Advertising on the Video Internet

How will content providers make money? Same as always – subscriptions, pay-per-view and advertising. I think a lot about advertising -- that’s what my company does -- we enable in-stream advertising and, I think, advertising will be the single largest source of Internet video revenue. It’s the dominant broadcast method and the dominant Internet method of monetizing content – why should it be different on the Video Internet?

What will advertising look like on the Video Internet? It will be shorter, more interesting and more relevant – meaning dynamic, real-time, targeted and personalized. Advertisers and agencies will have to come up with more entertaining, interactive and more modular video ad creative. Agencies like Martin Puris’s Not Traditional Media and Alan Feldenkris’ and Alan Schulman’s Brand New World are trying new things and changing the rules, like working on “Broadband” advertising campaigns that deliver a message in multiple, smaller (than the 15s or 30s) chunks over a longer editorial experience and have multiple associated HTML messages. Nonsense to the people who say it will be a branding medium or a direct response meduim, there will be a place for both (like TV and like the Web, right?). Like content, video advertising will be dominated by Windows Media, Real, Flash and Quicktime formats. The proprietary Rich Media products -- Eyeblaster, Unicast, Eyeblaster, Klipmart etc -- will be challenged by the Video Internet. First, their primary Web businesses of video banners, pop-ups and interstitials will be impacted by increased user control (in a world where ISP’s compete on the basis of who has the better pop-up-blocker, how long can these “rich media” video units survive?). As for in-stream video, advertising should be in the same format, environment and management scheme as the content – better experience for all. Look at the experimental forays into the pre-roll world that the in-page video ad guys are making at places like New York Times -- the advertiser value, user-experience and content-owner-interests are all degraded from a true in-stream Windows or Real experience. Unbelievably, some agencies are pushing the Unicast in-page solution to in-stream publishers. How could agencies including the one that helped launch the fine MSN Video product now be pushing an in-page, rich-media, transparent Java video overlay that tries to time and transition to the beginning of the player stream (often unsuccessfully) as an alternative to in-stream (i.e. “in-the-stream”) advertising? What the Internet ad guys need to learn is video programmers and advertisers won’t tolerate OK execution -- there is a level of acceptability in the Web that will not fly in video.

In fact, right now the variety of ad formats – particularly the proprietary rich media formats – is an inhibitor to Internet Video advertising and in the near future agencies will simply distribute a creative in WM only and hit the large majority of the market (Real, Quicktime and Flash will be relevant but in some sense optional). Jupiter Research analyst Nate Elliott has written on this extensively and he couldn’t be more on point, see e.g. http://hive.jup.com/analysts/elliott/archives/006392.html.

While there may be a place for in-page video advertising it will be a smaller one and in-stream video advertising will be the unit that matters. And it will really be in-stream – again, in-the-stream, not-the-page, same format, same player, coordinated from a technology standpoint with the content (the thing that makes the ad valuable, right?). Why should it be any different? Right now, in-stream inventory is constrained and demand is high so the high-quality branded content providers will call the shots for a while and the agencies need to listen carefully to them. I can tell you that ABC News, Scripps, MSN Video won’t be leaving in-stream WM or Real encoded video advertising for in-page, rich-media, pre-roll Java overlays any time soon.

Identity and Brand On the Video Internet

I’m sometimes puzzled by business plans for and predictions of the rise of aggregators of premium Internet video. Sure, that will happen to some extent – but generally speaking Internet broadcasters will be like other broadcasters and other Internet companies and want to have their own identity and build their own brand at their own end point. Yes, the cost and complexity of Internet video will be greater than that of establishing a Web presence but my observation is that aggregators are for the most part temporary solutions. Take the Feedroom for example, it’s been around for a while and has had some strong media properties use it as a turnkey solution to get their video online, but most have or are in the process of taking it back in-house for brand, identity and longer term digital media strategy reasons. In other words, as soon as it gets interesting it gets worth doing oneself and building one’s identity and brand online. Even iFilm and Atom Films which are more like the proposed aggregators of the future will disenfranchise themselves as the sites, filmmakers, artists they promote become self sustaining brands on the Video Internet. The better approach, in my view is to enable the inevitable drive toward brand building with stand alone tools that work in the background and become de facto standards for the building blocks of these Video Internet identities. Again, this is why video search will be so important – just like the Web, the good stuff will be widely dispersed and what we will need most will be the tools to find it (and the tools to monetize it, but more to come on that later).

The Video Internet

The Video Internet

There’s no doubt the broadband Internet is here. We’re not looking at projections but rather historical numbers which make it clear that things are going to get interesting. 55% of all US Internet homes are broadband connected homes. 33% of all US households now have broadband access and nearly 20 million have a home network. 10% of all Internet households access on-demand Internet video content each month. This equals a mass market with a mass audience. It took longer that many originally thought, but now its happening faster than anyone thinks.

But not only is the broadband Internet here, what I call the Video Internet is upon us too -- think the wild, wild west of the Web (the Page Internet) of 1995 and think about, in the not too distant future, a number of video presences on the Internet that begins to be measurable against the number of Web presences.

I think that the Video Internet will be a massively disrupting force to the video broadcasting business as we know it (how’s that for going out on a limb?) – Broadcast, Cable and Satellite providers. For some, like the ones who are ahead of the curve today like ABC News, Scripps Networks and others, disruption may not be a bad thing, rather an opportunity. Some will seize the day, some will struggle and adapt and some will struggle and never recover. Consider how profound a shift this is: Thirty years ago an aspiring broadcaster needed an FCC license. For the last twenty five years, the only other alternative was cable or satellite carriage. Now there are virtually no barriers – if one can bear the cost of the digital equipment and bandwidth, one can broadcast online.

The result will be an Internet where user interaction may be as much with a player/video, as with a browser/page, where video programming will abound, from traditional digital media producers and distributors, from the online giants (led by Yahoo, I’m guessing) and from a new universe of niche broadcasters and video bloggers who will make up what will be the very long tail of the Video Internet.

There is little doubt as to the above – look at the way cable evolved – HBO, Discovery, USA, FX, Lifetime etc., all started with repurposed, legacy or commodity content (CNN was launched on rebranded Reuters feeds), started to generate free cash flow and reinvested it in original programming. In parallel, the channel lineup exploded from 20-30 cable networks to hundreds as the appetite for broader choices and niche content grew. Why should the Internet be different – it won’t be, just more so. The big portals Yahoo, AOL and MSN (Google?, Amazon?) are or will soon be working on original content, the next tier of existing Web presences are thinking about video programming and the huge number of new “networks” – niche Internet broadcasters - will be a surprise to all but a few.

It’s already started: ABC News launched ABC News Now a 24 hour Internet-only broadcast news network last year – think CNN 25 years ago. Scripps’ newest network HGTVPro is an Internet-only network. CBS has original online video programming – talk shows about Survivor and Big Brother at CBS.com. USA simulcast the Westminster Dog Show. Major League Baseball streams every baseball game live at MLB.com. Yahoo simulcast the Fat Actress premiere. AOL’s been broadcasting live events (concerts) for a while and has made an online video franchise out of Desperate Housewives video recaps. MSN broadcast the Times Square New Years Eve celebration live and has aggressive plans for the future. Discovery and others are using cutting room floor content to complement and cross pollinate TV programming. And not just the traditional broadcasters, but print, Internet and even eCommerce sites like NYT, Washington Post, iVillage, Forbes, theKnot, about.com and Amazon are producing and streaming original video content.

And, most interesting, the stand alone Internet broadcasters are coming. Sites like http://www.evtv1.com/, http://www.heavy.com/, http://www.travelrapidly.com/, http://www.supersphere.com/, http://www.breaktv.com/, http://www.weird.tv.com/, http://www.zugaphoto.tv/, http://www.relaxingtv.com/, http://www.televisioninternet.com/, http://www.metv.com/, http://www.legalbroadcastnetwork.com/, http://www.zilo.com/, http://www.adventuretv.com/, http://www.sputnik7.com/, http://www.brycewilson.net/, http://www.maniatv.com/, http://www.streaminglaw.com/, http://www.tvworldwide.com/, http://www.thewebvideo.com/, http://www.blogtelevision.net/, http://www.netbroadcaster.com/, http://www.videodetective.com/, http://www.theonenetwork.com/, http://www.singingfool.com/, http://www.sidewalks.tv/, http://www.ugo.com/, http://www.healthysolutions.tv/, http://www.travelago.com/, www.current.tv and many, many others. Add to that the small but growing phenomenon of Video Blogging and get ready for video on the Internet to get wild. There are new companies and products launching everyday to provide the tools to enable this barrier-less broadcasting world – Brightcove, OliveLink, Vlog it! Cable, satellite and the Internet have proven the value of niche content and the Internet has shown us just how long a medium’s tail can be and that there is money to be made from long tails (ask Google). I would not be surprised if in 3-5 years the money to be made from the long tail (from ad inventory primarily) of the Video Internet isn’t greater than from the big three portals combined, despite their head start.

Now you know why Yahoo, Google and AOL (Singing Fish) have been spending so much time and money on video search engines. The explosion of video content needs a tool through which to surface the soon to be enormous amount of video content and tools like Yahoo’s Media RSS will put the publisher/broadcasters to work to help with the task and make the connections that much better.

Digital Media And The Nose On My Face

Digital Media and The Nose On My Face

My friends and colleagues suggested I take some of the emails I've bombared them with over the last few months, synthesize them somewhere, and going forward, find a more productive outlet, so here I am.

I’ve been in the technology community for a while now – and wearing a lot of different hats along the way – advisor (e.g. lawyer, consultant), venture investor, entrepreneur, big company executive. I’ve sold two companies I’ve run to public companies (AOL Select back to AOL, Backwire to Leap Wireless), made investments in companies that went public when I was a VC (Varsity Books, XMSR), but I’ve never liked an opportunity as much as the one I see now with video on the Internet. And I like it for two reasons – it’s a great investment of my time and sweat from a market timing and opportunity standpoint (I currently run a company called Lightningcast that provides audio and video ad insertion to companies such as AOL, Microsoft, ABC, MTV, A&E Networks, Scripps Networks, Infinity broadcasting and others) and, more importantly, its going to be a hell of a lot of fun. I have never been very good at predicting the future, judging the next big or new, new thing, or seeing a path for technology that others don’t see (actually I’m quite unburdened by my lack of any meaningful understanding of technology) – what I’m good at is seeing things the way they are, recognizing what’s happening now, evaluating it in light of what’s happened before and making some safe assumptions. Thus, my theme, talking about Digital Media And The Video Internet and the things about and around that topic which seem to me as plain as the (not small) nose on my face.