BUSINESS BLOGS
BUSINESS BLOGS
category: business
24 Mar 2008

I am surprised no one’s thought of this before: a site for How to videos!

Yes, that is sarcasm.

Last week I was going to comment on Mindbites’ raising $1M to take on a cornucopia of competitors… but I didn’t. Frankly, I think New Tee Vee’s Liz Gannes was being too kind in her post, maybe it’s because their VC True Ventures led the round in Mindbites. Not sure if that is why, but Liz has been more critical of the 5th, 6th and 7th contestant in the space than the 12th player Mindbites… and I wondered why. But I digress. Gannes is a fine reporter and it’s not like she projected a YouTube-esque success for Mindbites, so we let it slide.

Today, I learn that one more player - Spongefish - has raised $2M for, sit down, you guessed it: how to videos. Spongefish is joining Mindbites, Howcast, Howvids, 5Min, ExpertVillage, eHow and Video Jug in the space.

I’ve covered the intricacies of how to video sites here, especially in the context of UGC videos and frankly, this reinforces my argument for why so many VC funded companies fail: they do not really get advertising.

Don’t get me wrong: I want every company in online video to grow because that will make the online video segment take in more money from online advertising in specific and marketing in general, but How To’s will remain as difficult to monetize as UGC and lifestreaming content, for that matter, which is another segment of online video that is growing bubbalicious.

The folks at New Tee Vee, Venture Beat and Paid Content all remain surprised by the sheer number of How To projects being funded here, and I think I can explain why:

Most financing deals take 3-12 months to materialize… so maybe, just maybe, after the first wave of UGC video sites faced challenges in monetization, a bunch of MBAs gathered around a coffee shop and said “How To Videos” - that’s the sweet spot. So they all hatched business plans around a UGC How To Video site with subtle nuances… and before long, they all hit Sand Hill Road. All of these deals are being announced recently, but perhaps, they had been in the pipeline for months (when none of them were really announced). If all that remained for the deals to close was crossing t’s and dotting i’s then I can imagine why the investors didn’t feel that it was worth it to kill the deal, since so much of the reluctance to invest lies in due diligence and meetings, and not the actual wiring of funds.

Frankly, if that’s not the reason, I am speechless. Why? Some of these companies are already shuffling their cards. How so?

I won’t name who, but I found it odd that one of these sites was pushing to become a destination itself, but then found them promoting themselves on YouTube. I know, as I’ve said: YouTube is both a promotional and commercial platform, but if the business plan you sold to investors called for you to take on YouTube in the How To niche but then you turn around and put your library on YouTube, then you won’t be much of a destination.  Can you imagine a social networking site aspiring to become the next MySpace or Facebook advertising or promoting themselves on MySpace or Facebook?

Remember, these services don’t produce content, they’re platforms. For a platform to win, you have to be #1 or at the very worst, #2. Bear in mind, if we WatchMojo.com put our hundreds of How To Videos (out of thousands) on YouTube, HowVids, HowCast, etc., then there is nothing all that original about any one of those services insofar that they are not differentiated by content. To win: they need traffic. VideoJug does produce content, and it’s armed with $40M in funding.

So if your goal is to be a platform but you are using YouTube yourself to build awareness, streams etc., then Houston, we have a problem.

If I am reading this incorrectly, please enlighten me… but this is more “ain’t got a clue” management and investing if you ask me.

But, I digress. Anyway, we’re updating our Online Video Funding Amount Chart: see the bubble form in Live Streaming (selfstream) and How To Videos… as I press publish.