Our friends at Blip.tv raised some money from Bain Capital. In case the name sounds familiar, that is the company that Republican Presidential candidate Mitt Romney ran for years. This is the second institutional round for Blip.tv, who Tech Crunch notes is keeping its cards to its chest. Smart move. A lot of companies spend more time issuing press releases touting how much capital they’ve raised, all the while neglecting their clients and partners. From our experience working with Blip.tv (disclosure: we integrated their player in our CMS when we relaunched the site in August 2007), they are the polar opposite of that.
In the summer of 2007, we had to make a call between:
- integrating VideoEgg’s player
- going with Brightcove
- building our own player from scratch
- integrating Blip.tv’s player.
We went with option d, and especially in light of Video Egg getting out of this market earlier this year, this ranks as one of the best moves I’ve made in my career… because had I picked Video Egg and had to migrate away to something else this year, I would have lost it. Every week, some company calls us and offers us their platform pro bono in the hope that we migrate away from Blip.tv… consistently, we say thanks, but no thanks.
As you know, financing processes take 6 - sometimes 12 - months. When you see companies raise money these days, you know they are top notch quality companies backed by great managers. Why? Financiers have the best excuse in the world to back out of deals these days (hmm… “the world is melting away!”) so when you see deals being announced now, it means that much more.
Worth noting:
Blip.tv was founded in May of 2005 and has grown to serving more than 51 million video views in September 2008, which would represent a 250% increase compared to September 2007. The company now distributes more than 37,000 actively updated Web shows, which release an average of three new episodes per month.
Technically, we’re one of those 37,000… but we produce 100-150 segments per month, and publish 50-100. Admittedly, our videos are 1-3 minutes… but still.
If you are a regular reader of this blog (thanks, by the way), you might have noticed the lack of 7, 1,000-word blog entries of late per day… We’ve been busy.
Anyway, a few interesting tidbits:
- Yahoo! kills The 9. As I suspected when it launched: not surprising. Yahoo!’s got a lot of potential to really do interesting things in video… and with all due respect to everyone involved, the 9 was not it (disclaimer: own some shares in the company). Broadly speaking: I think a lot of companies will move away from “building” video assets to buying them. In bad economic times: if you expect revenues to be on the soft side, you cut back costs. This was such a casualty. That being said, cash sits on the balance sheet and does little, so companies use that in a more reasonable valuation landscape to scoop up companies. Not sure if this will happen at Yahoo!, but when you consider that Yahoo! has in the past year forayed into original sports and women’s content… don’t write this off.
- What? LonelyGirl15 was not a long-lasting franchise? The girl (last name Girl, first name Lonely) is off to greener pastures. Read more here. See our interview with Lonely Girl actress Alexandra Dreyfus here.
- Chicken or Egg? Apparently, neither: Video Egg changes business models like you and I change underwear: pretty often. I’m not even sure what the latest model is, frankly. Read more here. See our interview with their CEO a year ago here. A case of a company raising too much money before knowing what to do with it.
We’re seeing a major flight to quality in video, it’s about freaking time.
Almost exactly a year ago, Mojo Supreme and WatchMojo.com were looking at relaunching on a new platform.
After a lot of soul searching and due diligence, we opted to build the content management system using Typo3, a powerful open-source system. We then considered many options for the video player. We looked at Brightcove, Maven and other such closed options… but ultimately we were torn between Video Egg and Blip.tv’s players.
I won’t get into all of the reasons and criteria I went through, but for a few reasons - one of which was nothing other than my gut feeling - I decided to opt for Blip.tv.
It was one of those feelings that to this day I cannot fully explain. Maybe it was based on my interactions with the folks over at Blip.tv… who knows. Of course, within hours of choosing to work with Blip.tv, I knew it was a very wise decision. We’ve worked with them since August 19th, 2007, when we relaunched. Incidentally, at the time, our property (WatchMojo.com) was generating as many streams as our syndication network. Today, our network does 95%+ of our total streams, so yes, in some ways, the property is less important in that sense… but make no mistake about it: our property remains a showroom or storefront… so when people pass by and check us out, we need to put our best face forward.
I could easily say that going with Blip.tv remains one of our better judgment calls. Blip.tv serves videos for many great content producers, but I think that the way we’ve integrated them in both the back end and front end is very unique.
Since I made that call, Video Egg has tried many things and after $32M in funding have decided to drop the video hosting unit to focus on the ad network strategy. Good for them. This post isn’t a knock at Video Egg - I’ve interviewed their CEO, know a couple of their investors - and am sure that we’ll work with them in one capacity or another… what this post is about is a reminder of two things:
- When you build your company, you will face many crossroads, sometimes your gut is the best source to find the answer. Why? Because your gut will consider all of the variables anyway, but it will also allow you to see that some companies don’t really have their heart in a product, service, or segment… and if and when they realize that and get out of the market, you will have to find a replacement, fast.
Which takes us to point two for this blog post:
- If you are using Video Egg and got the following letter look at the glass as half-full. Check out blip.tv and tell then Ash from WatchMojo.com referred you to them (hmm… no, this isn’t an affiliate marketing schtick). This little episode just might prove to be a blessing in disguise.
Here’s the full letter, which I came across on SAI:
Hope this email finds you well.
Our business is changing, and I wanted to send you a personal note to let you know.
On May 31, 2008, we will be shutting down the VideoEgg Publisher and Player service. As such, we will be sending a termination notice to you early next week.
As you know, over the past twelve months, VideoEgg has become a leading video advertising network. We have decided to focus on video and rich media monetization technologies, and therefore are no longer investing in the video platform side of the business. We are trying to consolidate our relationships with profitable large partners and continue our focus on creating higher value ad solutions for brand advertisers.
Please be assured that, until May 31, 2008, all videos uploaded to our servers using the VideoEgg Publisher will be available for playback on your site.
Pursuant to our contract with you, we will provide you with access to your uploaded videos for the next 90 days. If you wish to work with us to allow you to access your videos, please email us at partners@videoegg.com, and we will assign an engineer to work with your team to provide you with access.
Check out WatchMojo.com to see more… or enjoy the following video for some nice eye candy:
And now check out Blip.tv.
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.
Video Egg is one of the many companies that has raised oodles of money: by last count, it had closed a Series D round raising money from WPP. I had looked into Video Egg’s platform last year and balked on them for the simple reason that they were not set up to accept 16×9 video content. I am sure they do now, but it was too late for me, as we were relaunching on August 19 2007 and we publish in 16×9 (instead of 4×3).
Anyway, instead of focusing on that - and a plethora of other things that content producers wanted - Video Egg took a few bizarre turns, doubling up on user-generated content (Video Egg powers a lot of social networking sites that run video content that most advertisers are not interested in) and then diving deep down into social media by billing itself as a Facebook ad network.
I gagged, but did not say anything. Others were not as kind.
Today Video Egg bragged about generating a whopping $1.5M over the past five months, as Mashable points out, that is a pittance relative to News Corp.’s Fox Interactive Media, who powered on MySpace’s awesome growth will do some $800M in revenue this year (disclaimer: WatchMojo.com is a content provider on MySpace TV).
What does this all suggest? Don’t jump of freaking bandwagons!
The Facebook bandwagon has been on turbo and it’s not surprising to see so many companies position themselves for it, but despite Video Egg’s best efforts, the effort only generated $1.5M. Had they focused more on the real deal (ie. video) they would have done better.
Surprising to see big-talking VCs take their eye off the ball and focus on the low hanging fruit that is social networks’ real estate… the real money is in video advertising on professionally produced video content for the Web. But don’t take it from me, check out the stats.
If indeed Video Egg’s Facebook-play is a mere sliver of their whole business (which I suspect it is) then they need to get over the flavor du jour strategy and drive that point home, otherwise, Video Egg’s competitors will eat their lunch.
Either way, Video Egg is backed by some of the smartest money out there, and the management team is pretty smart too, but am I the only one who is thinking of Bolt.com? Bolt.com was a media company leading a strong vertical, then it suffered from YouTube envy (ie. got greedy) and dived into user-generated content. Problem was Bolt.com got sued, sold to GoFish, that went nowhere (cause GoFish lost 90% of its value) and today Bolt.com is a mere flash in the pan.
Video Egg probably won’t fare so bad, and in fact, should do well… but they should recognize what the real opportunity is and drop the Facebook envy.
The next panel sought to answer the question: Is there money in Long Tail Video?” or mainly: how do you make money. The panel was moderated by Jeremy Liew, from Lightspeed Venture Partners.
“There’s 150 people in this room who believe there is money in video, so let’s ask how do you make it,” starts Liew.
Matt Sanchez, VideoEgg: “We’ve seeing pre-roll, or mid- and post-roll because that is close to TV ads, but those work with long form content. We have taken the market with an invitation overlay, it’s user controlled and that is something that can be demanded, even if done in conjunction with rolls. Pre-rolls are disruptive and deflate volume of streams, you are seeing more and more adoption of overlays.” The company supports 4 units, with overlays being the key.
Matt Wasserlauf, Broadband Enterprises: “30 second spots is a lot to ask the online viewer, and advertisers are making changes. The pre-roll is the anchor, all other ad units feed off the pre-roll. Repurposed 30-second TV ads get tired, in 2008 you will see a lot of great short form pre-roll creative, optimized for the Web, let’s hold judgment and see what comes of pre-roll ads.
Tod Sacerdoti, BrightRoll: “BR is agnostic to any one unit, we aggregate audiences and then resell it to marketers, it could be in any format. What you see mainly is branded content and branded advertising. But despite what is said about pre-rolls, pre-rolls is the most effective units. A lot of progress on standardization of hosting and serving and tracking of video ads, you see this with banner ads, why not video ads?” BR’s majority is pre and mid-roll ads, and the company supports 5 ad units.
Jayant Kadambi, YuMe: “The most successful ad format has a lot to do with the contextual relevance of ads to the content, and not really the format. We work with ad agencies and support any new idea agencies have to promote the idea. The bulk of our business remains pre-roll type of ad units.”
Everyone agrees that the lack of cross-site, cross-platform measurement services hurt the draw of online video. There are players like Tubemogul, Hey Spread, Vidmetrix and even Veoh who have started to address these, but despite the pros of each player there, those services remain very limited (they only work with some of the online file sharing sites, for example, and not the major portals like MSN video, AOL, Yahoo! etc.)
Related:
- Why Video Egg is hinting at suing Google over the overlay?
- Brightcove vs. Brightroll vs. Yume vs. Scancout etc.
- Will video become larger than paid search?
- Has the bubble in file sharing video platforms moved to ad networks?
Paid Content reports that video ad network Bright Roll has raised $5M in Series B. I interviewed the firm’s CEO Tod Sacerdoti some time ago, to read the post, click here.
This comes on the heels of YuMe’s $9M round this week, which in turn came on the heels of the massive Scanscout investment by Time Warner Investments… which itself was a knee-jerk reaction to Video Egg’s Series D round (nope, not a typo, that is D as in dude?). See my interview with Video Egg’s CEO Matt Sanchez here.
Last year (2006) web video sales were $439M, 2007 sales will be $750M. That is within the overall $17B online ad market. Of course, if investors are getting giddy, it’s not for the now and here but the tomorrow and maybe. Online video estimates have been mushrooming of late, see the growth in forecasts here:
An estimate of the online video ad market for 2009 - set in 2004: $657 million | Source.
An estimate of the online video ad market for 2009 - set in 2005: $1.5 billion | Source.
An estimate of the online video ad market for 2010 - set in 2006: $2.3 billion | Source.
An estimate of the online video ad market for 2010 - set in late 2006: $3 billion | Source.
An estimate of the online video ad market for 2011 - set in 2007: $10 billion | Source.
Some stats on Brightroll, then some thoughts on the space:
- in August 2007 Brightroll issued a press release saying it had served its 500 Millionth video ad, so presume the actual 500 Millionth stream was done sometime in July, 2007.
- its history page claims to have done 800M streams since the company launched, since we’re in October, I presume that was as of September 2007.
The company was founded in June 2006, according to founder’s Tod Sacerdoti’s Linkedin profile.
If you work out the math, that means it did 500M streams pretty much in one year, which is very robust (41M streams per month, assuming straight math OR 1.36M streams per day, which admittedly does not sound like a lot, but the “straight math” is not a good metric, frankly).
But since July 2007 and September 2007, streams grew from 500M to 800M, or 60%, if you believe the PR spin. Provided it’s true, that is a very strong growth trajectory and implies the company took advantage of the growth in streams to raise some dough. Good for Tod and his team.
Competitive Landscape
By way of comparison however, Video Egg claims 750M streams per month, but Video Egg’s number is that of content streams, whereas Brightroll only serves ads… Video Egg, of course, has done Series A, B, C and D and has well over $30M in funding… (by the way, First Round Capital, the Midas Touch weaving angel fund that backed Video Egg is raising $75M - $100M so hit them up if you’re looking for funds).
From File Networks to Ad Networks
Last year you saw VCs investing in Series A rounds for video file sharing sites. Now that is rare, with VCs investing in Series B, C and D rounds. Think Daily Motion, Veoh, Metacafe. The same is happening with the video networks.
When the Music Stops, Will Everyone Succeed?
No. I’m not sure of all of the file networks will survive, but the few ones that thrive will be just fine… the same will apply to the ad networks in video.
History repeats itself, amongst display banner ad networks, indeed Doubleclick, Fastclick, Valueclick, Blue Lithium, 24/7 Real Media and Right Media all hit paydirt, but it’s worth noting that there are hundreds of ad networks, many fizzled, and many were bootstrapped. Tribal Fusion, for example, was bootstrapped and remains private.
With video ad networks (and file sharing networks), the VCs are out in droves, which means that the stakes are higher. While some of these players will invariably be successful, I expect to see considerable bloodletting before the wine flows…
Risk Factors
What makes the ad network particularly challenging, frankly, is that a lot of the money being raised and spent will be spent on models, technologies and formats that might become redundant. That’s one risk that I’m not sure VCs are properly assessing because Video Egg for example seems to have changed models, strategy, tactics and platform a dozen times… the flip side to this is that some of these firms are in fact quite different and complimentary, now… but as the model develops, friends will become foe and new competitors will creep out of the woodwork.
Second, and this is key, is the fact that search technology is very much early stage when it comes to video, but as that develops, then ad networks will probably have to co-exist with search engines that will become gatekeepers between users and video content. Moreover, even search firms like Blinkx suddenly become chameleons and become file sharing / hosting networks, too: Blinkx the search engine for example is a search source our video meta search MetaMojo.com queries yet Blinkx the video file host is one of the many distribution outlets for our web video unit WatchMojo.com.
Third, there’s the file networks. The idea is that file networks will coexist with these ad networks, but the truth is that with VCs backing these ventures, few will want to share the pie. Many will want to own the platform and that means that the file networks will end up fighting aggressively with the ad networks, in fact, some are one and the same: Video Egg is both a file sharing platform and an ad network…
Fourth, TV companies currently are defenders of a $75B TV ad market. Naturally, the increasing valuations in video startups imply that a good chunk of that market flows online, and that will happen. But to think that TV companies will act like sheep and let Web’s second wave of startups focused on video do what Web’s first players did to print companies, we’re all kidding. Let’s face it, print companies founders are long gone and in their place were managers who got lax. Conversely, TV companies are still largely run by the people who built those companies (Sumner Redstone and Rupert Murdoch being two great examples). As such, TV companies won’t go down without a fight. Then again, that is also what is driving some of the decisions, global agency WPP invested in Video Egg, Time Warner backed Scanscount, and so forth.
Underneath the elbow-rubbing is a fierce showdown to own the video advertising market, the biggest market of them all.
There are many other risk factors, frankly, such as whether user generated content will end up helping or hurting the shift of ad dollars from TV to the Web, net neutrality, piracy and what not… but, well, I do have a call to take in 10 minutes…
The stakes are just rising.
See our comprehensive posts on the online video market here:
- Web video will become larger than search ads?
- Video is a $150B market cap opportunity by 2011?
- Video bubble moving from file sharing networks to ad networks?
WPP joined a growing rank of players opposed to DCLK/GOOG’s merger plans. Maybe what they have to say makes sense, but it should be noted, WPP invested in Video Egg. Video Egg claims to have invented - by way of a patent - the video ad overlay Google’s YouTube unit will now be launching with content producers (like WatchMojo.com).
Is that a coincidence. Actually… probably, but one worth noting nonetheless.
Update: Forgot to add, I think Video Egg is jockeying to be bought out by Google. More on this here.
When Veoh (disclosure: one of WatchMojo.com’s distribution/syndication partners) raised $40M, I thought: “hmm… they’re pushing the innovation envelope, which means that old media is gonna come knocking, I wonder how much of that is earmarked for legal funds.”
Shortly thereafter, Veoh struck pre-emptively and sued Universal Music Group, asking a judge to ask it to stop threatening it with legal action. It was odd, bold and ballsy in one swift move.
Next up, Metacafe and Daily Motion raised massive rounds, too, and in addition to the usual IT and sales/marketing expenses, I figured some of the funds would be allocated to legal defense funds, too.
Today, I hear that Video Egg raised a Series D (D!) round. Video Egg is supposedly generating a lot of revenue, which makes you wonder why a bunch of smart guys from Yale would prefer to keep diluting when their value is soaring and their coffers are brimming. The Series C to bring in WPP was strategic and smart, because the bulk of Video Egg’s inventory is questionable user-generated content, so getting WPP to sway traditional marketers to embrace the genre is key to Video Egg’s long term growth.
Anyway, if you want an answer as to why CEO Matt Sanchez and early investors Maveron, First Capital would dilute, consider one little fact:
Video Egg has a patent application filed on the overlay advertising (mind you, TV companies “invented” this and Brightcove has been doing for a while, too). I suspect Video Egg is jockeying to sue Google and YouTube in the wake of Google’s decision to introduce overlays on video ads on professional content found on YouTube (disclosure: we’re a professional producer on YouTube).
Google, already facing a $1B lawsuit from Viacom, is no stranger to lawsuits. And, while this latest $15M round puts VideoEgg’s financing-to-date over $32M, it’s peanuts compared to the $4B or so of cash Google is hoarding.
Lawyers are expensive. Ask my erstwhile colleagues.
I’ve not read the patent application (a NewTeeVee commenter provides the link), but I suspect that Video Egg is betting that Google will settle with them the same way that it settled with Yahoo! over Overture/GoTo.com’s lawsuit that Google allegedly stole the pay-per-click ad model GoTo.com pioneered… or better yet, Video Egg’s latest investors are betting that Google might simply outright acquire VideoEgg.
After all, as we outlined previously, the missing piece of Google’s quest for world domination is (assuming that DCLK’s acquisition goes through) a sales force to sell video-related ads. Right now, Google has numerous options: Tremor Media, Broadband Enterprises, and Video Egg. While the two former players operate heavily in pre-rolls, Video Egg (along with Brightcove) does seem to have a lead in overlays, something that Google is betting YouTube’s chips on.
First VideoEgg, then MySpace China?
WPP recently bought 24/7 Realmedia (TFSM) to increase its exposure to the Web. In 2006, Sir Martin Sorrell said that his company’s online unit would double in terms of revenue contribution, from 15% to 30%.
Clearly, to get there, it will take deals and investments. While WPP outright bought TFSM, it has made investments, too (something that traditional media company CBS has been doing, too).
TFSM offers WPP many opportunities: in email, ad serving, as well as an ad network. As a remnant network, I’d presume TFSM already reaches a considerable amount of user-generated content, as such, WPP is quickly becoming a very aggressive traditional agency/marketing in this space: in addition to TFSM, the company invested in a Series C round in VideoEgg, one of the bigger video networks in the social networking video space, and today announced an investment in MySpace China. I totally understand the China part, but doubling up - or in fact tripling up - on social networking by way of MySpace is starting to expose WPP a tad too much on this space, one which despite the hype is set to grow to a $2.15B market by 2010, at a time when all online ads will be $30-70B.
Regardless, we commend WPP for realizing that online is where they need to be.
More importantly, we give props to News Corp. for understanding, like VideoEgg did, that having WPP as a strategic investor is key to getting global marketers to embrace user generated content, because if anyone has doubled up more on UGC than WPP, it’s MySpace and VideoEgg!
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