Smart move by FIM today. I am not at all familiar with Strategic Data Corporation (SDC) but I was expecting FIM to make such a move once it became the top network as measured by impressions… note that Yahoo! bought 20% of Rightmedia… this is in the same vein:
SDC’s technology will enable FIM to deliver highly-targeted graphical performance-based advertising on literally billions of Web pages viewed each day across its growing network. Fox Interactive Media is among the most visited networks on the Internet with more than 135 million worldwide unique visitors each month and is the number one most viewed network in the U.S. with over 40 billion pages viewed each month.
40 billion page views. That’s a lot. Look at it this way, a company realistically makes 80% of their revenue from the top 20% of their inventory. Assume in this case than 50% of FIM’s impressions go wasted, that is 20 billion page views a month that yield low CPMs, or only attract CPA or CPC deals.
Peter Levinsohn - who replaced his cousin Ross - correctly stated that this was something they wanted to own and not lease. Looking at the numbers, you understand why.
For the sake of simplicity, say that by running an ad network, they get $0.25 CPM on those 20 billion imps, that is $5M per month. But if they own the partner, they probably double up the revenue to $10M. This also assumes that it’s a 50-50 share, it rarely is, the companies doing the selling (the network) gets 60% and more because the 50-50 share is net of hosting, serving and agency fees… and, more importantly, I would guesstimate that much more than 50% of FIM’s impressions are under-optimized.
All to say, this is a very smart deal. Whether or not SDC is the best fit remains to be seen but FIM is certainly well on its way to be a behemoth befitting the parent company’s offline strength during the 20th century.
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WatchMojo NewsletterFT is one of the most respected and serious newspapers out there, so calling them a ham is downright blasphemy, but I am trying to make a point. Yesterday I wrote a lengthy post on why Online TV / Video Studies are Misguided and Wrong even going as far as to say that respected, mainstream media will jump on such erroneous misguided reports without testing them against history’s lessons. In that post, I extensively compared the folly of saying that consumers will pay $0.10 per story or a $1 for an online edition of a magazine blah-blah-blah. Maybe it’s because the micropayment ecosystem never took off, but let’s be candid here: that was plain wrong. People don’t want to pay anything for content.
All to say, the next day, a respected FT writer (smart and sincere otherwise I am sure) picks up the report and runs with it. Some in the circle simply question it, others come out and like me say that such a report is plain wrong.
Frankly, I think it’s nuts that online ad video estimates mothballed from $500M by 2010 (set in 2004) to $3B by 2010 (set late in 2006), but the fact remains that we are seeing the future of online video advertising and online video content in a “blinds-are-closed” manner.
Here is what I think is the future of online video and content:
Believe it or not, the video ad will actually be found on plenty of places but alongside text content. Think about it, unlike blogs which are usually short, text content tends to include 500 words per page so readers scroll down. In other words, the 728×90 leaderboard at the top of a page and the 300×250 billboard ads are quickly passed by… over time, advertisers will realize that the most effective format above, along or underneath text content is a mute video (consumers will shun automatic-played-audio so that will join popups). This is what you already see on sites like Yahoo!
In other words, I agree with some that the pre-roll will die, but not for the reason they think. In other words, a video ad before a video clip will not prove successfull; a quick image before video will succeed, but ultimately, what will drive video content is higher CPMs for display/banner ads alongside your video screen.
Think about it folks: if I sit through a 1-3 minute online video, I am already accustomed to doing everything OTHER than watch a pre-roll in the instant before the main video content starts… but once the video starts, I am pretty watch watching tentatively one screen and am NOT scrolling down. So in this context, unlike how quickly display/banner ads disappear, a banner/display ad alongside a video box - ie. the “companion” ad - bears high value. In fact, some publishers will test refresh ads that change after 30 seconds, for example.
All to say, I run a digital media company called Mojo Supreme with a plethora of assets, one of which is a Web TV company (WatchMojo.com) who produces original video and I think long term I will generate more video ad revenue from the text-based properties and more display revenue from the video properties. This won’t happen overnight, but in 1, 3, or 5 years, I would sit through an episode of the Nanny myself if I am proven wrong…
Have you noticed how 2007 has changed the euphoric mood at video sharing websites? Sure, YouTube’s paid off big time with a $1.6B sale to Google, but as we suggested, it is going to get a lot rougher and tougher for the rest of the field to gain any traction.
Last week, Viacom and CBS told YouTube off, here is our rationale as to why Google/YouTube is not acting like a good corporate citizen.
Yesterday we found out that Veoh is not even large enough to merit the big studios’ attention.
Today we read that Revver is trying to find a niche and MSFT was considering buying it after it struggled to develop a sustainable business model, but passed. Maybe this reality has something to do with it:
When it came to convincing large entertainment companies to sign up, most of them flat out rejected Revver’s offer, according to a source close to the company. Studio executives told Revver that they weren’t interested in any plan that compensated amateurs on the same scale with professional filmmakers.
“The marketplace told Revver, ‘If you think we’re going to offer our premium content on the same basis with videos shot at a frat party, you’re out of your mind,’” said the source
Hollywood wanted different compensation levels for professionals and amateurs. It never happened and less than a year later, Revver’s plan to pursue partnerships with the studios has been mothballed, according to multiple sources.
Hmm… this graph is starting to make more and more sense now, isn’t it?
User generated accounts for the bulk of traffic online, but let’s face it, it’s not very realistic to monetize it, and until video goes from hype to substance, the TV producers won’t flock online (and when they do, they will muck it, anyway)… what does this all mean for the Revver/Guba/GoFish/Veoh/[insert anyone else here] crowd: it’s going to start sucking when you are paying a lot in hosting and bandwidth fees and all you have to show for it is a video of two girls kissing at a frat party… then again, that ain’t too bad, now is it?
Until now, we thought that YouTube - the big cahuna in the room - would be able to shelter itself as a result of both having the audience and the content, but Google/YouTube are taking an arrogant stance in talks with the media companies and I think over time YouTube will lose more battles than it will win…
Whether or not this means “opportunity” for Joost or someone else, I don’t know. I doubt Joost is going about it the perfect way… Ultimately, this space is wide open and it seems that when the scale tips, it has a lot to do with one’s mistake or lack of execution rather that another entity’s action.
Certainly is an interesting time and place in online video. Content is king… technology - and to some extent audience/distribution - is being commoditized. If you doubt me, read MSN’s Entertainment head honcho Rob Bennett’s quotes: “we have twelve times the audience YouTube has” (…) “we tried to see if we could integrate Revver’s technology into MSN’s Soapbox.” Trust me, that is not “wow, this is so unique that we absolutely need the IT,” it’s “ok, we could duplicate that in a couple of weeks…”
Content, try duplicating an archive of thousands of video clips. I hate to say it, but Sumner Redstone is right on this one, the consumer does not care about distribution, they care about content.
On a very related note, pardon my bias, but check out WatchMojo.com’s 4,000+ original video clips here.
