Last week online advertising firm Kiptronic was acquired by CDN Limelight Networks for $12M. Now $12M is nothing to sneeze at, but with $7.3M in funding (according to Crunch Base), it’s not quite a home run, either.
In fact, the sale represents the challenge that all video technology platform companies (be it in ad serving or analytics) face: to really scale and becoming meaningful, they need to infiltrate the leading player: YouTube, and the rapidly rising #2: Hulu.
In this case, I imagine Kiptronic felt it was on the outside looking in, and Limelight’s parallel world distribution (via the CDN route) was a viable alternative. I had spoken to Kiptronic in the past and told them that embracing their technology was based on their getting through to YouTube, where we do 40% of our streams (less than most content providers, by the way).
Of course, with YouTube being part of Google, who has its own ambitions in ad serving and analytics, so it will be a cold day in hell before they open up to third parties who either compete with it or might become acquisition fodder for it. Google is a student of history:
- it itself grew thanks to Yahoo!’s naive decision to feature Google’s search technology on the portal, then the largest site in the world.
- and seeing YouTube grow into the $1.65B beast it did thanks to MySpace’s users embedding all of those YouTube embeds, YouTube isn’t stupid enough to let athird party company grow on its coattails.
One of those third parties we work with and root for is Tubemogul. We use their analytics and distribution tools.
Today, TubeMogul announced a series of partnerships with firms like Blip.tv (we use Blip.tv’s amazing video player on our WatchMojo.com property, where we do 3% of our total streams) and DailyMotion (one of our many distribution partners). The two companies will now integrate TubeMogul’s analytics straight into their websites.
We welcome further clarity and transparency in the marketplace, because right now giving advertisers an accurate sense of our total reach of nearly 5M streams per month is challenging.
Taking a step back, I think this reality highlights my belief (albeit biased) that content companies present better investments than technology bets in the video market, for we can tap into YouTube and Hulu’s ecosystem and grow in tandem with at investment levels.
TubeMogul aggregates data from a myriad of distributors, including the major player in the market: YouTube. As with any other fine product, they do also exclude a bunch of touch points, such as Hulu or Blinkx, to name a couple.
Either way, while we crossed 50,000,000 total streams in early April, we crossed 30,000,000 streams on Tubemogul’s “sub-network” yesterday with a strong day where we did over 99,000 on YouTube alone:
For some content producers, TubeMogul can very well capture 100% of their streams, for others, it might be far less. For us, based on these numbers, the ratio between TubeMogul and our total network right now is 60% (or simply 30M/50M).
This ratio does not remain constant:
- If tomorrow we add a partner whose streams are not included in TubeMogul’s index, then the percentage will fall.
- If alternatively YouTube continues on its march to consolidate video views and garners, say 90% of the total video streams generated online, then the ratio will increase.
For us, given the wide range of content, I would guesstimate that over time, TubeMogul’s ratio versus our total network will actually decrease, even if YouTube does in fact continue to amalgamate views just as Google garnered market share in search.
Across the sites that TubeMogul’s index tracks, we’re now almost doing 500,000 streams each week (and have crossed this mark a couple of times in the past year). More importantly, we’re now doing 2-3 times the number of streams we did last June (the furthest TubeMogul’s great service lets me see). However, since Tubemogul only measures 60% of our reach, then you can see that we’re now doing more than 500,000 streams across our total network. Using the 60% ratio, we’re now doing 833,333 streams each week, nowhere what the big traditional media companies generate, but with absoluetly no marketing budget and a team of 10 people, it’s not exactly anything to be embarassed about either. Oh, as a bonus, our business isn’t shrinking by 20% either, so they can win that battle, for now.
Obviously, across our total network, we’re doing well over 100,000 streams each day, consistently, and growing nice and steady. If you do the simple math using the 60% ratio, we’re doing 166,667 daily streams… which is about right, as we are on pace to do somewhere between 4M and 5M streams this month.
We also reach 15M consumers in malls, coffee shops, gyms and other retail outlets across North America according to Nielsen. We’re also in talks with a couple of European OOH players. But we’re not talking about outdoors now, are we?
Back to the challenge of building a presence online, as we highlighted previously in the post “Three challenges facing online video producers“, the ability to build up consistenly-growing streams is a major problem because ad agencies don’t really care that you generated 1M streams last month, they want to make sure that you can deliver 1M streams next month, and the one after that. Then there is the issue that not all video streams are even equal… but that’s really for a separate post.
In fact, we’re quite confident that our streams will continue to demonstrate the hockey stick growth curve as we continue to pile on videos across an ever-growing list of distribution points.
Our WatchMojo.com channel on YouTube, for example, doesn’t even have 3,000 videos yet, even though our site has over 4,200 and our total pipeline of edited and unedited material comes close to hitting 5,000 videos.
Incidentally, check out the channel in the new widget YouTube is promoting below:
From our friends at Tubemogul: While nearly 90% of viewers watch the first 10 seconds of a video, only 10% watch more than 5 minutes. Worth noting that WatchMojo.com’s videos are 1 to 3 minutes… with most of them being in the 60-90 second range. Tubemogul has over 30,000 users (we’re one of them) so while this study might not be 100% empirical, it is definitely representative of made-for-web video content:
SAI and MediaMemo jump to conclusions that I think are somewhat faulty because while some traditional media companies such as CBS and FOX use Tubemogul, a bunch do not (or do not use frequently). Surely if you lump in viewing patterns of traditional media - which tends to be longer - then I think these numbers might get skewed a bit.
Then again, this begs the question: would online users, who clearly have short attention spans, sit through longer-form content? My gut says no… and this is a programming reason why TV companies are slow to move their content online. Of course, the bigger reason is an economic one which is captured by this table:
When traditional media companies do venture online, they find that they are replacing their offline dollars with online pennies, to quote NBC’s Jeff Zucker, who isn’t alone:
Discovery CEO David Zaslav expanded a bit on what he said last month about the value of full shows online for the cable net, in an interview with B&C: “I’ve spent a lot of time looking at the economics. If you take out a pen and you add it up, there’s not a lot of economics there [of putting full shows online]. The business model is not that strong…we get substantial value by distributing our content on dual-revenue-stream platforms, domestically and around the world. We’ve been able to take the best of our content and use pieces of it through HowStuffWorks.com or on our other sites..there’s no reason for us to take a fire hose and take a fantastically valuable library and make it available on the Web for free.”
In other words, the economic incentive isn’t even there, which explains why when it comes to traditional media and online media: those who can won’t and those who want can’t.
The 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.
From TubeMogul:
About a month ago, we launched a “Top 40″ list of the users getting the most views from videos deployed by us (an admittedly biased list, but an interesting one). We will be releasing an updated list shortly, but it’s worth pondering: what is the key to their success? Great content, for one. An additional insight came after we released our recent research on “Online Video’s Short Shelf Life.” A blogger savvily pointed out that most successful content creators already understood that online video fans have a short attention span, and thus put out a high quantity of videos.
Curious if that was actually the case, I tested it using our Top 40 list, and found it to be largely true. In the month of June, Chris Pirillo (#2 on our list), deployed 803 videos. Similarly, WatchMojo.com (#6) put out about 691. Further on down the list, Vlaze media (#35), put out a decidedly humbler 74 videos, and Sony (#40) deployed 32–and so on.
The data shows the brilliance of this. Since average online video viewership tends to peak on day three, putting out videos often allows producers to constantly ride the highest point of the wave. While individual videos rise and fall fast, a given producer can always have a steady audience.
Web video publishers need to balance quantity with quality if they want to be relevant, let alone scale, online. The pro of operating in a hyper-syndication world is that audiences might be splintered and fragmented, but you can reach them on those places if you have an effective distribution strategy. The con of it, frankly, is that it’s nearly impossible to stand out from the clutter.
When people question our strategy of publishing so much content (5,000 videos, 100 new each month), the analogy I use is this:
- Think of the Web as a massive college building… seemingly with no end in sight, as one classroom leads to another, and another, and another.
- Think then of the online video ecosystem as a huge classroom with a number of desks…
- With each online video aggregator (such as YouTube, MySpace TV, Veoh, DailyMotion, Metacafe, etc.) representing a desk. While those desks share some similarities, they are all, in fact, independent and stand alone islands. It’s not, after all, like YouTube links to the same video - or for that matter, related videos - on another site…
- On each desk you find stacks of paper on it, lots of them, with each stack representing:
* categories
* subcategories
* keywords- Each video is represented by a sheet of paper…
What do you represent? You’re a you-know-what disturber shooting spit balls on as many desks and stacks as possible. What services like Tubemogul do is help you get those spit balls on as many targets at once… but that’s just one small part of the equation. Why?
Ironically, while online video content is broadband content and dynamic in nature, currently SEO is utterly ineffective with video (relative to text content), so no one can really see through the sheets of paper, let alone see what’s on each desk.
Individually, no matter how great the content (quality) on each sheet of paper, they get lost in a sea of pulp and paper…
The only way to get your sheet seen by users - who might be landlocked to one desk (by having signed up on that site) - is to ensure that your sheets of paper fall on as many:
a) stacks, and
b) desks,
as frequently as possible… why?
In between the time you upload two videos… there’s a whole lot of papers landing on your sheet after yours has landed… making yours disappear from the top and rendering it nearly invisible to the human eye.
In other words, content companies that can’t scale syndication - and production - will find themselves irrelevant before long.
However, this opens up a new question, which is: is there such a thing as diminishing returns with marginal distribution?
WatchMojo.com is ranked 6th largest producer and syndicator of online video, according to TubeMogul’s updated monthly rankings. TubeMogul is a web analytics and distribution tool for online video (more), so yes, the stats are skewed towards video producers who use the service, but with 30,000 users - including FOX, CBS, HBO, PBS, Warner Bros, and Sony Pictures - it’s representative of a few things:
- what people watch online is different from what is consumed offline
- traditional video content owners are reticent to embrace the Web, by fear of either cannibalizing traditional revenue streams or simply out of inexperience
Sitting ahead of us include: Next New Networks (who incidentally saw its CEO step down this past month, had they not ranked 1st, I presume the VCs would have torched the joint altogether), techie Chris Pirillo, how-to site Howcast, For Your Imagination, and Michael Eisner’s Tornante.
Here’s Read Write Web’s rundown and commentary.
Here’s NewTeeVee’s rundown and commentary.
TubeMogul is one of the many services that makes video publishing (and mainly, syndication) manageable. Put simply, instead of having to upload your videos to numerous distributors’ websites one by one, TubeMogul allows you to upload via their interface and syndicate across a wider number of sites.
Like many intuitive services, there is always room for improvement, but unlike others, TubeMogul seems to work diligently to improve its core offerings all the while it has pushed the envelope to make things easier for content producers, including WatchMojo.com. Mind you, we’re probably in a category of our own, what with:
- 5,000 videos on our site, of which “only”
- 1,000 - 2,000 are syndicated across
- 100+ distribution partners.
This was confirmed today, when much to my surprise, WatchMojo.com ranked 6th on the the TubeMogul 40: the 40 largest content owners amongst the 30,000 who deploy TubeMogul transcoding and syndication services.
TubeMogul’s Set of Obstacles
From our first syndication efforts in 2006, we were always looking at scaling. But when we first came across TubeMogul in 2007, it was love at first sight. Ever since, I’ve been intrigued by the company’s services, but always envisioned a few obstacles, namely:
#1- how to get more distributors on board, who initially might have wanted/preferred a direct relationship with content owners
#2- how to get more content owners to use them, particularly traditional media companies reluctant to give up all that data
#3- how to differentiate itself and be more than an under-the-hood service that could always be replaced by something faster, quicker, bigger.
There’s a Japanese saying that says “where some see threats, others see opportunity.” TubeMogul and WatchMojo.com seem to buy into the adage.
#1 - The Not-So Fragmented Video Distribution Market
YouTube is commanding a greater and greater percent of market share in the video space. But on the flip side, new distribution partners pop up every day.
As counter-intuitive as it might sound, there are dimishing returns to incremental distribution.
If YouTube eventually has over 80% market share, do you really need to be elsewhere? Moreover, do you want to be? As a content producer, you ask yourself:
- why bother putting your video on a 100th site if said site generates 100 views per day for you?
- relative to the distributor, who is helping who?
Definitely, once online video advertising revenues grows from $1.25B in the US this year to $7.1B in 2012, it will make sense to syndicate blindly, but until then, you are better off protecting your library as not to dilute its value.
With relatively little quality content libraries available but an over-abundance of distribution points vying to become the third player in the marketplace after YouTube and MySpace TV, it is imperative for these distributors get as much content as they can, and this is how TubeMogul has parlayed the current environment to address obstacle #1: getting distribution partners to sign on.
Don’t get me wrong, I am sure today TubeMogul can and very well might be charging some distributors to join, there is, after all, a cost to including a new partner. Mind you, doing that opens the door for a new challenger.
On our end: we could easily be doing 20M streams a month, but that requires”giving the content away” with no consideration for revenues or profit. For us, it’s not as important to generate more streams as it is important to generate sustainable streams, and profitable streams…
But regardless of our strategy, TubeMogul has proven an ability to remain one step ahead of our needs, and when they were one step behind, they were modest enough to ask for advice… recognizing that we were one of their “highest maintenance” content provider partners (this, arguably, is the only time when it’s a compliment to say that and one feels happy to hear it).To their credit, TubeMogul have used the resources of their recent funding from Howard Lindzon’s Knight’s Bridge Capital Partners (Lindzon founded the CBS-acquired Wallstrip) to increase reliability. They’ve also very conservatively treaded into new territory without dropping the ball on their core offering.
#2 - Should Online Video Revenues Really Be Advertising Based?
TubeMogul is an interesting startup for a second reason, again, specifically because online video advertising revenues have been disappointing for all companies other than the major TV-centric media companies who are in-market with video advertisers.While many video startups have bet heavily on becoming video ad networks and had to restart their business plans (example: Video Egg, EveryZing/Podzinger, Brightcove, etc.), TubeMogul has become a clearinghouse, connecting advertisers with their publishers by leveraging their data and serving as a conduit between advertisers and the content libraries they serve.
This way, TubeMogul has been able to overcome obstacle #2: where otherwise a content producer might be hesitant to allow TubeMogul to access all of their video consumption data, by opening up their library to TubeMogul, the content owner allows TubeMogul to serve as a gateway to advertisers who might ask it for data. In this vein, TubeMogul is not an ad agency per se (it would create conflicts, anyway), but more of a comScore, Nielsen, Hitwise or Quantcast, that advertisers turn to for data on which they make purchasing decisions.
#3 - What Should TubeMogul Do?
Last year, VidMeter/VidMetrix was scooped up last year by Visible Measures [see our post], leaving TubeMogul as a lead M&A target.
With Founder/CEO of NetRatings Dave Toth on its board, you can connect the dots and presume that TubeMogul’s exit has been telegraphed to Nielsen NetRatings, but what with this being an otherwise market driven exercise, don’t be surprised if the occasionally-vilified comScore or TNS make a run for the company (who recently acquired Compete.com, founded by Bill Gross, who also incubated Overture/GoTo.com, the true pioneer of the pay-per-click model that Google borrowed and scaled).
Frankly, as TV-centric, traditional media companies search for ways to navigate online, a case can be technically made for CBS, NBC, ABC or even FOX to look at the company.
- CBS would make a lot of sense, it acquired Wallstrip and Howard Lindzon remains involved with the project. TubeMogul would also fit well with Last.fm in the broader discovery / recommendation space. Moreover, if you look at CBSAudienceNetwork.com, I can’t help but think that that is TubeMogul’s API at work (though I am guessing here).
- With Disney and NBC, it’s less likely, while with FOX, TubeMogul would be a great fit with MySpace’s Strategic Data Corp., the acquisition News Corp. did to bolster its inventory across MySpace and the unit now headed by Adam Bain… admittedly, this is far more of a stretch than CBS, and the traditional measurement services who would be able to leverage TubeMogul best.
Last but not least: an ad agency, namely WPP, who last year acquired 247RealMedia, would also prove interesting, especially if it seeks to develop the advertising route some more.
Of course, it can remain independent and in the meantime develop in a few areas. What are those?
Oh, look, thanks to TubeMogul, the clips have been uploaded… I can head out and enjoy the evening.
Expect to see a lot of consolidation in the broad video space.
- the fight for #3 in file sharing social networks will cause many (DailyMotion, Metacafe, Veoh, Revver, Break) to consolidate and merge to remain viable against YouTube, Yahoo!, MySpace and MSN.
- ad networks and advertising platforms will also see some shakedown (Yume, Scanscout, Brightroll, Tremor Media, etc.)
- today we saw content producer LX.tv get acquired by NBC. See our thoughts here.
Just now, metric company Vidmeter got acquired by Visible Metrics. It’s worth noting that Vidmetrix is a tool by Vidmeter, spawned from Holt Labs, whose founder Bri Holt previously sold SocialMeter.com to Adaptive Blue, Read Write Web columnist Alex Iskold’s Union Square Ventures’ funded company, USV is Fred Wilson’s fund, who incidentally was an angel investor in Wallstrip, Howard Lindzon’s video blog on the stock market, who sold to CBS and then proceeded to invest in Vidmeter’s competitor Tubemogul (on tomorrow’s Six Degrees of Separation, we’ll look at…).
All to say, Holt deserves some credit for identifying these niches and then creating products that catch the eye of would-be buyers, quickly.
We’ve used Vidmeter’s Vidmetrix. Also in the market are TubeMogul, as well as Hey Spread. Veoh too has a multi-upload tool function, but Vidmeter and Tubemogul also offer analytics, which makes them a more interesting acquisition target to more companies (think Nielsen, comScore, Google Analytics, Webside Story, etc.) I can also see a company like CBS acquire Tubemogul, don’t ask me why, just a gut (ie. Think Howard Lindzon is Kevin Bacon).
This is the year video goes mainstream and many companies that were thinking “Build” shift gears and decide to Buy. the dollars are shifting away from TV way too fast for cash-rich, time-restricted media and technology companies to sit around.
Disclaimer: WatchMojo.com has various working relationships with both Vidmeter and Tubemogul, and distributes content on Veoh. We’ve been rooting in equal parts for both Vidmeter and Tubemogul and fully anticipate them to have a successful exit too, soon.
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