After reading the What is WatchMojo.com’s eCPM? post where I talked about our licensing and advertising revenue streams, a couple of readers email me to ask: what’s this licensing revenue you talk about?
You would think I’d shut my mouth, but I would love it if more content creators pushed for guaranteed revenue, but few do… and it’s a shame because it explains the relative lack of quality video content out there that advertisers look for, and in turn, this explains why video advertising revenues are not yet supporting content creators.
In 2006, we focused on content creation, in 2007 we focused on distribution (admittedly giving it away) but in 2008, the emphasis is on monetization, and the truth is, very few distributors have the ability, size and know-how to deliver advertising revenues.
Anyway, there’s nothing too black box-ish about it, so here’s the secret, sit down, get ready because here it comes:
- We ask for it;
Mind you, 7 out of 10 distributors balk; 3 consider it, and 1 - maybe 2 - agrees to it. But guess what, those who agree to it get good content, lots of it, and get something that others who don’t want to pay don’t have (just to be clear, sure, some of older partners still get content on revenue share alone, but we get 10 requests for our content each month, maybe more, so I am talking about new deals, I’m not crazy, I don’t go to old partners telling them I will delete our videos if they don’t show us the money).
- This partially explains why our streams continue to grow but not as quickly as if we gave it away. The posts I link to below outline the rationale for this. I could get into a nuance between text and video content about why this is not a bad idea at all… but I will leave that for another day. If this sounds like something that is interesting to you and you want to read on this sooner, email me at ash@mojosupreme.com.
- Reality is, when you give away your content away for free, people assume it has no value. Moreover, when a licensor gives it away pro bono, they licensee views the content as “risk-free” and does not really push it (if they pay for it, they need to recover the investment, after all).
- Believe it or not, we even tell syndication partners to let us know before they re-distribute it.
Hulu, for example, re-distributes our content to a wide array of spots, but they email us beforehand to see if we (and other content owners have an objection). Considering the media DNA they have (the service is a joint venture between NBC and News Corp., after all), to them this is a logical thing to offer content partners.
Technology-centric services like Blip.tv (a company I certainly respect) are surprised when we ask them for that courtesy. It has everything to do with one’s vantage point: technology companies think that they are doing you a favor when they do things without asking you; media companies understand that you might have an objection when others make critical decisions for you.
There is no black or white rule of thumb, sometimes we welcome the re-syndication (ROO for example gets us on Daily Express, something that we would not have had the time to secure ourselves; but in other cases, we manage to secure guaranteed revenue from some by not letting a distributor redistribute our content). Honestly, to quote Jack Welch, it has to come straight from the gut. There are no playbooks in this space and the simple truth, even companies and people who raise millions from VCs don’t have the faintest of clues, so it helps not to pretend to have all of the answers.
My rule of thumb is that I know less in the morning than I do in the evening, and in the online video space, a lot happens between morning and evening, so that’s a good thing.
All it takes, however, is common sense to understand that some companies have cornered themselves by speculating. That’s right, it helps to be conservative.
Some of these theories seem extremely counter intuitive, but if we relied on speculative advertising revenue share deals alone, we’d be bankrupt, long ago. Yet we’re almost breaking even and our eCPM overperforms that of the market.
More pontifications:
In Why Online Video Businesses are a Joke, I outline the case for paying for content in exchange for exclusivity, which is uber counter-intuitive in these days of hippie-minded super distribution.
In Does the Law of Diminishing Return Apply to the Theory of Content is King, I make the case that while every incremental unit of distribution/video consumption is welcome, when the ad model is under-developed (or crappy as I like to call it), you actually tend to dilute your offering by giving it away for free.
In Advertising vs. Licensing, we began to explore the merits of the two models, and argue that in early periods of growth, licensing will prevail, while in boom times, advertising revenue will outperform licensing and trace this obsession we have with speculative, straight advertising revenue share deals to two case studies: MTV and Google.
In Successful Revenue Models for Content Libraries, we outline all of the various options available to content owners.
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WatchMojo NewsletterThe formula to make money off online video is actually quite simple:
Option 1: Secure licensing fees. For more on this, click here.
Option 2: Generate advertising revenue, share with others, when applicable (you can put product placement here to simplify things, since that is a form of advertising).
Technically, you can also simply be a producer (create clips and then sell them), but we’re talking about publishing and syndication, which imply you own the rights and are not creating custom clips per se.
We’ll start by looking at Option 2, given TubeMogul’s recent study that suggests a $12.39 CPM ad rate for online video producers who are monetizing their video. Those last three words are important, as not everyone is monetizing video yet.
In case you are wondering, yes, WatchMojo.com is monetizing its video streams.
In case you are wondering what our eCPM is, read on.
First, let’s look at what drives online video advertising revenues.
There are tangible and intangible variables to consider.
The tangible variables that determine revenue are the following:
The formula for Advertising Revenue is =
Number of Videos (simply, how many clips in your library)
x
Views per Video (how many times is each video viewed)
x
Distribution Partners (your own site, YouTube, Myspace, Hulu etc.)
x
Distribution Platforms (web, wireless, television, out of home digital networks)
x
CPM (how much you can charge for each 1,000 monetized streams)
x
Revenue share percentage (from 0 to 100%, basically)
- There is a multiplier effect, and that is Frequency of publishing. The more you publish, the higher the likelihood that someone stumbles on your content. On this, no one beats us: we publish 3-5 clips per day.
We also have one of the bigger library sizes.
These are very important attributes that create obstacles that make content creators remain irrelevant and incapable of generating meaningful revenues. By irrelevant, I don’t mean that in a bad way, I mean unable to cut through the noise and clutter that is online video.
The intangible variables that determine revenue are the following:
- How ad friendly is the content. Ours is extremely ad friendly, whether it’s our automotive, entertainment fashion or travel content. But, it remains informational and entertaining, so we please both viewers and advertisers. This is key and more art than science.
- How evergreen is the content? If your content is relevant today but useless tomorrow, I have bad news for you, your eCPM will be lower than if the content is evergreen.
Put all of these variables into a big blender, mix, shake, stir and what you get is your eCPM.
So what is WatchMojo.com’s [net] eCPM?
Our total eCPM taking into consideration all revenue is $16.67 (using July’s figures). But this is from both licensing and advertising revenue. Advertising eCPM is $10. Mind you, we don’t have a sales force, technically. If we did, it would be much more.
But here’s the thing:
Few content companies can command licensing revenues, and if I am admitting all of this, it’s because I sincerely want others to do so, because it forces aggregators/distributors who are armed to the teeth with millions in VC money to share some of that loot with producers of quality content… which is what will make advertising revenues in online video meaningful.
Over time, however, I fully expect online video advertising eCPM to be bigger than video licensing revenues, but we’re not there, yet.
Related:
Does the Law of Diminishing Return Apply to The Theory of Content is King? - read more.
For more on licensing fees, click here.
Update: Fixed. We’re back. Thank you to everyone at YouTube and Google for fixing this in a timely manner.
I don’t usually blog about our business relationship with YouTube, at least not specifics. But this is out of bizarro world.
Google is announcing some improvements to its core service. Great. Maybe they want to look into this!
I just realized that a bunch of our videos were unavailable on our account, citing violation of the site’s Terms of Use. In the past, we’ve had the odd incident, and usually it was a technical glitch or something else. When it wasn’t a technical glitch, we have always been right, basically. Bear in mind, we produce videos, so we own the rights to the media.
Anyway, last time I checked (July 16 2008), we had over 1,700 videos on our YouTube account.
This morning, we have 160!
Three words come to mind: What.The.F***. Ok, make that four words: Dude, What the F***?
Needless to say, emails have been sent in to YouTube. I’m hoping this is a glitch. Update to come, soon. Of course, they’re on the West Coast.
Update #1:
- I asked a few people who cover the industry, Liz Gannes of New Tee Vee mentioned (hopefully she does not mind me posting her answer, don’t see why she would):
“I don’t know — at least they didn’t suspend your whole account — they did that recently to Loic Le Meur. It’s usually some conclusion over a copyright claim.”
Did a quick search: French entrepreneur Loic Le Meur covered it here. Incidentally, Loic had uploaded videos of interviews he conducted with a French TV station. That does not seem to be the case with us, as we shoot everything ourselves and don’t upload third party content unless we have a clear right to do so. Moreover, in the 1% of occurrences where we use a sample clip from a movie, for example, it’s either done with permission as promotional content or it’s basically fair use / derivative work.
I still figure this is a technical glitch… as I stated, we’ve had a few occurrences where an individual clip disappeared, and it was a glitch, too. One time, Van Morrison’s peeps asked us to remove a clip, too… but that was a mass takedown request: we were not using any audio or video, just an album cover. I thought that was excessive, his people agreed, so did YouTube. Clip’s back up. The point is: we work very hard to be on the right side of the copyright law and strive to be good corporate citizens, so when someone assaults your integrity, it’s not a pleasant thing. One time we had an issue with MySpace, too… but that too was kosher, in the end.
All to say: details to come.
It’s 8:37am on the West Coast… so I don’t want to go crazy and start calling people’s cell phones… yet. I’m kidding, I think.
Update #2:
A reader emailed me and asked if we got any emails warning us of any infringement. Great question: nope, no emails. This is why I think this is a technical glitch. Deleting 1,600 videos out of 1,760 or so seems wildly crazy… then again, maybe Eric Schmidt, Sergei Brin and Larry Page are trying to cut back on costs. I’m kidding, that’s for sure.
More to come. When do Goobers (what do they call Google’s YouTube employees) get to work, I wonder…
Update #3:
All right, no sense in pressing Refresh a thousand times on our YouTube account or Send/Receive in my inbox - or whatever you do to see if you have new emails in Gmail. Got to run some errands, will be back, soon.
Update #4:
Back from lunch. Boy am I glad we have a cheap pizza outlet in our neighborhood. As I was waiting at the pizzeria, I was checking my Blackberry and wondered: that’s odd, I didn’t even get an email confirmation when I emailed copyright@youtube.com. Maybe Gmail is down. After all, Google Docs is buggy, it says some of the documents were last updated on May 1, though I am sure I used them today! But that’s for another post.
I’m now getting worried: it’s now almost 10am PST… still no sign of life at Google/YouTube.
I hope our friends at YouTube are fine. What if terrorists attacked the compound? That would suck. Maybe there was no terrorist attack, but simply a power outage. Did the weight of Google’s supercomputer crash on itself.
Maybe I should grab my tool kit, grab a pair of tickets and go see if they need help. Montreal to SF is 6 hours, less the 3 hours I save traveling West, maybe we can be up by the time Googlers head home. I wonder, when do they show up to work? That’s the question.
All right, no time to waste: where’s my tool kit, I’ll need that. I can’t seem to find my screwdrivers, but here’s my wrench and sledgehammer, hopefully those will do.
Do you think they’ll let me on the flight with those? More details to come.
Update #5:
Houston San Bruno, we have contact. YouTube is “looking at it” - they’re “trying to figure it out”. Most importantly, it looks like they survived the nuclear strike, if one took place.
Details to come, I hope.
Good thing I got flight adjustment insurance on my flight tickets, no need to get to SF personally. This gives me more time to find my screwdriver, too. I think I would look suspicious if I tried to board a plane with just a wrench and hammer, but completing that duo with a screwdriver would make me look less fishy to customs guards, I’m sure. Nothing like an impatient Canadian-Iranian trying to board a one-way flight to SF from Montreal with a wrench and hammer alone.
Stay tuned folks.
Update #6:
Seems like I misplaced my passport. So no traveling to SF right now. Let’s see if we can solve this puppy remotely. My contact at YouTube rightfully pointed out that while one page in our YouTube account (My Videos) shows that indeed we’ve uploaded 1,788 videos…
Another one (My Account) shows a paltry 160. What gives?
I used to be really good at math (is this calculus or algebra, damn it!), but first calculators, then Excel, and now Google Docs’ online spreadsheets are making me really bad at math… but I am very sure that 160 does not equal 1,788. Regardless, looks like we’re closing in on the culprit.
This begs a question: is it better for your site - which generates 1-3% of your total streams - to be up and running properly or your YouTube account. Before you answer, remember that YouTube commands a 75% share of video streams and 25% of video viewer eyeballs…
Stay tuned for an update, and that question merits a post onto itself.
Update #6:
Oh, my God. The case of the missing 1,622 files is now going into hour 6, if not more. It’s now 2:15pm EST… last flight out of Montreal’s Pierre Elliott Trudeau and into SFO is t 5:15pm. With international flights though (no, Canada isn’t the 51st state) I would have be at the gate a whole 90 minutes before, or 3:45pm, or in a mere 90 minutes.
That’s what we’re working with, I guess.
Will Google manage to fix YouTube’s glitch in the next 90 minutes? If they don’t… this means I can’t fly down there to lend a hand. Maybe they’ll send the Google plane? That would be pretty cool. Cooler still would be if I manage to fix YouTube…
They hired their CFO from Montreal, maybe they’ll hire the YouTube-fixer from here, as well. Not like YouTube is broken of course, but I have previously suggested ways to fix YouTube:
- 13 ways to turn YouTube from a cool site into a profitable business.
- How YouTube can increase revenues and lure advertisers.
- Memo to YouTube: Do This, You’ll Print Money
- 4% is Part of the Solution
- YouTube’s Nuclear Option to Monetize its Content
Here’s a wild idea: maybe if I stop suggesting all of these things, the videos will come back?
Maybe this is karmic revenge? Who knows. Let’s go see.
Nope, still only 160 videos. Where oh where did the 1,622 other videos go?
Oh-oh, it’s now 2:30pm. Must decide: to stay or head to the Bay?
Update #7 @ 4pm EST:
All righty. Got some bad news. Not only did I miss the last flight out to SFO, but it looks like the 1,622 videos have totally fallen through the cracks, somewhere between San Bruno and Mountain View. Gone, forever. No need in getting on that flight… in the end, I need to go back to my cubicle and start uploading those clips, one by one. Come on, I’m just kidding.
The good folks at Google/YouTube are working on it. Thankfully, they seem to be pretty good with tech matters (hey, maybe they can count Yahoo!’s shareholder votes) and we’re told the videos should - knock on wood, Big-Guy willing - be back up soon.
My colleague asked “why oh why did this happen to us”? Frankly - as TubeMogul’s CEO Brett Wilson told me as well - WatchMojo.com is a high maintenance power user (case in point, consider this crazy blog entry), so invariably even if something isn’t our fault, I’m still surprised that things don’t actually get off the rails more often… considering that we do millions of streams every month across thousands of videos (that’s just one partner, YouTube’s command of the rich media video market is awesome and the fact that they don’t have glitches more frequently remains one of the more impressive feats of the industry, in my humble opinion).
Sure, it does suck to have lost an entire’s day worth of streams and revenues off our YouTube channel, but like we do with everything else, I still look at this as glass is half-full, not half-empty.
There’s a silver linings in all of this… and everything else in life (or business), from my earlier post this year:
If you wake up in the morning and are greeted with bad news, don’t worry too much because you’re bound to get worst news later on in the day…
And if ever you are greeted with some good news, enjoy it cause it won’t last, something is bound to go awry…
If you remember these two tenets of startups, then you will be amazed at how much success you can have because you don’t sweat the small negative stuff and you don’t let the good stuff get to your head.
You don’t know what you got until it’s gone, goes the expression… and honestly, seeing our clip count dwindle down from 1,788 to 160 only makes us want to put our entire library on YouTube…
Check out all of the content on our own site in the meantime. Update to come, hopefully today…
Update #8 @ 7pm EST:
Well, it’s a good thing I never made that flight - I’d be somewhere over Chicago now - because the folks at Google and YouTube managed to bring all 1,622 clips back on the grid.
Booyah. Hope you enjoyed keeping track of it… I am sure the folks at YouTube were too busy to read any of this… but hopefully they have a good sense of humor these things.
Russia’s answer to Michael Arrington, search engine Quintura’s CEO Yakov Sadchikov comes across some interesting figures on the Russian online advertising market, estimated at $260 million from January to June 2008. This is up 73% year-over-year, according to a report from MindShare Interaction. More interestingly is the fact that contextual advertising accounted for $161 million (or 62% of total online advertising spending), while display advertising accounted for $99 million (38%) of total online spending.
The business daily Kommersant breaks down the top 10 online display advertisers in Russia, including:
- Ford Motor Co. ($4.6m),
- MTS ($2.5m),
- Megafon ($2.3m),
- General Motors ($2m),
- VimpelCom ($1.9m),
- Peugeout Citroen ($1.6m),
- Nissan ($1.5m),
- Samsung ($1.3m),
- Honda ($1.2m), and
- Procter & Gamble ($1.1m).
Partially because I was born in a Russian-built hospital in Tehran, I’ve always been somewhat interested in Russia, its history, and its recent resurgence. The country is a fascinating story in the re-making, what with the rumors surrounding outgoing President Vladimir Putin’s massive fortunes, and the stratospheric rise the country’s fortunes have experienced of late. Consider some stats I came across:
The average monthly Russian salary was:
- $200 in 2003,
- $303 in 2005,
- $545 in 2007.
according to Kommersant and Pravda. Obviously, there’s plenty of upside.
And that’s for the average employee, as in all countries, the highest earners earn far, far more. A CEO earns $150,000 per annum, or just over $10,000 per month, according to this report, and that was 2007, I suspect it’s gone even higher.
In fact, the top CEOs get up to $24,000 per month, according to this.
Connecting the dots: as Russia’s massive population - which a few short years ago was showing troubling demographic signs - increases its purchasing power, expect online advertising rates to follow suit. Here’s comScore’s Top 10 Russian sites:
PLAY
