I like Veoh. Not because they’re a distribution partner of WatchMojo.com, but because Dmitri Shapiro is one crazy guy (in a good, Ozzy Osbourne kind of way).
Some time ago, Veoh snatched content from TV and funneled it to its online offering.
Then, it decided to preemptively sue Universal, who had threatened to sue Veoh. I wrote about it here.
Yesterday, Veoh leveraged NBC/News Corp.’s joint venture Hulu’s embed codes and funneled premium content from the joint venture. Bear in mind, this wasn’t even a novel idea, since it was inspired by OpenHulu.
Shapiro told NewTeeVee:
When asked about the move, Dmitry Shapiro, Veoh founder and chief innovation officer said, “Look, people want access to all kinds of content. We are striving to provide access.” Shapiro went on to say that Veoh is in official talks with all the major content providers, and that the site already has an official relationship for CBS TV content.
This seems like a strange move on the part of Veoh. It kind of cheapens the Veoh brand in that it comes off as though they couldn’t get a straight-up deal with Hulu, so they did a workaround instead. And it’s not even an original workaround; it’s already been done by the guys who run OpenHulu and TVParadise. Veoh has raised tons of cash and has a full staff — why lower themselves?
Hulu spokesperson Christina Lee has told us before that “Hulu encourages viral distribution of its service in accordance with its terms of use.” But I’m pretty sure Hulu wants the ads included in that viral distribution.
Initially the ads were disabled, Veoh blamed a bug, but then after back-channel talks, the ads suddenly appeared, to which Valleywag commented that while Veoh runs network advertising for low CPMs, Hulu’s high-yield pre-rolls ran amok, much to the delight of Messers Zucker, Murdoch, and Kilar.
Here’s what I think: Shapiro is a bad-ass, and he’s got $40M in funding to back up his bravado. I don’t want to take sides, because indeed Veoh is a distribution partner and we also work with these media companies, but since I won’t comment on what I think, I will comment on the bigger reason why I think Veoh did this:
Reason #1 (the PR Spin) is of course what Shapiro told NTV’s Chris Albrecht:
“Look, people want access to all kinds of content. We are striving to provide access.”
Reason #2 (the business development reason):
Sometimes a good salesman gives a little bit of taste before making their pitch. So it could be argued that indeed, Veoh wants Hulu to see how much traffic it can drive:
“Hulu encourages viral distribution of its service in accordance with its terms of use.”
Reason #3 (the mad scientist’s rationale):
Let’s face it, in America, litigation is a business strategy. Much like how sometimes business development deals spawn corporate development talks or vice-versa, I think that Veoh’s exit strategy entails acting as a shit-disturber to get the lawyers involved… because once that happens, sure, it becomes a shouting match or a competition for who wields the biggest cock. Sorry about that, it’s Friday evening. But, sometimes those discussions are resolved by some kind of sale. I could be very wrong, but there’s one more tidbit in the variables
CBS has an official distribution deal with Veoh. I personally think CBS might eventually make a deal to buy Veoh, but when you dig deeper, it makes little sense.
The Argument for CBS Buying Veoh:
Yes, CBS has bought Last.fm (music) and it has probably looked at Digg (and passed because social news - while it fits with CBS’ direction - is inherently tricky with a site like Digg, as I’ve covered aplenty).
In web video, it did not enter official partner status in Hulu and lacks distribution. Well, allow me to clarify: it lacks distribution that it owns. Rightfully and smartly, CBS has launched the CBS Distribution Network which has effectively made its distribution soar, but invariably, CBS might back out of that strategy and acquire one of the many YouTube challengers, be it Daily Motion, Metacafe, Revver, Break, or Veoh.
But, not all of those companies fit perfectly with CBS:
- Daily Motion hails from France.
- Metacafe from Israel.
- Veoh is American… and based in Los Angeles, where a lot of the power originates in CBS.
I am probably way off, crazy, and saying all of this might irritate some of my friends at CBS… but it is all making for a good storyline, and everyone knows I like to tell stories.
The Argument Against CBS Buying Veoh:
But are these enough reasons for CBS to buy Veoh?
Shapiro probably figured that CBS:
- until web video develops and becomes the behemoth it one day will, CBS does not really need distribution it owns
- won’t pay all that much (considering Veoh’s raised $40M) for a site with inherent legal issues,
- has already invested in Joost in its $45M round.
If CBS buys anyone, eventually, it would be Joost (sister company Viacom, too, has invested in Joost).
So what I think is happening, what is in fact pushing Shapiro and his backer Michael Eisner is to force News Corp./NBC to the negotiating table. I do not think that News Corp. will want to buy Veoh - it owns MySpace, after all. Neither do I think that NBC will want to buy Veoh, because in principle NBC’s Jeff Zucker is Old Media’s Defender against everything Veoh et al. represent…
So, Veoh figures it needs to get a dialog going with Hulu… because it recognizes that 2008 might very well be Hulu’s make or break year… Paid Content also adds to the Veoh-Hulu brouhaha here.
To clarify: yes, I know, Hulu bought a site like Veoh in terms of technology, called Mojiti, but Mojiti has no real distribution. Furthermore, Hulu is a stand-alone company, that happens to be owned by News Corp. and NBC, so it can allow itself to do things that its parent companies won’t do.
Veoh is probably - like its competitors vying for #3 after YouTube and MySpace - going to be raising more and more money. But before it gets over-funded (and thus unsellable) it is trying to see if any media company will bite.
Am I crazy for thinking all of this? Maybe, maybe not… but one thing is sure, Veoh’s Shapiro is far crazier than I am.
Assertive, Bold and Crazy! was the title of this post, and that of course spells ABC, which is owned by Walt Disney. Connecting the dots, we mentioned Michael Eisner, who up to recently was synonymous with Walt Disney. What about Disney? Will it be making a move for Veoh?
I don’t think so… Disney’s strategy is very different from the other media companies CBS, Viacom, News Corp., and NBC, who themselves are not all adopting similar strategies. We’re not even talking about Time Warner, because it is imploding AOL into an ad network. For a related post, called “Who is King of Digital Media” click here.
So, with the music stopping and starting and chairs starting to be tossed aside, this means that Hulu is a likely potential exit strategy for Veoh, and this technique is Veoh’s attempt to get Hulu to talk.
Disclaimer: WatchMojo.com is involved with all of these companies in one way or another but do not have insider information whatsoever. So take this all with a grain of salt! For a rundown of who is in bed with who in terms of media firms and video startups, click here.
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WatchMojo NewsletterIn 1999, I graduated with a degree in finance. I wanted to work in investment banking (analysis or m&a). No one would interview me, let alone give me a job. That’s partially how I ended up working online. At the same time, I’d submit story ideas to Fortune magazine, Business 2.0, Fast Company and no one would return my inquiries, let alone hire me.
Oddly enough, I am about to close a sizable M&A deal representing the selling party. I’ve also done more than enough analysis that has gotten good media coverage. I’ve also been published in numerous spots, including AOL, MSN and Yahoo! - the world’s three leading portals. This isn’t about self-promotion (I swear), it’s to outline what’s happened in media over the past 10 years:
Because at the macro level their businesses were shrinking, old media types were too busy protecting their necks and defending their turfs to give young punks like me a chance.
As such, a lot of people like me migrated to the Web. We did not have a choice and became passionate and impressed with what the Web offered: boudaryless opportunity.
However, we knew there was no money online. Sure, we read and heard about mega-million dollar payouts, and sure, there were billion dollar exits. But very few people then or now ventured online for money.
Over the past 10 years, the noises emanating from new media have become louder. As old media has taken an even bigger hacking, old media professionals are migrating online at a faster clip.
The first wave included people like George Shaheen, Lou Dobbs… who once the bubble burst went back to their old ways with wounded hearts.
The second wave are coming now, less out of greed but driven by fear of what remaining in their old segments would do. While some are reluctant, a lot are not.
But the ones who are successful realize that the name of the game remains patience. Yes, seemingly overnight successes remain a part of the lore. But more than ever, they need to understand that building successful franchises and businesses online does not happen overnight.
As such, it’s almost ironic that someone like me, aged 29, is telling that to forty- and fifty-somethings looking to move online to be patient.
The same microcosm applies to the writers’ strike. I get why the writers are striking - in a few years online revenues will grow considerably - but the fact remains: those who seek to bypass traditional media and strike out online need to realize the money isn’t there now and they won’t get the kind of distribution and attention they get offline.
If they can handle that reality, then welcome to the Web. If you can’t handle that, then don’t bother trying.
Business Week - a magazine I used to read, still love, but don’t have time to subscribe to anymore (and quoted in twice!) - just picked its Business Person of the Year.
No, it’s not Steve Jobs. Not Sergey Brin or Larry Page. It’s not Rupert Murdoch or even Bill Gates. It’s certainly not Mark Zuckerberg… or the dudes that invented Twitter.
The winner, this year, was “boring old Hewlett Packard’s” Mark Hurd. I won’t lie, I love being involved in startups but sometimes it’s worth noting that simplicity and focus will usually beat out far-fetched concepts that are not really businesses and grab the spotlight for a day but then fizzle away.
If you are building a company these days, get step out of the echo chamber (and consider spending more time reading Memeorandum.com than TechMeme.com) and get a sense of what’s happening in the real world to climb to the top.
For the fiscal year ended Oct. 31, sales rose 13.7% to $104.3 billion, and earnings jumped 17% to $7.3 billion. Those numbers have translated into sharp gains for investors too: For calendar-year 2007, the Palo Alto (Calif.) company’s shares rose 23% to $51.36, compared with a 13% gain for IBM and a 2% decline for Dell. “Businesses at HP that were problematic have been cleaned up,” says Roger Kay, president of market researcher Endpoint Technologies Associates. “It shows the whole company is doing well.”
No wonder BusinessWeek editors and readers have selected Hurd 2007 Businessperson of the Year. The low-key executive, who has quietly cleaned up a mighty mess at the venerable Silicon Valley bellwether, beat out some big names on our list of top managers, including tech neighbor Steve Jobs and media mogul Rupert Murdoch. While legitimate arguments can be made for many of the names on our list (BusinessWeek.com, 1/2/08), Hurd stands out for his remarkable skill navigating the intensely competitive and complex computer business. During his three-year tenure, HP has become a rare example of a tech company succeeding in the delicate balancing act of selling to both consumers and corporations.
Hurd, 50, is a classic example of a no-nonsense operator hammering away at a struggling business to get it moving in the right direction again. The marching orders: squeeze out costs and improve efficiency. When Vyomesh Joshi, who leads HP’s printer business, told his boss he was moving the entire team that works on black-and-white laser printers from Boise to China, where most of that product’s sales potential lies, he got Hurd’s enthusiastic approval, recalls Joshi.
Taking a page from Jack Welch’s book, HP has become more disciplined and pulled out of businesses where the company isn’t the No. 1 or No. 2 player, such as digital cameras. “The really big thing for us is to have built a long-term plan and long-term strategy for the company, and we stayed on track with that,” says Hurd.
Indeed, a lot went right for Hurd and HP in 2007. With a 19.6% worldwide share of the PC market, HP stayed firmly at the top of the heap, according to researcher IDC. (Dell, which lost the lead position to HP in 2006, currently has a second-ranked share of 15.2%.) How has HP managed to turn around a business that was hemorrhaging just a few years ago? It embraced a strategy known inside the company as “decommoditization,” or, in plain language, casting PCs as more than mere boxes looking just like the next guy’s. HP redesigned its machines, infusing them with a slew of features, such as one that lets customers play a DVD or listen to music without booting up the entire machine.
Read more.
Every time I think I am being bullish on Web and online video growth rates, something comes along that makes me realize I am actually being conservative. Case in point:
THE U.K. NEXT YEAR WILL become the first major economy in which the Internet overtakes television as the No. 1 advertising medium, according to a new forecast from WPP’s GroupM unit. The new prediction follows a report released last month by GroupM, the world’s largest buyer of media, which estimated that the Internet would become the dominant ad medium in Sweden during 2008, and that the U.K and Denmark were “likely to be the next in line.” GroupM now forecasts that the U.K. will likely pass that mark by the end of 2008 when the Internet will account for 24.8% of British ad spending, just behind a projected 26.0% hare for television.
The forecast assumes Internet ad spending in the U.K. will grow 30.8% during 2008 to $6.7 billion vs. a 1.0% rate of growth for television, which will climb to about $7.0 billion. The GroupM analysis assumes online ad spending would need to climb 6% or more during 2009 to overtake the market’s television advertising volume.
Last month, GroupM issued a report predicting that the Internet would reach a double-digit share of worldwide ad spending for the first time in 2008. The report estimated that search would comprise between 65% and 70% of measured online ad spending in 2008, up from 50% in 2005.
This is pretty impressive and actually in line with two analysis I did:
When will Web Advertising Surpass TV
When will Online Video Advertising Surpass Search Advertising
I could be wrong, but I think TV advertising is going to get crushed sooner and faster than print advertising did because what is digital has a higher beta. In other words, the multiplier effect is stronger… Bear in mind that my growth rate for search is lower than what many studies predict, many have search growing to $40B by the time I have video growing to cross $30B… but the point is: online is where the action is.
One reason why online will be far bigger than we imagine is that the digital media bug has caught on with traditional media, so pretty soon, calling anything old or new media, traditional or digital will be pretty non-descriptive. In fact, as traditional media continues to buy more and more assets online and leverage these with their networks of people, sales channels, etc., expect more and more money to be funneled online.
Indeed, some of the offline units will shrink, but media companies have a simple choice: accept this inevitable outcome and thrive over time, or fight it and die.
The Web is a bastion of efficiency and all it does to the media world is remove a lot of waste and excessive layers.
Spark Networks is looking for a hookup. Spark Networks runs many online personals, back in the day, it differentiated itself with offering publishers a private label service.
When I was a sales executive for a men’s online magazine, I had the pleasure of closing a lot of advertising deals with the online personals sites: Match.com, Date.com, Friendfinder.com, AmericanSingles.com, Love.com, etc. All of them. In fact, they were some of our biggest clients. Spark would repeatedly pitch us to have a private label version.
Indeed, some of these sites were doing a killing. To publishers, they represented a welcome revenue stream: at a time when no one was advertising (2001-03), the online personals sites were; either through:
- affiliate marketing programs that paid out a CPA (cost per action, in this case a signup) or
- online advertising deals.
Their business model was lucrative in that people paid them monthly fees AND they gathered a lot of data on end-users.
In fact, oftentimes clients would forget to cancel their memberships even if they found a match, so the recurring fees would repeat many times. Ultimately, the average client would remain for 2 to 3 months, providing lucrative and recurring revenue. Over time, the user data would also prove valuable.
But, I personally think most of these sites lost out on the bigger opportunity, that being said in hindsight of course. The industry makes for a great case study in just how much times change and offer a lessons for today’s high-profile social networking sites.
1 - Once the online advertising market turned around, a lot of these online personals found that obtaining high-quality, low-cost advertising real estate to promote their sites and acquire users proved hard. While previously these marketers were welcome by publishers, by 2004 a lot of demand from global advertisers and agencies created inflation in advertising rates and online personal services - always fickle and very ROI-oriented - could not compete for prime real estate.
2 - Fake profiles. All online personals sites knew that they had some fake profiles. I’m not exactly publishing news by saying that. Very few did anything about it… and ultimately, a lot of users were turned off because of these fake profiles.
3 - Social networking sites such as MySpace, Facebook and what not ended up becoming competitors and eating into the online dating sites’ raison d’etre.
4 - Free dating sites have garnered market share, much the same way that classifieds have taken a hit from Craigslist.org.
5 - Craigslist.org itself launched Missed Connections and Dating categories which further eroded online personals share of the pie.
6 - But the biggest missed opportunity was by these same sites, because many had adopted and fine-tuned a strategy based on subscriptions, none of them really managed to generate sizable advertising revenue despite having a lot of data on users. This was very foolish.
7 - Over time, the emails many of these online personals sites became dated and lost value. After all, say I use an online personal in 2000, I would have used my old email account. I was also single and 22 then. Today I am not really using my old email addresses and I am married and 29… the point is, not all user data is created equally… which takes us to the next point:
8 - Today investors and media are drooling over user data on MySpace and Facebook, but I doubt how valid and accurate most of that data is, and what shelf-life most of that data has anyway. This is a lesson for investors and management at such companies who mortgage their company on user data.
9 - Advertising is the more lucrative business. Spark Networks boasts a market cap of $130M on shrinking revenues of $15M. It’s nothing to sneeze at, but it’s not where it would be if it was an ad-supported model… because a) revenues would not be shrinking and b) the multiples would be higher.
10 - Most importantly, you should sell when you are hot. Online personals would have fetched far higher multiples a few years ago, but today many are seen as passe for the reasons outlined above.
