Daily Motion is escalating the battle for #3 in their space (after YouTube and MySpace TV).
Online video advertising is growing, quickly.
Online video advertising is where search advertising was in 2000-01: a major part of the web ecosystem desperately looking for a business model.
Unlike search - where traditional media companies failed to invest and even new media companies gave up in favor of portaldom - a lot of companies are vying for online video supremacy. My read on it is that we will never have a Google of video. That’s right, even YouTube - incidentally owned by Google - won’t command the kind of revenue within its segment that Google does. The reason for that is lack of competition and monetization ability. On the former, YouTube has a lot of competition in the monetization race.
Either way, looking at the stats, the numbers are impressive:
An estimate of the US online video ad market for 2009 - set in 2004: $657 million | Source.
An estimate of the US online video ad market for 2009 - set in 2005: $1.5 billion | Source.
An estimate of the US online video ad market for 2010 - set in 2006: $2.3 billion | Source.
An estimate of the US online video ad market for 2010 - set in late 2006: $3 billion | Source.
An estimate of the US online video ad market for 2011 - set in 2007: $4.3 billion | Source.
An estimate of the Worldwide online video ad market for 2011 - set in 2007: $10 billion | Source.
An estimate of the US online video ad market for 2012 - set in late 2007: $7.1 billion | Source.
An estimate of the US online video ad market for 2012 - set in early 2008: $6.6 billion (all broadband at $12.2B) | Source.
It’s thus not surprising to see the sheer volume of money that is being invested in the space, here is an incomplete snapshot:
Judging from that, investors better be patient because only YouTube has exited, handsomely, to the tune of $1,650,000,000 (that’s $1.65B, in case you’re wondering). I’d like to remind everyone that more money does not equal more return, but I digress.
It’s worth noting, too, that YouTube raised less money than everyone else in its peer group but I highly doubt anyone in that group will be worth more, ever, than YouTube.
I am personally hoping that WatchMojo.com pulls the same feat in its peer group. I won’t say “jokes aside” because I am not exactly kidding, admitting that yes, indeed, we’ve raised - and spent - less than $5M to build our content and distribution, which is actually bigger than some of our peers. You might notice that I do not call the players in our group competitors because we are the bastard children of the broader video space: everyone is betting heavily on platforms and user-generated content and our category is definitely going against the grain.
Lastly, I think most of these players are pricing themselves out of exits:
- IPOs will be very hard: yes online advertising is growing quickly but I suspect traditional media (that owns rights to the content) will garner a big share of the online video ad pie. In this context, hitting $100M in revenues or more becomes very challenging, especially with the low-quality content most of these sites are trying to monetize.
- M&A becomes nearly impossible because you need to sell for more than you have raised, and judging by Revver’s fate (who raised $12.7M and sold for less than $5M) that becomes quite hard.
It’s a good thing I am no low-expectations mofo… just because we have not raised boatloads of cash (yet anyway) does not mean we’re not gunning for a big payday one day, but realizing that such a day might not materialize tomorrow, I respectfully think a lot of the companies in the broader video space and our content creation space in particular have dug too deep of a hole for themselves.
To each their own.
This is a work in progress, I am adding CMS platforms (Brightcove, Maven, etc.) and CDNs (Limelight, Akamai, etc.) as we speak. If you have more companies and funding amounts, or if I made a typo, leave the correction in the comments or email me at ash@mojosupreme.com.
From Dan Rayburn’s blog:
So with all that being said, below is what the going rate is for streaming media delivery. These figures are based on actual contracts and RFPs I have seen in the market and comes from customers telling me on a weekly basis what they are paying. Since last quarters pricing, which I detailed here, the biggest change is at the 50TB+ per month commitment. Anything below 50TB+ has pretty much been level all year. Only above 50TB+ and really at 100TB+ is where the price has dropped from last quarter.
Read the rest.
Being a fairly large producer of video content over at WatchMojo.com, I’ve come to appreciate the need and desire to serve videos in a crips, quick and reliable fashion. Having viewers from Bombay to Boston, having a global grid that can serve videos is not an option, it’s a must.
Relying on a host is just not optimal, usually, and so enter CDNs, or content delivery networks.
Last year when CDNs began to capture both private and public investors’ attention, you knew the good times were back. But CDNs were commoditized the first time around for a reason. Should you invest in something that is, in fact, a commodity?
The leader in the space, of course, is Akamai. Akamai has had some competition of late from Limelight Networks, backed by $130M in financing from Goldman Sachs. Akamai managed to woo then startups MySpace and YouTube and rode their growth to an IPO. The stock’s performance has been clouded by legal liabilities stemming from a lawsuit from Akamai, which has proven to be a legal bully against startups. After the most recent slide, I bought a few shares… I’m not sure if I’m a long term investor in Limelight, frankly, because every day that goes by, I see more and more downward pressure on CDN pricing power. It should be noted, that just because there is pricing power on a stock does not mean the overall macro, fundamentals of a company or industry are bad. Limelight, for example, is seeing massive revenue growth, and if the lawsuit cloud disappears, then you can see the stock pop a few dollars.
But before you dive into the stock, note that there are upstarts crowding the space: former Doubleclick founder and managers launched Panther Express… who some say is doing to Limelight what Limelight did to Akamai: undercutting prices and winning over clients.
Today, a new player enters the space: Edgecast. According to James Segil, co-founder and president of the company: “We give the bandwidth to customers at cost and plan to make the profit on the services, such as reporting tools,” Segil says. “More important, we improve their performance, give them more features, offer dedicated edge space, and more - all while reducing their costs as much as 50 percent.”
Customers like IMAX Corp., one of a dozen businesses in entertainment and media, are not complaining and have signed up for EdgeCast to deliver streaming and downloadable video to their websites. Segil says he and partners pulled together enough private capital to launch the network globally, rather than regionally, “to compete better against Akamai and Limelight.”
Read more on NewTeeVee. Also, worth checking out this post on 10 P2P players in the CDN space.
Related:
- Why Limelight Networks Shot Up 27% Friday
- Akamai vs. Limelight Networks - Start Your Engines
- Grid Networks Tackles CDN market with P2P Solution
- Akamai and Level3 - Who will win?
Disclosure: I own shares in Limelight, my former boss Mark Jung sits on Limelight’s board but I have absolutely no insight into the company by way of that relationship.
Last Friday I wondered what was up with the 27% spike in Limelight Networks’ stock price (disclaimer: long LLNW).
I thought it was an institutional investor piling on some shares, since the company’s stock debuted at about $18, zoomed up to nearly $22, but had fallen back down to $15 before the 27% spike.
Today Paid Content reports on a Light Reading post that in preliminary hearings, a court sided with Limelight (and against arch competitor Akamai), thus explaining why the stock shot up on Friday: ”The court said that Akamai was trying to patent the process, not the technology and rejected the claim.”
As a result of the ruling, shares in Limelight rose $4.21 (27.04%) to $19.78 on the day, after touching an all-time low of $15.13 earlier in the trading session.
Rafat Ali added: “The case is complex, so if someone else understands the ruling better, let us know.”
I have yet to read the 29-page report, but will sometime this week if I have time. But the premise might not be that complex if you apply it to something simpler.
First off, I’m not a lawyer (again). Second, I’m not about to say that you cannot patent a process. I’m sure you can. I guess it depends on what the process is. From what I know about CDNs, I am not sure what CDNs do is patentable. I’ve not given it that much thought… but then again, I’m no brainiac from MIT.
But, if you take a step back and consider that a patent is intellectual property that is not fundamentally different than copyright, then you can say that “while published works are copyright”, the process by which you print a document is not. This is probably simplifying it too much, but it does apply to the Akamai vs. Limelight Networks a bit. The judge, I would presume, probably feels that the process whereby (using the same example)
a) ink gets applied to paper to form words and sentences and then
b) gets printed on a sheet of paper,
b) gets bound and printed
does not constitute a copyrightable asset. I’m no electric engineer (or whomever does what LLNW and AKAM do) but that makes sense.
If you look at this in a different form of IP, say trade secrets, you can apply the same rationale: Take Coca-Cola versus Pepsi, or McDonald’s versus Burger King. Surely if McDonald’s uses a certain type of meat, or develops a super duper oven etc., or decides to have 3 people working side-by-side to assemble the world’s greatest burger, these are trade secrets that a McDonald’s employee might not be allowed to use at BK if they were to leave from one to another, but if BK too wanted to change its process of putting the patty on the bread, etc., ie. apply the same process, I’m not sure there is anything non-kosher.
Now, leaving food and beverages and returning to, well, whatever it is that Limelight produces: if the folks over at Limelight Networks were hiring former employees of Akamai and these people were violating any competition or confidentiality agreements, then a court could try to prevent these people from working at LLNW, but even then, it would not be able to shut down the Arizona-based company altogether.
According to a GigaOm post when it was filed, “Court documents show that, the lawsuit was filed in the US District Court in the State of Massachusetts in late June 2006. MIT and Akamai allege that Limelight is infringing on Patent # 6,108,703 and patent # 6,553,413. Both patents were issued to MIT and are licensed exclusively to Akamai.”
So, what processes are patentable, well, I’m not sure if that’s even a word, let alone the question I ask… but for now, all I’ll say is this: The risk with lawsuits, as I’ve written here before, is that you can blow your false sense of security by over-extending your legal right…
Anyway, I’m not a lawyer to take this all with a grain of salt, but the venerable readers of this blog might trust my interpretation of legalese and its translation into English… but we won’t go there.
Note to Limelight: I’ll send over my bill for legal advice first thing tomorrow morning…
Disclaimer: I’m not a lawyer, I just think that I am. And, I own shares in LLNW.
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