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.
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?
Video ad enabler YuMe raised a $9M Series B, repeating the trend we saw earlier in file sharing networks, where investment flowed into the leading and more promising file sharing networks while the wannabe has-been’s fizzled and lost relevance.
Looking at the top 10 video sites by market share as of May 2007, it’s interesting to see relatively new media players YouTube, MySpace and Google Video hold on to the top 3 spots, followed by some traditional media players AOL and Yahoo! Videos…
But nestled in the 5 to 10 slots are the second tier challengers Break, Daily Motion, Metacafe, Veoh who have all raised additional funding rounds. It’s certainly odd that the top 2 players are no longer on the market: YouTube exited after “just” $11.5M in funding from Sequoia and MySpace, of course, that is part of News Corp.
But it’s clear that VCs are betting that one or a couple amongst Break, Daily Motion, Metacafe, Veoh can be relevant. Of course, this means it’s tougher for the 180 or so other video file sharing sites to stick around, time will tell (WatchMojo.com partners with about 30 or so of these and I can place bets with much confidence on who will remain relevant in a few years time).
Anyway, back to YuMe, their Series B round comes after Video Egg’s Series D and ScanScout’s big investment. Clearly the potential of a $750M US web video market growing to $4.3B by 2011 ($10B worldwide) is interesting and enticing, but look at all of the players in the platform space:
- Brightcove
- Brightroll | see my interview with CEO Tod Saceroti here.
- Video Egg | see my interview with CEO Matt Sanchez here.
- Tremor Media
- Broadband Enterprises
- Yume
- Scanscout
- Google/YouTube
- AOL/Advertising.com/Instream
- VideoMovement
- etc.
Not to mention the video search players:
- Blinkx
- Pixsy
- Podzinger/Everyzing
- Google/YouTube?
Michael Arrington and Henry Blodget do a pretty good job of listings features and business comparisons of the players in the space.
If you believe that web video will one become larger than search ads, and might even one day suck out enough from TV ads, what is basically a $57B market in the US already and a $73B by 2009, then maybe all of this investment is justified.
Time will tell… for the record, I think that web video has definitely the potential to become larger than search ads (but I am biased as a video executive - though we also have search products) but won’t be larger than TV ads, because the web will shrink the ad market by making it more efficient… But, like I said, time will tell.
PLAY
