If only hindsight was a currency, John Battelle would be rich:
YouTube was the single fastest growing new form of search on the Web, and Google pretty much outflanked (and outspent) everyone to buy it. Not to get into video monetization, per se, but to harvest and control the most important emerging form of search. In short, Google could not afford to NOT own YouTube.
So, fast forward to today. What’s the most important and quickly growing form of search on the web today? Real time, conversational search. And who’s the YouTube of real time search? Yep. Twitter. It’s an asset Google cannot afford to not own.
But the reality is different, far different. It’s a shame I have an NDA with YouTube and can’t get into the nitty gritty details, but trust me, YouTube was not bought because it was a search destination, it was to foray into online video and video advertising. The fact that it has since turned into a major search destination has a lot to do with Google’s DNA infiltrating YouTube and oh, maybe I’d venture to say that YouTube has totally cornered the video content space… but I digress.
I still think that Twitter isn’t so much YouTube (as in, the latest in search, which means Google must own it) but rather Facebook, or should I say, it’s 2009’s version of Facebook: is it just me or was it just last year that the hippie love crowd was gawking all over Mark Zuckerberg’s site. Expect an article in Fortune magazine sometime in 2010, I guess, talking about how Twitter rules our lives.
Don’t get me wrong: Biz Stone and Evan Williams project has certainly added an interesting twist in the ever-changing story involving news, citizen journalism, and yes, real time search, but last year at around this time, a lot of otherwise smart people thought that Facebook was about to torch the world, and now - from a purely business model perspective (hmm: as in revenues less costs) - all you see is a trail of smoke.
But where 2009 differs from 2008 (or in the YouTube sale to Google’s case, 2007), is that the market has changed, and having raised nearly tens of millions in financing at a valuation of $250M, Twitter just isn’t that much of a must-have to Google, who suddenly does not think that companies that cost $50,000 per annum to maintain are worth saving, even if just a couple of years ago they paid millions for them.
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WatchMojo NewsletterThe headline to the news that advertising will shrink, and online ads might shrink by 5%, might as well be: quick, let’s fund more crap, if you ask me.
Think about it: we have way too many ways to upload crap onto the Web, creating an influx of low-quality “content”. Last time I checked, marketers like to associate themselves with something of quality. The problem is whatever content of quality exists is being drowned in an ocean of UGCrap, and the traditional media companies are being so annhilated that they have little incentive to move their libraries (be it print, radio or video) online.
The result: too much inventory around low quality fare, and nothing worth advertising alongside of.
Guess what? The music suddenly stopped, and all of the chairs were made of crap.
The following graph is from Fortune’s article entitled How Facebook is taking over our lives, and I must say: this is the most impressive part of it.
Like anything else, taken to the extreme, there are ill side effects with Facebook and social networking in general. This morning I read how a study points out that Facebook infantilizes the mind, and I won’t lie, it sort of reminded me of the music video/comedy clip we recently produced which actually captures the spirit of the study well. Enjoy:
Total ad spending — online and offline — is expected to fall 7% in 2009. This is a direct result of the economic meltdown, no doubt, but while traditional media will certainly not return to the pre-crash levels, there is reason to believe that online media will come back even stronger, because when the economy recovers (basically, when your toddler gets engaged), the spoils will go to online media. But right now, for an entire generation of executives and entrepreneurs, it’s a constant struggle, not to thrive, but merely to survive.
From AdAge:
- “Online advertising isn’t immune to the recession, and it’s only just begun.”
- “Like in 2001, online media is fighting for its very existence.”
- “There are companies that are going to go out of business this year,” said David Moore, chairman of WPP’s 24/7 Real Media.
The following is arguably the most important thing I’ve read in ages, and every media executive and entrepreneur needs to print it out and stick it everywhere:
- “And at least one speaker suggested publishers face extinction if they think advertising is going to save them. Bob Carrigan, CEO of tech publisher IDG Communications, said he no longer sees traditional advertising as a growth business. Rather, his company is relying on lead generation and an ad agency-like “media services” division that creates custom websites and custom content to pay the bills.
“We love standard media and sell ads all the time,” Mr. Carrigan said. “But we’ve seen a lot of companies become extinct or on their way to extinction because they protected their legacy businesses too much.”
What does this mean to your business?
1 -The Metrics That Suddenly Matter?
Considering that all of a sudden, ad-supported models are out of vogue, are unique users, pageviews, impressions and even average time spent on a site less important? I am not sure if this is the case for your business, but it is for us. I tell anyone and everyone who cares to listen about WatchMojo.com’s surging all-time and monthly streams, but those matter if we lived in an ad-supported ecosystem. The truth is, what drives our top line is licensing revenue (guaranteed deals), so the key metrics are quantity, quality and frequency of videos.
2 - The M&A Game as Survival?
Equally important, if everything media companies have done in the past few years are based on the desire to maximize value in an ad-supported model and ads shrink and dry up, then maybe all companies need to be in constant M&A talks so that they are in a position to partner with others, hoping that this would increase their odds of survival.
This has to be one of the best lines I’ve read in a while, from SAI’s Nicholas Carlson’s piece on succession planning at News Corp.
Know what happens when a boxing referee slips between the ropes and out of the ring in the middle of the match?
A hint: The brawlers don’t suddenly stop throwing punches.
News Corp. is indeed a sprawling empire, check out the numerous aspirants to the title:
# Fox News boss Roger Ailes “would kill anybody” says our source. “He’s the Dick Cheney of News Corp.” In the past, he’s said if he were younger he would want to take on Hollywood. But he’s happy printing money where he is.
# Co-chairman-CEO of Fox Filmed Entertainment Jim Gianopulos is a “street fighter, ruthless.” He’s “Rupert’s kind of guy. He runs through walls.” He’s probably News Corp’s top business guy in films. He doesn’t care about TV.
# President, Entertainment for the Fox Broadcasting Company Peter Liguori will probably be the odd man out.
# Dana Waldman, co-president 20th Century Fox Television, is “shrewd and tough in creative.”
# Chair of Fox Sports David Hill is a long-time Rupert soldier. But the old Aussie probably won’t end up doing anything new.
# Rupert’s son James Murdoch reminds people of his dad, says our source. He asks good questions, has no ego (well, there’s one difference), and is a great listener. “He has no pretensions.” Because of the obvious nepotism, people questioned his merit when he took over Sky in Europe, but the internal consensus is that he did a good job there. “He did Sky and now he’s learning the rest of the world. You have to respect that.”
# Rupert’s other son, Lachlan, is not considered a player, however. A “doofus.” He’s a “great guy to go drinking with,” but when he went up against Roger Ailes in a few political battles early in his career, “Roger tried to kill him. It was like Trevor Berbick versus Mike Tyson.”
# Watch Rupert Murdoch’s wife Wendi when Rupe goes off to that big newsroom in the sky, but not yet, says our insider. She’s still enjoying going to parties and traveling all over the world for now. But “make no mistake, she’s ambitious.”
# MySpace CEO Chris Dewolfe’s not to be underestimated, but “the bloom is off the rose.” Rupert doesn’t like two things: Getting beat and seeing execs in the press. Facebook is beating MySpace and profiles and interviews are everywhere all the time. He went to Davos this year. A bigger role in operations is not in the cards.
Now call me crazy, but while Rupert Murdoch is almost 78 (he was born March 11 1931) and his father passed away at 67, his mother is nearly 90, so methinks Mr. Murdoch will actually outlast all of these men and women, and then some.
Disclaimer: News Corp. bought IGN, which bought my old company where I was a partner and minority shareholder. I could have stuck around at FIM and had a decent corporate career, but I left to start WatchMojo.com. Noteworthy in all of this is that News Corp. sued us in 2006, claiming I violated my non-compete… but I fought back, represented myself in court and won the trial… We now have a distribution deal with MySpace TV.
But… reading Carlson’s post, it reminds me why I got the hell out of corporate life: the politics, the backwardness of fiefdoms and turf battles. Check out this WatchMojo.com video which outlines the company’s past and how the various units came to be:
Reading Andrew Chen’s Which Startup Collapse Will End the Web 2.0 Era, I could not help but think about how in the dot com boom, financiers and entrepreneurs rushed to take an idea from a powerpoint presentation to an IPO in a ridiculously quick time span, which explains why all of the high profile dot coms bombed.
This time around (web 2.0), it wasn’t all that different. The only difference, really, was that instead of drowning a napkin with capital and hoping that money could make up for time, we thought that free software and cheap hardware could make up for time, and money.
Time and money have always been inter-related, hence the time value of money concept.
Now that we’re clearly in a recession, deflationary period, or outright depression, you have to wonder: can you actually win by scaling quickly, or are you in fact better off managing the clock and winning by attrition?
Last week, I read that Mania TV was on the auction block looking to sell for cheap. Mania TV was one of the first companies that I came across back in 2004/05 that made me think: oh, look, online video content can work. However, I thought Mania TV suffered from a multiple personality, where they went from wanting to emulate MTV, to dabbling in Hollywood too much, then to becoming Yet Another UGC Site, to then morphing into an Aggregator, only to return to their original content creation roots. It’s a shame. I really hope they survive and thrive.
But in that process, they plowed through $24M in funding, making it nearly impossible to provide a realistic exit for investors, and in turn, in this economy, rendering them unable to raise an additional penny. I hope they survive, but I am not sure they will. However, even the most recognizable Web 2.0 brands have in fact raised boatloads, be it Digg, Slide, or many others that come to mind.
As such, if we are to learn from history then, the way to build a company is not to drown an idea with capital and try to make up for the time it takes to go through the motions and learn what works in an industry, at a given time, for a given company, but to actually grow up in a natural, healthy way.
Getting back to Allen Chen’s article about the companies that might indeed crash and burn and end the Web 2.0 era, look out for the following characteristics that he lists:
- Started in 2004-2007, and
- Self-described as Web 2.0 startups
- Have grown to lots of headcount, let’s say >40 people, which can burn through a $5M Series A in under a year
- Substantial traffic, let’s say >5 million uniques per month, which drives up the cost structure
- Ad-based business models, which rely on big sales teams calling up agencies (whose pockets are now reduced, if not closed)
- Low-context advertising inventory, with low CPM in sectors like communication and entertainment
- Mature internet sectors, where the upside is now established, and acquirers are less likely to pay up as a result
- Not a leader in their category, where they may be #5 or higher, and investors may be unlikely to keep supporting their growth
- Media content hosting, where they allow users to upload, host, and stream content without charging a dime, which also drives down the cost structure
Read the whole piece here. Sometimes you win by having vision, ambition, execution… other times, it’s luck… and timing!
Learn to manage the clock. Winning by attrition is winning nonetheless.
Reading about IAB trying to come up with standards for online video advertising, I wonder: should we be coming up with standards for online video advertisements when we don’t have real standards for online video content?
Scouring through TubeMogul’s archives, I’ve realized the three main obstacles facing online video content producers are the following:
1- Most People Don’t Watch Web Video For More Than 60 Seconds
In other words, because (before even seeing this study) we knew that people would not watch videos for longer than a couple of minutes, we decided to keep videos short and sweet in the 1-2 minute range… you might ask: “well, why not create 30 second videos?”
The answer is two-fold:
a) We want videos long enough to that we can eventually justify running 0:05 - 0:30 ads, if we choose to run such pre-roll ads on our property and network, and
b) Our series are generally 5-10 minutes long (whether it is a Travel Guide on Chicago or the Seven Wonders of the World), so since we break it up into shorter clips, making them too short would create way too many videos.
2 - Online video lives fast, dies young
For example our Interview with Lady Gaga did 100s of streams initially, but now does 1,000-10,000 streams per day… the same can be said for many other videos. If you can generate streams to older videos, you pave the way to building a successful syndication business, which we have.
3 - Web series struggle to hold on to audiences
I think this is a classic textbook example of people being lazy and looking for get-rick-quick schemes. Truth is, even “overnight successes” took years to build. Our rationale has always been the same:
You have to create a mechanism where web viewers have a higher propensity to stumble on your content, the only way to do is by emphasizing quantity, quality and frequency. We talked about this in depth in Standing out from the Clutter.
This speaks for itself: our average streams per day and month has consistently grown…
What are some of the other obstacles facing content producers? Well, the lack of business model is the main one, which maybe explains why the IAB is looking at coming up with standards.
Facebook doesn’t seem to be losing any momentum these days. The social networking phenomenon is adding 600,000 users per day, including baby boomers. Go figure. While not everyone is a fan, others are chronicling how it’s taking over their lives.
Speaking of being on Facebook, here is a video called “I’m on Facebook” that we produced recently, enjoy:
A couple of graphs capturing our growth.
- WatchMojo.com monthly streams:
- WatchMojo.com’s all-time stats:
We are crossing 45M this month, and will cross 50M in March or April.
It took us 28 months (from January 2006 to April 2008) to get to 25M streams, but we will have doubled it in 12 months afterwards, which is an amazing feat that we’re quite proud of.
We’ve also formalized some of our distribution arrangements, more details to come on those.
“First of all, a lot of the riffraff is going to go out of business… it’s hard to compete with junk especially when they’re giving it away for free.”
That’s coming from EA’s boss, John Riccitiello. Read more on EA’s plight, more here and here.
There’s two parts to that statement, the first part is about junk and the second part is about free. But it speaks volumes about how much business has changed in the past 6 months.
When people put professional video on the same shelf as UGC, I know they’re clueless; the “riffraff” is going out of business… yet some people were dumb enough to think that advertisers would back UGC the way they would professional content. Right now it’s moot, as advertisers are taking a pass to catch their breath… which takes me to the next point: “especially when they’re giving it away for free”.
A lot of content companies give away their content… Look at our revenue breakdown:
We generated more revenue from licensing than syndication. That’s because we don’t produce junk and don’t give it away for free. Whatever business you’re in, these days, you should abide by those two mantras.
