BUSINESS BLOGS
BUSINESS BLOGS
category: business
15 Dec 2008
related tags: Internet & Web | Video | Investing | CBS | CNET | Hulu | Sling |

Search and video advertising are very different: the former captures intent, the latter captures interest.

This plays out very differently with the kind of advertising that each one draws.

Search: Direct Marketing

Search is perfect for performance based campaigns that need a positive ROI in the mid to long term (don’t kid yourself, all campaigns are ROI-negative in the short term).  The problem with search marketing is the volume, generally speaking, all factors being equal, you eventually run out of leads and search queries you can advertise alongside, so you have to trade off quantity with quality… meaning that in the long, long run, it becomes less ROI positive… to the brink of becoming a losing proposition again.

Video: Branding

Video [online] is all about branding.  On TV you buy airtime to run an infomercial looking for sales… on the Web, you run video ads because you are promoting a car or trying to get the word out on sales.  Yes, you want cars being driven off the lot or butts in the theater seats… but you know video is a very different proposition.

It’s interesting to see TV.com try to mesh TV and Web… again. Will it work?  Who knows.  I had my own plans for TV.com, frankly… but that is pretty moot now.

Great Expectations

When it comes to what I find most different about video and search advertising, really, are the expectations.

Back in 1999, websites began to throw in the towel on search as a business.

AltaVista became a portal.

Yahoo! outsourced its search strategy to Google.

Google took advantage of the perfect storm to build a business valued at $200B (now $100B).  Part of this had to do with the utter lack of expectations for search to become big.  With video, it’s the opposite.  With TV being a $65B advertising market, and with offline dollars flowing online faster than ever, people simply presume that eventually video will become huge, too.

This has spawned hundreds of startups to vie for the dollars… but right now the market is made up of pennies.  I think the long term difference between search and video is there won’t be one company with the kind of market share and revenue stranglehold that Google commands in search.  Look at video.  Sure, YouTube does 50% market share with regards to streams, but it’s yet to crack the revenue enigma.  Over time, I see a bunch of players each doing 1-15% revenue… with hundreds more doing 0-1% of the revenue in the space.  At the other end of the spectrum, look at Hulu, everyone’s darling this year.  We love Hulu too (as much as we love YouTube - they’re both distribution partners of ours), but Hulu will run out of content sooner or later. I know it sounds impossible but trust me on this one.

Era of Lowered Expectations

What this means for investors is simple: even before the market meltdown of 2008, chances were that the implied valuations being placed on some of these startups would never pan out… now with the market meltdown of 2008 ushering the era of lowered expectations I think this reality will only set in more and more in 2009 and beyond.