests to comedy, dance, a cappella singing and photo competitions. Those contests can be public or private. Each are wrapped in targeted advertising and there’s a strong mobile component. The site has some basic community features and an “easy upload to MySpace” tool.

Speiser says that Bix will maintain it’s current site under Yahoo ownership and the team will move to Sunnyvale. Speiser says that “in the coming months, we’ll offer more customization and atomize the contest tools so that you can run contests on your blog or Myspace page or corporate web site.”

Fox has it’s own karaoke site in kSolo and something tells me that every time anyone sings in the shower we’re contributing to the grand Google karaoke database.

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Online karaoke site Bix ended its beta with flair last night with the launch of a $50,000 “Second Chance” video and audio karaoke competition. The “Second Chance” refers to the many of us that did not win on American Idol — not a requirement for entry. This is exactly the kind of contest, with the kind of prize Bix needs to catapult itself into public awareness.

There appears to be no sponsor other than Bix so they won’t be testing it as a direct marketing channel yet, which is too bad. However, they are about to test the validity of two theories in the overall model (although it’s being tested with an enormous prize which could skew results):

1) Can they get entrants with talent?

2) Can they get viewers?

I expect the answer will be yes to both, but I’m quite curious what viewer participation will be like. The length of an American Idol broadcast serves as a natural filter for viewers. Without that, how will viewers interact with the site? If you are just coming to vote for your friend, will you bother to watch other entries? If you are coming to explore, how many entries will you get through before enough is enough? Will visitors be drawn to “most popular” filters thereby relegating some good, but undiscovered entries to the bottom of the list? I guess we’ll find out.

Since I last wrote about them, they’ve made improvements to the UI and added some community features, like a really simple upload to “My Space”. All of this increases the chances that this could really explode.

As I said in my previous post, as a marketer, I believe this is a marketing concept with real potential. Now, we’re about to have data instead of opinions. I’ll look forward to reporting on the results in a future post.

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American Idol proved not just that we love watching the highs and lows of wannabe superstars, but that a surprising number of us wanted to be up there. It’s these two factors that make Bix, a company enabling public and private contests online, think the service it’s about to launch is a winner.

When I first played around with the Beta site, I couldn’t stop thinking it was just another entry in the online karaoke space. With a healthy dose of skepticism, I then spoke with CEO Mike Speiser. By the end, because of their business model, my perspective had changed.

Bix is trying to address a real business problem: diminishing effectiveness of brand advertising. In the US alone, advertising accounted for $143B in 2005, with most of that dedicated to print and TV , which is why the old adage holds: “Half my advertising dollars are wasted – I just don’t know which half.”

Speiser believes that controlled sponsorship of a legally sanctioned online contest, be it karaoke, short films, photo essays… all of which the Bix engine supports, is a powerful brand advertising concept. As someone who has faced the very problem Bix is trying to address, I think he’s right. Online contests present not just a branding opportunity, but open a new direct channel for the marketer, allowing multiple opportunities to deliver coupons and offers.

But will people use it if they see it as nothing more than a marketing vehicle? If the corporate sponsors offer good enough prizes, they’ll find performers. And if the performers offer enough of the good and even more of the bad, people will watch.

The site is certainly easy enough for the mass consumer to use. I spared the world my singing, but I watched Speiser create a contest and karaoke video. Setting up a contest is quick, as is creating and uploading a video with a webcam. Also, viewing content, voting and sharing are all simple enough tasks.

Still, there is a lot of work ahead of them. The user interface needs an upgrade to attract serious corporate advertising dollars; Bix needs to optimize for mobile users (mobile was a huge factor in American Idol voting); and it will have to soon go international, before someone else does, to tap what’s likely an even better market.

And certainly, if successful, competition looms. Sites like Youtube and MySpace have already proven they can make stars. And Fox, with MySpace and Ksolo in the same portfolio, will find the market tantalizing if Bix takes off.

The site is still in invite-only Beta but will launch broadly in the coming weeks. It will be free to all comers for a few months as they roll it out, but the company believes advertisers will soon realize contest sponsorship is a service worth paying for. Then we’ll see if Speiser and his investors are right and the ROI keeps them coming back for more.

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