Look at the table below. You see that entire subset of “streamself” startups?
I must have been asleep because there aren’t only half a dozen ways to stream yourself to the Web, there are 35!
Today Youtube confirmed that it, too, would be diving into the genre. Conventional wisdom is that one of YouTube’s many competitors (MySpace TV, Veoh, Daily Motion, Metacafe) will want to get into the space so they’ll pony up the cash to buy one of the “really original 35″ ways to stream yourself to the Web.
Trust me: the last thing any one of YouTube’s competitors want is more unsellable, low quality video.
While the leaders of both Justin.tv and Ustream.tv put a positive spin on this, the fact is that the exhibitionists that turn to “selfstreaming” live will favor YouTube because YouTube commands 60% market share in online video and by extension has the audiences that such users look for.
The fact that some of these “35 original and unique” companies focus singularly on live streaming means nothing to users, it means something to PR teams and IR spinsters… but users won’t care if there is 8 people watching them.
I wish them well, but we’re seeing the same dynamics in live streaming as we saw / are seeing in video file sharing social networks: way too similar companies vying for aggregation and distribution supremacy with too little quality content.
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WatchMojo NewsletterIAC’s Ask.com already uses Google’s text ads, but hitherto, it’s still used its own search algorithm, which it acquired when it bought Teoma. Teoma and Wisenut were once considered to be potential Google killers, Ask Jeeves bought Teoma; Looksmart bought WiseNut.
Anyway, Ask.com already uses Google’s text ads and when Google filed to go public, it was disclosed that Google was giving Ask a 110% revenue share. That’s right, Google was essentially paying off Ask.com for market share. However, IAC always maintained that one day, it might launch its own ad platform, too. This always seemed to be a hollow threat, because Google has created the world’s most effective and valuable advertising marketplace… it did not make sense for Ask.com to do that, frankly.
Today SAI is reporting that blanketed between potential layoffs is the possibility that IAC simply drops using Teoma to power Ask.com’s search engine and instead fully turns to Google for both algorithm and paid search.
The implications are actually both trivial and important. They are trivial in that Google is getting access to Ask.com’s less-than-5% market share as is via the paid ads relationship; but in the backdrop of MSFT arguing that the market needs a strong No. 2 to fend off a Google monopoly in search, Google might also want to avoid this. Google already powers AOL. So if Ask.com is also powered by Google, in fact, Google “owns” the real estate on 3 of the Top 5 search engines (Google, AOL and Ask.com). In that context, I hate to say it, but it would make sense for YHOO and MSFT to hook up, because otherwise YHOO and MSFT will be fightning for the #2 slot instead of taking on Google for the #1 rank.
This morning I read a quote from Tiger Woods, to paraphrase, it basically said “don’t show up to play if you don’t think you can win”.
I love that quote.
Well, I personally show up even if I think I might not win, but at the risk of sounding over-confident, it’s pretty rare that I think I can’t win. Maybe that’s why I rub some people the wrong way. Of course, those aren’t the kind of people I care to associate with…
Not everyone can be liked, of course. To quote a very successful college football coach (Steve Spurrier): “when people like you, it’s because they can beat you.” So true.
Some people don’t like Tiger Woods, either. Not only he’s that good, but his skills are second to his desire to win, judging by that quote. That’s a pretty killer combination if you ask me. Tiger Woods is so polished, however, that he commands respect everywhere he goes.
Others might be less skilled but their drive to win is so strong that it rubs some people the wrong way. I don’t pretend to be the most skilled at anything, but I’ll find a way to win without cheating or whining, like many losers do. Those who might not be the most skilled people but have an extremely strong desire to win and a track record for winning get respected reluctantly. I think I fall in that category. I love it.
NBC CEO Jeff Zucker is in that category, too. I don’t doubt that he is very smart and possesses great leadership skills and considerable drive (when he was battling colon cancer, the man scheduled chemotherapy on Fridays so he could be back to work on Monday!).
But I think his drive, feistiness and aggressiveness so far outweigh everything else that he must rub many people the wrong way (and that says more about others, frankly). Considering that Zucker was the youngest executive producer at GE-owned NBC, you better believe that he has his share of jealous and envious onlookers.
Some killer quotes from a recent Zucker speech:
The future of NBC News is not on the broadcast network, but at MSNBC and online, said Jeff Zucker, president of CEO of NBC Universal.
“The definition of NBC News is really changing,” he added, “and it’s becoming more MSNBC and MSNBC.com.”
He also took print journalists to task for “disproportionately” harping on downsizing at NBC News in the face of declining viewership for broadcast news in general.
“When we try to evolve NBC News, a lot of people want to write about that,” he said, suggesting that newspaper reporters’ seeming obsession with the declining fortunes of the TV-news business was a bit of schadenfreude.
“The thing they want is for the [TV-news] business to die faster [than the newspaper business], because that’s what makes them feel better,” he added.
“Obviously, Dow Jones is a fantastic company,” he said. “Whether it’s worth the price News Corp. paid for it, time will tell. It’s easier to pay that price when the only shareholder you care about is the one you see in the mirror every day,” he quipped, referring to News Corp. chief Rupert Murdoch.
Zucker started his climb up the NBC corporate ladder at the news department as the network’s youngest-ever (he was 26) executive producer of Today.“You can’t be on 24 hours a day and not make some mistakes, some misstatements,” he added.
Say what you want about him, the man knows how to give good sound bites and his desire to win is certainly admirable. If you connect the dots between the first and last thing he said, you have to realize that times have changed. The world is global, connected and “on” for 24 hours. You have to be, too. It doesn’t mean you have to slave away for 24 hours… it just means that you have to be ready 24/7 (at least figuratively). Invariably, you might make mistakes, but so long as your overall strategy and execution are correct, you’ll come away a winner… and that will piss off enough people to make you laugh all the way throughout the exercise.
Newspaper company McClatchy writes down $1.39B. Magazine company Hearst reloads its digital strategy. You’d almost think that by 2008 (14 years after Netscape’s Navigator browser launched and made consumption of content easy), print companies would be better positioned online, right?
Wrong. In many ways, media companies - be it print, radio or TV-based - seem to be more uncertain about their next steps today than they were in 1998.
Web 1.0: How Print Media Blew It
The Web represented an enormous opportunity - and threat - for print media organizations in the 1990s and they blew it.
They played into their weakness and let the threat overcome their strengths; in non B-School lingo: they did not unleash their premium archived text content online, they either put it behind subscription walls or kept it offline altogether. In all fairness, no one could really predict that consumers would tuck away their wallets and the free, ad-supported ad model would prevail… but prevail it did.
As a result, online magazines and blogs won market share. In parallel, search engines leveraged what content was out there and attracted the lion’s share of online advertising as paid search captured 40% of the online ad pie
Over time, print media organizations realized that unless they embraced the Web, they would go out of business: the marketing dollars were indeed pursuing consumers online. Today online ads capture 7-9% of ad dollars but consumers spend 15-25% of their time online. This is the single greatest inefficiency - thus opportunity - in recent history.
With the dot com bust all of the upside disappeared, what little motivation print firms had to tackle the Web went down the drain. A few companies maintained the investment and charged ahead. The outcome was inevitable: Ziff Davis failed to buy IGN, for example, and Ziff Davis bleeded money and value; IGN, however, went on to be acquired for a cool $650M to News Corp. (disclosure: News Corp. bought IGN, who bought my old company in 2005).
The lesson, again in hindsight, was that the print media companies should have capitalized on the weakness from 2001-03 to invest online. Few of them did. I was a VP of a men’s lifestyle online magazine and we beat out Esquire, Men’s Health, GQ, Playboy and Maxim because they ceased to invest online as of 2001 whereas we continued to publish content and build an audience.
Web 2.0: All About Video
Today, online advertising is steamrolling faster than ever: over $20-25B was spent in the US alone in 2007, global ad sales accounted for $45B, with an $80B global market expected by 2010. While paid search prevailed up to 2007, the next wave of growth remain display advertising and video. When it comes to the former, print companies’ online properties are a natural fit to capture a lot of revenue; but what about the latter: what about video?
Video advertising is definitely the single highest growth opportunity online. I am biased as the founder and CEO of WatchMojo.com, one of the largest producers of original video content. But that bias is not unfounded: 2008 marks the first year that online video ads will cross $1B in the US, and this amount will grow to $7.1B in 2012. What would global video sales be at that time: $15-25B, I forecast, if not more.
I’ve always been conservative: while I said that online ads would surpass TV ads by 2021, Yahoo!’s CEO Jerry Yang turned to be more bullish, arguing that this tipping point would happen in the next five years. Mind you, he’s trying to fend off MSFT and convince shareholders not to accept Redmond’s offer (disclosure: I own shares in YHOO and predict a sale of YHOO to MSFT for $50B).
But five years! Maybe Yang is right. Regardless, online video represents the single biggest opportunity for print media firms. The problem: video is not in their DNA.
I was shocked to find out, however, that many print firms have in fact been investing in online video. NY Times, for example, has been publishing video content. Who knew? I didn’t.
Yet they do. According to Senior VP of Digital Operations Martin Nisenholtz:
Times journalists all create more than 100 pieces a month. We stream five million a month.
“We decided that our mission was to extend the Times journalism, and that mission would depend on Times video. We decided to extend that mission into video.”
Mind you, we do more streams per month, and we produce more than 100 clips per month… and we’re no Times. But we’re a company that focuses on web video content, so it’s like comparing apples with oranges.
I also expect Dow Jones’ WSJ to offer more videos over time (and no, we’re not limiting this to Kara Swisher’s videos on Boomtown!) now that they are part of News Corp., the most diverse media company in the world, who is launching FOX Business News (hold on, someone is handing me a note: oh, FOX Business Network has launched, we regret the error).
How Print Media and TV Media View Online Video
Unlike TV-based media companies (which incidentally, I certainly count News Corp. a member of) such as CBS, NBC, ABC (owned by Walt Disney), print media views online video as incremental.
TV-based media companies view online video as cannibalistic. Yes, all of the players in this category will tackle the space head-on because they have learned from print media’s 1990’s era mistake (which we outlined above), but the problem is: the print media companies who dived deepest in the Web mantra suffered most: the Chronicle laid off 25% of its staff last year even though it “got the Web”.
TV media companies, on their end, will probably look at online video content producers like AOL viewed Weblogs Inc., Jason Calacanis’ professional blog network, which they bought for $25M in October 2005. When that deal happened in 2005, a lot of people wondered: why would AOL buy a “bunch of blogs”?
I recently spoke with a high-ranking executive involved in the acquisition and the rationale is actually quite logical:
- Time Warner’s model of producing text content was outdated and expensive.
- Weblogs Inc., meanwhile, had mastered the art of producing high-quality, low-cost content.
By acquiring Weblogs Inc., AOL got a lot of content, a slew of writers, online audience, but most importantly, a process to produce content for the Web at low cost.
The process alone is key. CBS’s Quincy Smith always talks about startup DNA. Startup and entrepreneurial DNA is what all media giants lack. Few however admit it. Fewer yet do anything about it.
But the last part to AOL’s rationale for buying Weblogs Inc., - and the last three words (”at low cost”) in particular - are very important because the Web shrinks the media, publishing, marketing and advertising business. The Web is all about efficiency and eliminating waste, something that traditional media was synonymous with; just ask NBC’s CEO Jeff Zucker who practically welcomed the writers’ strike as a means to weed off such waste. If you doubt that, ask yourself why NBC’s Peacock investment fund just added $750M to its capital base from $250M to $1B. That’s where the growth - and savings - are.
Buy vs. Build
Ultimately, I think that 2005-2007 marked a period where many media companies - be it print or TV-based - adopted a “build” strategy, be it with regards to content creation, aggregation or distribution. I won’t single any one company in this post because we work with most of them and I do not want to judge their deeds (I do that more than frequently, what I mean is that’s not the point of this post).
Expect 2008 to mark the transition to a “buy” mode with online video. Why? I should probably shut my trap here… but I feel quite comfortable sitting on my perch to be direct and candid about the following.
When you read, for example, that
- despite $7B in revenues per year, Hearst “has about 2,400 videos live on its sites and are on pace to produce another 150 programs across its network. The programs will range from how-to, to episodic shows to user-generated reporting, man-on-the-street”;
- NYT’s About.com has 1,500 videos on its site despite being acquired for $410M by NYT in 2003;
- NYT produces 100 videos per month and has a market cap of $3B.
Then you realize that a pure video content creation company like ours has more content than Hearst and About.com combined and produces more content per month than the NYT does and does so across a larger base of categories then you start to wonder: how much more and how much longer will these companies invest to build?
You want candid and direct? Keep reading.
It’s all about Startup DNA
Big media companies remain just that: big media companies. Such firms have experienced and talented people who are certainly knowledgeable and smart, but they also operate in big companies where everyone is spending a portion of their day justifying their raison d’etre.
After News Corp. bought IGN and IGN bought my company, I knew that I did not want to stick around and justify my worth. So I built WatchMojo.com. I could have built WatchMojo.com with less strain, stress and risk within a company, but no way on earth would it be as big as it is today had I done that.
Why? Because all factors being equal, startups work more efficiently than big companies, and the Web makes that fact even more glaring. When media companies seek to build from within, inadvertently they compete with startups and only showcase just how inefficient they are.
In the initial few months, quarters, even years, big media employees facing the build vs. buy debate cast their votes squarely on “we can do this ourselves, why buy” (I’d do the same thing, frankly… maybe).
But over time, as big media companies pile on the cash on their balance sheets but they see their income statements shrinking at the expense of the Web… you can’t help but think that sooner or later, the internal preference to build will tip in favor of buy, buy, buy. At least if you ask senior management who has to answer to shareholders.
Content is King
Connecting all of the dots, it’s thus very funny to me - a former ad exec. and storyteller - that online aggregation and distribution plays like Joost, Hulu, Tidal TV, Veoh et al. keep raising more money at ever higher valuations while content creator companies remain somewhat off the radar.
Think about it: today Silicon Alley Insider and Valleywag commented on Veoh’s attempt - via Bear Stearns - to add to their existing $40M financing and add $40M more! I want Veoh to succeed: I love their crazy CEO and they are one of our hundreds of distribution points, but at some point, how much leverage do such companies have in exits for their investors?
Revver sold for less than $5M despite raising $13M in funding. Not sure about the math there but that’s not a sound exit strategy. When the dust settles, Veoh and their competitors will ultimately be vying to be # 3 after YouTube and News Corp.’s MySpace (more disclosures: all of these companies are part of our sprawling syndication network).
We in the online video space - be it content producers, aggregators or distributors - all want the same thing ultimately: more dollars flowing to online video advertising… but what will make that happen is better video content and more video content.
Content is king.
Yes, it’s a cliche. But cliches are cliches for a reason.
When stock prices nudget upwards, there’s always a greater fool willing to come along and pay for more a security. At least, that’s the theory.
But when stock prices are in a free-fall, sometimes fear becomes rampant and no buyers are to be found. This is why stock market crashes take place.
That being said, I think all factors being equal, greed is a greater force than fear.
How come?
This morning I came across a post calling for a $250B mobile ad market. Mobile execs have no clarity into the market. It’s anyone’s guess what the wireless entertainment and mobile advertising markets will look like… but when investors see projections like that, it makes them willing to lose $560M in a venture like Helio.
Madness.
Tech Crunch has a fantastic glimpse into the demise of Stage 6, DivX’s YouTube clone. When DivX launched Stage 6, it was essentially done as a result of both YouTube envy and a desire to showcase its alternative to flash, basically.
While Stage 6 - or any other competitor - had no chance of making a dent in the space, it did manage to create something of value. What that value was remained uncertain. This week, DivX shut down Stage 6. The initial culprit was rising hosting costs and no leverage in sale talks due to way too many me-too players in the space. We’ve seen manifestations of both in the market:
- YouTube was racking up hosting fees of well over $2M per month when it sold to Google.
- Revver sold for less than $5M, or 1/3 of the $13M it raised in financing.
Anyway, turns out, the culprit was neither costs nor leverage, but rather ego. According to Michael Arrington, the board members and their egos killed the company.
Earlier this week, VC Fred Wilson outlined some things to look for when you assemble a board. He mentions that the advice is better suited for large publicly traded companies’ boards… but the point remains: choosing a board is critical for all companies, large and small.
This past month, we’ve seen Yahoo!’s board come under fire with their mishandling of Microsoft’s takeover bid. That will end up in lawsuits, trust me (disclaimer: Long YHOO). In fact, the company now faces seven - count ‘em seven - lawsuits.
What Does a Board of Directors Do?
The Board of Directors’ main function is to represent shareholders. They have a fiduciary duty to represent the best interests of stockholders. Directors may be insiders or outsiders. It is generally recommended to have independent board members that the company management cannot manipulate and control.
While Wilson’s advice is for publicly traded firms, I thought of offering a few tips for entrepreneurs and startups as they seek to put together a Board or recruit advisors.
What Are the Differences Between a CEO, President and COO?
First, some basic definitions, all taken from my first book Course To Success: Everything You Need to Succeed Beyond School:
The Chairman of the Board is the main liaison between management and shareholders. Depending on ownership, power and the individuals, the CEO can at times also serve as the Chairman of the Board. In publicly traded firms, it is the Board of Directors that is ultimately responsible to shareholders, the community and all other stakeholders.
The CEO, conversely, is:
A company’s Chief Executive Officer plans, organizes, directs, controls and coordinates the operations, finances, infrastructure and administration of an entire organization as well as the interaction of its major departments, initiatives and programs. The CEO interacts with other senior executives to make sure that the firm’s actions reinforce their quest to meet their goals. Depending on the size of the firm, the duties of the CEO range from managing day-to-day operations to overseeing the general interaction of a firm’s various departments. The CEO is ultimately held accountable for the firm’s financials, actions and results. The CEO reports to the Board of Directors.
In large firms, the CEO may handle the strategic planning and corporate development of the firm but he will or may recruit a lieutenant to execute the business plan of the firm.
The main difference between a President and CEO, if any, is that the President is responsible for the execution of the strategy… sort of like a Chief Operating Officer. If there is any difference between the President and COO, it’s that the title of President is sometimes used interchangeably with that of the CEO… so in a small company, if you have a President and a CEO it might cause confusion to staff. You need to be very clear as to who does what, in essence.
If you are a CEO and will also have a President, you better trust that person with your life, because otherwise it becomes a potential trouble spot.
The Chairman: A Modern-Day Frank Sinatra?
When it comes to having a Chairman, it’s trickier. At our company, being a privately held, self-funded startup, we do not really have a Board of Directors yet, so this is all moot. You can load up a company with advisors, many in Silicon Valley do, but when it comes to directors, you should be careful. We currently have a handful of advisors, formal or informal but no directors.
If and when we raise money, that will change, as we will probably assemble a Board and appoint directors.
There’s no rule of thumb, but everyone will agree that small boards are easier to manage than large ones. There are countless of blog entries and advice on this and they all echo this. However, most of these suggestions and tips come from investors so be careful about running with that advice.
While the Chairman might seem like a symbolic figurehead, truth is the Chairman of the Board of Directors is more than just a title…the position has tremendous power over you the CEO and the company, because the CEO (or President) reports to the Board of Directors and the Chairman is the ringleader of the BOD.
However, the shareholders can always vote out the BOD if they have enough votes (hence why MSFT is trying to switch YHOO’s boardmembers).
My recommendation to anyone who starts a business is ask yourself if you get business. If you do, then you should remain Chairman of the Company. Obviously having a strong Chairman might make investors more comfortable with investing, oftentimes the investor might want to appoint a Chairman, especially if they hold a meaningful stake in the company (this need not be a majority stake).
However, appointing a Chairman is a big deal, it takes time and trust. It’s a two-way street: just because someone is interested in being your Chairman does not mean you should accept their offer, after all, if I walked into your house and offered to baby-sit your children, I fully expect you to bide your time before accepting my offer, even if I have the best of intentions. In all honesty, I had an amazingly experienced and successful gentleman offer to be my Board member, I really wanted him on board (literally and figuratively), but having been backstabbed and betrayed by some in the past, I awas wary at the time.
What is important is to recruit advisers, directors and eventually a Chairman is to find people who will make time for your company. The last thing you want is someone who “dials it in” and does not really have the time or desire to help you build your company.
Ultimately, as an entrepreneur, you should know your limitations and leverage your strengths. If you understand business and recognize that the role of a Chairman is, then stick to your guns and understand that it is always easy to give things up than ask for things back. That applies to ownership matters as well as the structure of the board. Of course, if you don’t understand basic things like the difference between debt or equity or how to read an income statement, then obviously, despite your best intentions, step aside and make room for someone who does.
If you want to build a world class empire, you can’t treat it like a bush league operation.
You try not to read too much into this, but NYT is being pursued by activist shareholders, then its subsidiary About.com sees its CEO Scott Meyer resign… the company line is that this was amicable and planned.
Maybe. But then why is NYT Digital dean Martin Nisenholtz taking over?
I don’t know… but maybe I should go ahead and buy About.com and reposition it for the upcoming video revolution (Oh, wait. It’s already started)?
Does anyone have $500M or so to front me? I’ll pay it back…
While many people seem to suggest that the slowing economy will affect funding, it is certainly surprising to see players enter competitive and uncertain spaces with new, large funding rounds.
Examples:
- TidalTV raised $15M, it’s essentially a similar business to Joost and Hulu. Joost has raised $45; Hulu has raised $100M. Disclosure: WatchMojo.com provides content to both Joost and Hulu, along with 100s of other large destinations.
- Panther Express raises $16M. Last time I checked, CDNs were being commoditized. Limelight Networks debuted at $20/share in its much ballyhooed IPO, but it’s now at $7… “up” from its 52-week low because every day a new rumor pops up about a potential acquisition (last week MSFT, this week Level 3).
Anyway, more power to these companies and their backers. Online video streams surpassed search queries, so at the macro level, the market is steamrolling… but does that mean that we need more competitors at the micro level?
Time will tell.
Google is now sitting at well below $500. Is this important? Yes.
Infospace was once worth $20B when its founder Naveen Jain said he was running the world’s first trillion dollar company. Today, INSP is worth $340M. I used to own the stock, got rid of it after Google went public and all would-be search stock holders sold Infospace, Ask Jeeves and Yahoo! for Google.
This tremendous demand for Google’s stock, combined with Google’s revenues growth made the stock rise tremendously from its 2004 IPO.
The stock’s ascent has been nothing but breathtaking:
This helped Google hire more and more talent, with less salary and more options. Problem is the company’s headcount has ballooned when its stock was sky-high, as a result, a lot of options that were doled out might be under-water or tethering on the brink of it.
In fact, if you were hired after 2006, there is a chance that your options in the company are below water. If those shares are vested, then you are owning options at a loss. If you sold the shares, good for you, but will you remain or look for the next hot startup with 1,000%-style returns ahead of it?
It’s important to note that Google’s long term prospects remain robust, but while many focus on the impact of the US recession, it’s important to note that Google’s international revenues stand at 48% and could very easily rose above 50% in 2008… In fact, with a weak USD, adjusting previous years’ performance, Google has gotten most of its revenues abroad.
The main specter overshadowing Google stock is not the US recession, but the fact that display and video advertising are growing faster than search ads and Google has yet to really demonstrate any ability to generate meaningful revenues from that market, let alone own it.
Over the next few weeks and months, maybe quarters even, Google’s stock will have a psychological test to overcome: investors will be intrigued to buy the stock, but they will wonder if the stock is in a deflationary period where it will be cheaper tomorrow than it is today. Even with some $15B cash on hand and an enterprise value of some $125B… Google is 3-5x more expensive than Yahoo! - the best positioned company to win in the next display/video-based growth period.
