This is the third installment of a series of posts I am writing on Tech Crunch, looking at video content.
The first piece, The State of Online Video was a kind of “balance sheet” assessment of where the industry is at.
The second piece, 12 Surprising Things Holding Back Online Video Advertising was more of an “income statement” that looked at the surprises over the past few years that have held back the economic side of online video while the consumption thereof soared.
Before looking at the future of video advertising next week, today I published Part 3 which looks at How Videos Are Found and Consumed Online. This time, we actually included graphs. Here is the intro:
To try to understand—let alone guess—the future of video advertising, one needs to start by looking at the biggest trend in media over the past few decades. In November 2006, Bear Stearns Cable and Satellite analyst Spencer Wang published a study called “Why Aggregation & Context and Not (Necessarily) Content are King in Entertainment”. While Bear Stearns has since been acquired by JP Morgan and is now a mere footnote in business books, the study’s findings are more relevant than ever. Let’s examine 8 key factors behind online video consumption.
Read the rest here and check back next week, where we look at how videos will be monetized…
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WatchMojo NewsletterI guess I can call off that iPad skit, Mad TV - now defunct - came up with this year. I guess their genius was years ahead of its time.
Found via Huffington Post.
Do you remember the Turin Games? Yeah, me neither. I was knee-deep in the very early stages of WatchMojo.
Four years ago today, we launched WatchMojo.com with the objective of becoming a leading producer of video content, viewed on our property. Having seen my last company AskMen.com – a publisher of men’s lifestyle content – become part of the News Corp. empire, I figured I would apply my ability to attract talent, create content, build an audience around it and monetize it to the emerging online video industry.
Boy was I crazy.
Step 1: Understand and Anticipate the Dynamics of Supply and Demand
Back in 2006, investors and media were giddy over social media and user-generated content (UGC). Producing content, let alone video content, was so out of vogue that people literally questioned my sanity.
Making matters worse? We didn’t start off with an offline catalog or rights to any long-form video library. We started with a clean slate, a white canvas as I used to tell the talent I’d meet.
But unlike every company that was launching some kind of video file sharing social network (largely for UGC, no less), we were going against the grain by producing premium content.
Step 2: Keeping Loyalty High and Costs Down
Having generated sales commission over the years and profited from the sale of my last company as a minority shareholder, I was fortunate to have some money to launch my company without outside investors. The plan was to launch, showcase what we wanted to do, and then raise money.
Boy did we ever not follow the script.
Four years - and 5,000 videos and 105,000,000 cumulative streams later - we still don’t have outside investors. Either I know something and will one day be hailed as a genius, or the big joke was on me and I shall be viewed as a great fool (only the Men in the Arena, to quote Yossi Vardi, will understand what that means, I guess). Either way, to this day, despite the vagaries of startups and last year’s Good Times RIP shakedown, we never laid anyone off and have built a great team. Obviously not having to let people go is half the equation, we’ve never even had much of a retention problem, despite not having much money to spend.
At the first Tech Crunch 40, Clearstone Venture Partners’ Sumant Mandal stressed the importance of starting a company where you have access to talent. True, but you should not be somewhere where there is too much competition for talent either. It’s counter intuitive and perhaps Machiavellian, but we get access to talented people without any turnover. That keeps product quality high and costs down. People would almost pay to work at WatchMojo, so everyone goes all out to make the company succeed. It all boils down to the people, and we’re rich on that front.
Step 3: It’s Best Not To Be the First to Market
Clearly, we weren’t alone nor were we the first ones. In 2005, Mania TV made me realize the time was ripe for online video. I also remember reading a Business Week article about a “vlog” called Rocketboom. Ironically I was on a flight down to Manhattan to meet ad agencies on behalf of AskMen. Honestly, I was sick to my stomach and looking to strike out on my own.
At the time, running sales for an online magazine, the notion of producing video content – where CPMs (or cost per one thousand ad impressions) rates carried a hefty ten-fold premium – was intriguing. But the risk of starting a content company from scratch was overwhelming. I recall going to bed every night eager to start a new, but wake up questioning the wisdom thereof.
But seeing what others were doing right and wrong, I was growing more and more confident to be able to pull it off. My biggest worry then, frankly, was creating content no one would watch. Suffice to say that 105,000,000 views later (with no marketing budget), we overcame that fear.
Step 4: History Repeats Itself (Namely: Content is King, Flight to Quality)
Then as now, I believed social media will change the rules of engagement in news and publishing, but ad agencies and marketers could not possibly be interested in advertising alongside user-generated content. Today it’s clear that UGC isn’t going to capture ad dollars though social media – by its sheer size – will do just fine.
Nonetheless, I stood by and watched as every single investor I spoke to balk on us, only to invest in one or another peddler of UGC.
Now that was crazy, I thought, but as I’ve learned, one man’s crazy is another man’s common sense. So my team and I trekked along: we were producing videos and publishing them on our website: WatchMojo.com.
Step 5: Avoid Insanity
The best advice I got last year was hearing uber angel investor Ron Conway say that he loves it when an entrepreneur admits that something isn’t working and goes to him and asks his blessing – Godfather-style – if they can try something new. “I will give that entrepreneur $100,000 more”, said the dean of angel investing, who has backed everyone from Google to Digg.
It seems counter-intuitive, but that indeed captures the definition of insanity: doing the same thing and expecting different results. Knowing that, back in 2007, we shelved our desire to build a leading destination and sought to leverage existing social networks and video file sharing websites to focus on distribution.
That’s when our streams began to take off.
Step 6 : Adjust Your Playbook
It’s important to avoid following the crowd and sticking to your guns. Over the past few years, we’ve seen VCs ride one fad after another: social media, UGC, Facebook-related services, link shorteners (Really?), Twitter-related startups, location based services, etc. However, while you should remain true to your core (provided it made sense in the first place), you should always tweak the peripheral aspects of your business.
The first video producers sought to build destinations, which is prohibitively expensive because:
- the cost of hosting and streaming the videos is high,
- search engines have generally sucked at indexing videos so low-cost but effective SEO tactics fail relative to indexing text content,
- the revenues in online video have, let’s face it, trailed projections,
- more interestingly, audiences (readers, listeners, viewers) consume content by type (video vs. articles) and not categories (auto, business, fashion). This last item, frankly, deserves a post in of itself, but that is for another day.
We’ve benefited from a rising ride, but we’ve also outgrown the market by focusing on quality and executing on quantity, frequency, consistency and timeliness. The videos we produced in 2006 remain – while less aesthetically pleasing – just as relevant as the ones we produced this week.
Step 7: Why Buy the Milk When You Get the Cow for Free?
From 2006 to the end of 2007, we gave away our videos to gain data and build a brand and an audience. We entered speculative revenue share syndication deals. Streams took off, but revenues didn’t.
As a former ad sales executive, I went from being very bullish about online video advertising to having a more sober outlook. I still remain bullish over the long term, but am realistic about the things that hold back the sector. For more on that, read this article on the 12 Things That Hold Back Online Video Advertising, which I published on Tech Crunch.
With our back to the wall in December 2007, we signed a licensing deal with minimum guarantees (or MG’s) with one of the largest media companies that validated our content and gave me the confidence to change the rules of engagement. We had already signed the odd guaranteed-revenue licensing deal, but this one deal was large enough and with an established company, so from there on out, we began to take a hard stance.
We held back distribution (though we continued to grow at dizzying rates) but commanded minimum commitments and guarantees. It worked. We reinvested every penny to stay a couple of steps ahead of the market. The key is “a couple” of steps. Some companies fail because they are way too ahead of the demand and the marketplace. I always use the analogy of remaining onside in a sports game. Sometimes you need to slow down or move laterally to avoid getting too far ahead of the market. We did that by beefing up each category we supplied content in.
Before we knew it, we had a dozen paying clients which provided a nice baseline to grow revenues from.
Step 8: Always be in Revenue Mode
Bootstrapping means that you drive with one foot in the grave and another on the gas pedal. But it forces you to think of revenues at all times.
There are costs to not having VC money; that’s for sure. If I could have, I would have built a medium sized ad sales team in major markets by 2008. We’re now at a size and place where ad agencies can no longer ignore us, but I think it’s important not to invest too early in a sales organization either. The best sales person can’t close a box let alone a deal if the box is empty.
We’ve never invested in a big sales team, so because of that, you could argue that we remain pre-revenue. But, that’s bull. All companies are and should be in revenue mode at all times.
Do you really think that Twitter, for example, suddenly went from pre-revenue to profitable? Of course not, they were always aggressively looking for revenue but didn’t admit it, and then once they got Microsoft and Google to pony up cash for access to their data and became profitable, they became profitable.
Ultimately, you have to be able to map out when revenues in your industry will become meaningful and - as much as I hate to say this - time your growth accordingly. Too much labor costs too early will kill you, especially if you are bootstrapping.
Step 9: It’s All About Perspective
As an entrepreneur, you can never get too high or too down. When you’re greeted with good news, enjoy it because around the corner you will get slammed with more a sobering event. And when bad news hits, don’t sweat it, because there might be worst news around the corner making you envy your previous state of mind.
If four years ago someone would have said: “You can have 100 million cumulative views, a barrage of clients, case studies with McDonald’s, Coca-Cola, Coors and others, but never raised a penny in capital and still flirting with profitability”, I’d pounce on it.
Step 10: Understand Debt to Manage Risk
Once you overcome product and commercial risk, the field opens up. Let’s face it, these days, with the venture capital industry shrinking and VCs raising less money than they set out to, most VC firms will focus on late stage deals that pose less risk and can provide a quicker liquidity. Basically, VCs have proven to be as good as picking winners amongst early stage companies as your senile grand mother would be. So if you are an early stage company looking for VC, honestly, go back to the drawing board. If you’re one of the “lucky” ones who will be able to get a term sheet, brace yourself for some draconion terms.
For a myriad of reasons, WatchMojo has never raised any money from outsiders. Initially I invested cash I had from the proceeds of the sale to News Corp., then I sold my stock portfolio. I even turned to debt, but when you study the most successful media companies (be it Hearst in the early days or News Corp.), you realize debt fueled their growth.
I certainly do not encourage anyone to use debt recklessly, regardless of whether you invest in content/media or in software/technology. But once you eliminate product risk and start to overcome commercial risk, then debt is a very reasonable option when interest rates are low and you understand administration, finance and accounting.
Content isn’t a zero sum game. Maybe in the “winner takes all” tech space, VC is the way to go, but seeing how much VC money has gone into failed startups and gauging the overall VC investment relative to the returns, I like our risk/reward odds just fine. I also realize that had we raised any VC money, when the going got rough in late 2008, we would have probably been forced to shut down. Instead, never having added any fat, we added muscle in 2009 and had a breakthrough year.
If you can raise VC on your terms, do it, but it does always come back to haunt you. They say funding gives you runway and buys you time, but if you can avoid it, then you actually give yourself options over time.
I always tell other entrepreneurs “would you take an investor’s advice if the money wasn’t attached?” Well, I never took any money but I do always take the advice. That, I think, is the secret to our success.
As we embark on our fifth year, so much in our industry remains speculative. But seeing online video becoming more and more a reality and excitement building up in wireless, I think that light at the end of the tunnel is indeed sunlight and not an oncoming train. Of course, you never know until you step into the arena and find out for yourself.
From Royal Pingdom:
Read more on Royal Pingdom. Need we say more about YouTube arguably being the best M&A deal ever?
Last week, Tech Crunch published my article on The 12 Surprising Things Holding Back Online Video Advertising, in it, I mentioned that while YouTube has been closed to most technology and ad solutions, surprisingly, it was more open than some of their peers by allowing producer partners to sell ads.
YouTube has tried and experimented many things in the hope of boosting revenues, whether they are derived from advertising or subscriptions. yesterday they mentioned that they are trying to get people to pay $5 to watch a movie. Will it succeed? Don’t know.
On the ad front, we’ve always pushed YouTube to be aware and realistic of the market as they try to stay ahead of it.
When we first signed our deal, they didn’t allow us to sell ads. We lobbied them and earned that right.
But they didn’t go all the way. For example, the company was late in accepting pre-rolls. Back then, I argued that indeed, no one likes pre-roll ads, but by not even being able to tell an ad agency that we can offer pre-rolls, we were not even being asked to propose deal ideas. This year, they finally allow pre-roll ads, but they tell us that we cannot sell a companion 300×250 ad along with a pre-roll, which is industry standard. There are a few other things (details, really) that YouTube does not budge on, but I won’t share too many details as we are bound to a confidentiality agreement, though the companion ad is clear when you simply visit the site. I am not saying any of this to irritate the powers that be at YouTube, after all, I view monetizing YouTube as the single greatest opportunity in all of business in the 21st century, problem is, I am not sure Google/YouTube really recognizes this.
When I read Google CFO Patrick Pichette talk about boosting revenues, I wonder, those small steps are great.
Nikesh Arora, president of global sales operations and business development, said that YouTube had several successful ad campaigns over the quarter, including a campaign for Avatar that took advantage of all the site’s display advertising capabilities. CFO Patrick Pichette noted that the home page of YouTube was sold out almost every day during the fourth quarter, with the site selling ads in more than 20 countries worldwide.
That’s because YouTube is becoming increasingly important to brands and agencies, according to Arora. “There’s been a big shift… [YouTube] has gone from being ‘nice to have’ to an essential part of the media mix,” he said.
But enable producers to include a companion banner to pre-rolls and you will see an immediate spike in revenues.
YouTube generates 40-50% of our total streams, but they generate less than 5% of our revenues. That is a travesty. If YouTube is to become both a commercial and promotional platform, it needs to move faster and reach to our (and producers’ in general) needs. Why?
Only if producers start to sell their own inventory will Google
- increase sell-through,
- increase CPMs.
The eCPM we get from YouTube is not what it should be. When we sell ad campaigns, we yield 10x higher rates than what we usually get. Since YouTube shares in those revenues, they have an incentive to align interests with ours.
You want numbers? Currently we generate 5-digits per year with YouTube, if they let us run companion ads with pre-rolls (and thus open us up to more pre-roll campaigns) then we would do 6, maybe 7-digits selling our YouTube channel. I view pre-rolls as pop-ps and post/mid-rolls as pop-unders, don’t get me wrong, but they could currently generate a much needed revenue stream which YouTube is basically cutting off. Let’s face it, the problem right now is a lack of premium content, which is expensive to make.
YouTube needs to take a cue from Google’s AdSense, which while maintaining a strict set of rules and guidelines did open up to empower everyone to leverage the massive audience it reached.
Image found via this site.
From Yahoo News:
A US filmmaker who lay trapped beneath Haiti’s earthquake rubble for nearly three days survived in part thanks to a medical application installed on his iPhone, he told a television station Thursday.
Dan Woolley was making a documentary about poverty in Port-au-Prince when last week’s devastating 7.0-magnitude earthquake struck, trapping him in the ruins of his hotel with a fractured leg and a profusely bleeding gash to his head.
“I had my iPhone with me and I had a medical app on there, so I was able to look up treatment of excessive bleeding and compound fracture,” Woolley told MSNBC in Miami.
Using the Jive Media Pocket First Aid and CPR, he found recommendations for how to self-treat his injuries.
“So I used my shirt to tie my leg and a sock on the back of my head. And later used it for other things, like to diagnose shock,” he added.
Woolley also used the iPhone’s more traditional functions, setting its alarm to go off every 20 minutes to keep him from falling asleep.
Eventually, after some 66 hours trapped under the rubble, Woolley was pulled out alive by French rescuers.
Interesting:
A national survey by the Kaiser Family Foundation found that with technology allowing nearly 24-hour media access as children and teens go about their daily lives, the amount of time young people spend with entertainment media has risen dramatically, especially among minority youth. Today, 8-18 year-olds devote an average of 7 hours and 38 minutes (7:38) to using entertainment media across a typical day (more than 53 hours a week). And because they spend so much of that time ‘media multitasking’ (using more than one medium at a time), they actually manage to pack a total of 10 hours and 45 minutes (10:45) worth of media content into those 7½ hours.
Generation M2: Media in the Lives of 8- to 18-Year-Olds is the third in a series of large-scale, nationally representative surveys by the Foundation about young people’s media use. It includes data from all three waves of the study (1999, 2004, and 2009), and is among the largest and most comprehensive publicly available sources of information about media use among American youth.
News release below:
DAILY MEDIA USE AMONG CHILDREN AND TEENS UP DRAMATICALLY FROM FIVE YEARS AGO
Big Increase in
Most Youth Say They Have No Rules About How Much Time They Can Spend
WASHINGTON, D.C. – With technology allowing nearly 24-hour media access as children and teens go about their daily lives, the amount of time young people spend with entertainment media has risen dramatically, especially among minority youth, according to a study released today by the Kaiser Family Foundation. Today, 8-18 year-olds devote an average of 7 hours and 38 minutes (7:38) to using entertainment media across a typical day (more than 53 hours a week). And because they spend so much of that time ‘media multitasking’ (using more than one medium at a time), they actually manage to pack a total of 10 hours and 45 minutes (10:45) worth of media content into those 7½ hours.
The amount of time spent with media increased by an hour and seventeen minutes a day over the past five years, from 6:21 in 2004 to 7:38 today. And because of media multitasking, the total amount of media content consumed during that period has increased from 8:33 in 2004 to 10:45 today.
Generation M2: Media in the Lives of 8- to 18-Year-Olds is the third in a series of large-scale, nationally representative surveys by the Foundation about young people’s media use. It includes data from all three waves of the study (1999, 2004, and 2009), and is among the largest and most comprehensive publicly available sources of information about media use among American youth.
Mobile media driving increased consumption. The increase in media use is driven in large part by ready access to mobile devices like cell phones and iPods. Over the past five years, there has been a huge increase in ownership among 8- to 18-year-olds: from 39% to 66% for cell phones, and from 18% to 76% for iPods and other MP3 players. During this period, cell phones and iPods have become true multi-media devices: in fact, young people now spend more time listening to music, playing games, and watching TV on their cell phones (a total of :49 daily) than they spend talking on them (:33).
Parents and media rules. Only about three in ten young people say they have rules about how much time they can spend watching TV (28%) or playing video games (30%), and 36% say the same about using the computer. But when parents do set limits, children spend less time with media: those with any media rules consume nearly 3 hours less media per day (2:52) than those with no rules.
Media in the home. About two-thirds (64%) of young people say the TV is usually on during meals, and just under half (45%) say the TV is left on “most of the time” in their home, even if no one is watching. Seven in ten (71%) have a TV in their bedroom, and half (50%) have a console video game player in their room. Again, children in these TV-centric homes spend far more time watching: 1:30 more a day in homes where the TV is left on most of the time, and an hour more among those with a TV in their room.
“The amount of time young people spend with media has grown to where it’s even more than a full-time work week,” said Drew Altman, Ph.D., President and
Black and Hispanic children spend far more time with media than White children do. There are substantial differences in children’s media use between members of various ethnic and racial groups. Black and Hispanic children consume nearly 4½ hours more media daily (13:00 of total media exposure for Hispanics, 12:59 for Blacks, and 8:36 for Whites). Some of the largest differences are in TV viewing: Black children spend nearly 6 hours and Hispanics just under 5½ hours, compared to roughly 3½ hours a day for White youth. The only medium where there is no significant difference between these three groups is print. Differences by race/ethnicity remain even after controlling for other factors such as age, parents’ education, and single vs. two-parent homes. The racial disparity in media use has grown substantially over the past five years: for example, the gap between White and Black youth was just over two hours (2:12) in 2004, and has grown to more than four hours today (4:23).
Big changes in TV. For the first time over the course of the study, the amount of time spent watching regularly-scheduled TV declined, by 25 minutes a day (from 2004 to 2009). But the many new ways to watch TV–on the Internet, cell phones, and iPods–actually led to an increase in total TV consumption from 3:51 to 4:29 per day, including :24 of online viewing, :16 on iPods and other MP3 players, and :15 on cell phones. All told, 59% (2:39) of young people’s TV-viewing consists of live TV on a TV set, and 41% (1:50) is time-shifted, DVDs, online, or mobile.
“The bottom line is that all these advances in media technologies are making it even easier for young people to spend more and more time with media,” said Victoria Rideout, Foundation Vice President and director of the study. “It’s more important than ever that researchers, policymakers and parents stay on top of the impact it’s having on their lives.”
Popular new activities like social networking also contribute to increased media use. Top online activities include social networking (:22 a day), playing games (:17), and visiting video sites such as YouTube (:15). Three-quarters (74%) of all 7th-12th graders say they have a profile on a social networking site.
Types of media kids consume. Time spent with every medium other than movies and print increased over the past five years: :47 a day increase for music/audio, :38 for TV content, :27 for computers, and :24 for video games. TV remains the dominant type of media content consumed, at 4:29 a day, followed by music/audio at 2:31, computers at 1:29, video games at 1:13, print at :38, and movies at :25 a day.
High levels of media multitasking. High levels of media multitasking also contribute to the large amount of media young people consume each day. About 4 in 10 7th-12th graders say they use another medium “most” of the time they’re listening to music (43%), using a computer (40%), or watching TV (39%).
Hermoine and Alex declare their love and fight to get married. I’m 99.9% sure this is a joke, but you can never be too certain these days…
