MSFT first doled out the carrot and played nice by offering Yahoo! a premium… but nothing: not even “formal” talks.
Rumor is that MSFT is now taking out the stick by whispering that they might re-evaluate (read: reduce) the bid due to worsening market conditions. I don’t think this will happen, but I also don’t think it’s an impossibility (holy double negative; read: a lower bid is possible because it will inflame shareholders considerably and I suspect that some Directors would resign to distance themselves from YHOO’s most senior management, fearing lawsuits - not that resigning would shelter them from lawsuits, of course).
And why is this possible?
Do the math: if GOOG was $747 in November and is now $450… what would Yahoo! be trading at were it not the $31/share offer?
I knew there was a reason I unloaded 87.5% of my shares when I did (at $29 per share).
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WatchMojo NewsletterVenture Beat covers the rise of digital media funds focusing on content. Last year, I predicted that after funding video file sharing social networks and ad networks, venture capitalists would start to fund content companies. Investor and web entrepreneur Howard Lindzon disagreed, arguing content did not scale. Interestingly, Lindzon had invested in - then quickly flipped - Wallstrip, a maker of short videos related to the stock market.
Today, we published our stats for the first time: WatchMojo.com Streams 8M Videos in First Quarter on Strength of New Partnerships with MySpace, Hulu, Imeem.
For a content producer, I think that is pretty good… or at least, a pretty good start.
In fact, judging from the hardships of UGC firms to generate meaningful ad revenues, I think quantity matters less than quality anyway and you will see that reflected more and more in investment patterns. I covered this aplenty in the Content Plays Build Funding Momentum post.
The rationale was pretty simple:
- the web is a free, ad-supported place.
- as such, marketers need to underwrite the content.
- marketers have rejected UGC.
- online web video advertising will cross $1B in US spending in 2008 but that remains tiny compared to the projected $7.1B expected in 2012, let alone the existing $75B TV ad marketplace.
- premium content will always command a premium.
But, as I’ve frequently pointed out, most VCs are not necessarily media executives, let alone advertising types. As such, much of their investments in the video space have been largely misses. To date, apart from YouTube, not a single company has really been a home run, let alone a double. Video Egg was the most recent company to do an about-face on their business model.
Mind you, a few VCs understood this and they made investments in about 10 web video content companies, but relative to the sheer money gone in platforms and UGC plays, it’s been a small figure.
By the end of 2007, it was clear that the timing of my prediction was a bit premature. In fact, sitting at New Tee Vee’s conference, you thought VCs would be avoiding content at all costs. In fact, of the panel that Om Malik had assembled, it was looking bleak:
- Only Spark Capital’s Dennis Miller was bullish on content;
- Tim Haley of Redpoint Ventures was more interested in content platforms (if I hear the P word one more time, I’ll hurl… but I digress);
- Mike Hirshland of Polaris Venture Partners was interested in content so long as it had already gained traction;
- George Zachary of Charles River Ventures was so adamantly against it that many wondered WTF he was doing on that stage. I am not saying that he is wrong, many in the crowd however thought it was odd for him to be on that panel… but then again, maybe his dissent is why he was there in the first place.
Anyway, that has changed, or should I say, is changing: 2008 is starting to make my prediction look awfully correct.
The only nuance - and a major one at that - is that it is not VCs per se, or VCs alone, but rather, VC are joining the fray by aligning themselves with talent agencies and strategic investors.
Let’s look at some of the players:
1- Making a lot of noise, is Velocity Interactive Group. The fund was the result of a merger between ComVentures and Ross Levinsohn and Jon Miller. The former was the ex-CEO of AOL, while the latter ran News Corp.’s FOX Interactive Media for Rupert Murdoch. Velocity has invested in Generate and Next New Networks.
2- Joining Velocity in the $15M Next New Networks Series B round was Saban Capital, who is also getting in on the fun by launching a new media fund. Saban hired Craig Cooper, co-founder of Boost Mobile and formerly a VC with VantagePoint Venture Partners and Softbank Capital. Saban Capital is led by Haim Saban, who sold Saban Entertainment to Disney for $5.2 billion in 2001. The company was responsible for the Power Rangers series, among others.
3- CAA + Draper Fisher Jurvetson and its founder Tim Draper, who has always had a particular soft spot for entertainment-related projects. Brian Garrett and Rick Smith, former partners at Palomar Ventures, and Brett Brewer, former president of Intermix, are working with Michael Yanover, head of business development at CAA. Read more.
4- CAA is also working with Sequoia, who has funded Will Ferrell’s Funny or Die. The link between these parties is actually Kvamme’s son, who was a producer on the initial clip that spawned the company.
5- ICM + Qualcomm - rumored to be launching a digital media fund, too.
6- WMA + Accel + Venrock + AT&T = Mailroom Fund. Read more on Paid Content.
7- UTA recently incubated a digital video firm called 60Frames, involved in financing, ad sales and syndication of “professionally-produced” content.
8- Endeavor is a minority investor in a film financing company, Media Rights Capital, though it is in a slightly different light than the ones mentioned above. MRC is supposed to invest in other multiplatform projects in broadband and mobile as well.
9- Softbank and Korea Telecom partner on $40M fund. Read more on Paid Content.
10- As well, there are a couple of other funds that have approached us in the past month that I won’t include due to confidential and competitive reasons (mainly out of courtesy and common sense - sorry), but the point is, you will be seeing more and more such funds as the “backlog” of video advertising dollars looking to flow from TV to the Web adds up.
As these funds refine their offerings and get a sense of where they want to hone in on, I presume some of these funds will become laggards, while a few become winners. Much like the VC game, only one or at the very most, two will really become the golden standard of their sector.Who will that be? I don’t know. What I do know is that in Hollywood, they bet on stars. Strictly speaking, in Socal, the stars might very well be the ones in front of the cameras… but one reason why historically such funds have fared poorly is their lack of willingness to recognize that Hollywood’s formula does not always convert well to the Web.
Online, for media companies to succeed, they need to succeed in three areas:
1- Content: Content is king, yes, it’s a cliche, but indeed as new distribution opportunities open up, the value of content soars. Broadband content is explosive and the syndication opportunities are quite infinite.
2- Marketing: Unless people see your content, it’s worthless.
3- Sales: Investors are fickle… you cannot put your blind faith in investors’ backing you, so the sooner you can find ways to generate revenues, the better. Investors’ funding then becomes the cherry on top of the icing.
Those are the three pillars of any successful media company. So long as the investment profiles of the funds look out for projects that score high on those three areas, then I think they’ll be able to make money… lots of it.
WatchMojo.com did 8M video streams in Q1, 2008, with a whopping 4.5M coming in March alone. Here’s the press release.
Curiously, I have no idea where that would put us amongst other content creators. There are a lot of figures and sources for aggregators, but not many (any?) for content owners. It’s a shame, and I smell a market opportunity for someone.
Anyway, judging by comScore’s latest figures, a property needs 67M streams to crack the Top 10.
I spoke to Andrew Lipsman, Senior Manager of Industry Analysis at comScore who gave me a breakdown of what it would take to crack the Top 25, 50 and 100 ranks. Using comScore’s USA Home, work and university panel:
- To crack the Top 25, you would need 20M streams
- To crack the Top 50, you would need 7.5M streams
- To crack the Top 100, you would need 1.5M streams
What would 5M streams get you, you ask? About 70th. Here’s the problem, most of the sites in the Top 100 are aggregators, and few, if any, have any exclusive content (let alone own the content).
Hulu for example is getting good feedback and seeing nice traction, but it does not have proprietary content; as an aggregator, it’s possible to scale quickly. We’re certainly in scale mode now, all our graphs are pointing upwards and what not, but admittedly, content takes time to scale… but once a content creator scales, it becomes an immovable force in the landscape. We’re freaking everywhere, including YouTube.
Speaking of YouTube, it’s not surprising to see that YouTube is king, sure, but it would be very interesting to see which content creators generate the most amount of streams across many sites.
As a content producer, I am most interested about that. Naturally everyone will want one metric or another, for example ABC’s digital chief Albert Cheng stresses user time spent watching videos over streams. For a traditional media company like ABC, I see his point. While our content is formatted very differently than ABC’s, I would like that figure too, especially when you consider how our library stacks up:
- 12 categories: Automotive, Education, Fashion, Film, Food, Health, Music, Politics & Economy, Space & Science, Sports, Technology and Travel
- 30 or so subcategories.
- 3500 videos published, 4000 in all including pipeline, 5000 including all unedited material
- 500 hours of filmed material
- 100 to 200 hours of programming
- Average length: 1 to 3 minutes.
- 99% is in English, with 1% being in French and Spanish, with plans for content in German, Mandarin, etc.
Not only was March a record month for WatchMojo.com, but we’ve set a new record every month since we began to track cumulative monthly streams across our network.
Advertising vs. Content
This is an important thing to consider: as video advertising formats face obstacles to scale, the line between advertising and content will blur increasingly. I am NOT saying that content will become advertising, but a lot of advertising will look like content. With proper disclosure and targeted to the right audience and in the right state of mind, it can work.
As such, tracking which companies that produce or own content that generate the most amount of streams is going to become very important.
Analyze This: Need for More Video Analytics
Last week Google unveiled YouTube Analytics to allow content owners who use YouTube determine where the streams are coming from. That’s a nice addition, but in a hyper-distribution world where media has legs and everything is embeddable, it would be excellent to get a kind of web-wide analytics tool where you can see the top content creators, too.
I thought of this when New Tee Vee’s Liz Gannes questioned the wisdom of Yahoo! not disclosing stats for Yahoo!’s now defunct The 9 show: “Neeraj Khemlani, Yahoo’s head of programming, would not disclose The 9’s audience size — a move that seems silly in this day and age. ” I asked what she meant by that last part, she said:
“Most video viewer stats are public by default — why withdraw yourself from that comparison?”
She’s right, but what is not public by default are views for an entire producer, or network, or company across the Web.
In fact, I expect players like TubeMogul or the recently-acquired Vidmetrix to come up with such data… but that would require the underlying sites (YouTube, Veoh, Revver, etc.) to let them publish that data.
I sometimes hope that Google would make its Analytics data public… but I doubt that will happen because not all publishers would allow that. However, since YouTube, Veoh and Revver etc. already publish individual video views… but not something like total views by producers. I think advertisers would really want to see that.
Lord knows I would welcome it, because we would be high atop that list.
Anyway, it’s been a fantastic first quarter, we look forward to building on it. Here’s the press release, again.
PLAY
