This morning 5Min announced a $5M series A round from Spark Capital - who have also invested in video content network Next New Networks. Spark Capital is one of the few pro-media, pro-content VC firms out there. They’re certainly going against the grain when it comes to what VCs are looking for traditionally. In fact, Spark Capital is one of the few who actually reinforced my theory that VCs will start to invest in video content startups because:
- there has been an over-investment in video file sharing video networks and video ad networks
- distribution has become commoditized and content can scale pretty easily and quickly thanks to things like RSS and trends like deportalization.
But what else does this investment news signal?
How To Video Landscape is Cluttered, Competitive and Not Very Differentiated
First off, the how to video landscape is very cluttered. When we launched WatchMojo.com in January 2006, doing how to videos was the obvious thing. As New Tee Vee’s Liz Gannes points out:
How-to video sites make a lot of sense. Video is often a far better way to demonstrate how to do something than text or audio. And then there’s the business side; viewers seeking out video are expressing interest in a specific topic, meaning they are ripe targets for advertisers.
I agree about the first, let’s test the second part later on. While demand for how to videos seemed obvious, what became even more obvious was that there was a plethora of well-funded and entrenched players. Again, quoting Gannes:
5min CEO Ran Harnevo and his investors are portraying themselves as underdogs compared to competitors like VideoJug and ExpertVillage, which have ample cash reserves. More than ample, actually. VideoJug has at least $30 million in funding, and ExpertVillage was recently bought by Demand Media, which has $320 million in funding. Other competitors include Scripps Howard’s DIY Network, MAKE’s Weekend Projects podcast, SuTree, iAmplify, the pre-launch Howcast and the recently merged Zipidee and TotalVid.
Very quickly, we decided to alter our game plan and steered away from becoming too how-to oriented. Sure, we have our share of how to videos in our library of 4,000 clips, but they are really just one small part of the archive. More importantly, we decided to adopt a more infotainment angle for them. For example, our How to Tie a Video Clips are light-hearted and basically entertaining. But, they do the trick. This New Year’s Eve I used Sylvia’s tips here to tie my first ever Windsor knot.
Two Sides of the Spectrum: Informational vs. Entertaining
This is an especially important component. Gannes mentioned “viewers seeking out video are expressing interest in a specific topic, meaning they are ripe targets for advertisers” I actually disagree. When I served as VP of Ad Sales in my old life, I realized that advertisers wanted to juxtapose brands next to hip content, not too informational. This is partially why, I think, marketers advertise in magazines and not encyclopedias and dictionaries (I know, I doubt the latter would run ads, but you know what I mean).
I am biased, since my background was working for a online lifestyle magazine, but I don’t think most marketers like to advertise in content that is too informative. It’s almost like they are admitting that their brands appeal to people who don’t have a clue. I now this sounds harsh, but I am biased. Everything we do has a lifestyle angle.
Pick and Choose Your Battles
As a user, I think it’s great to see more startups vying for supremacy in the how-to space.
How To Videos are both hard and easy to pull off:
- Why a Content Strategy Around How To Video Is Easy: it’s the lowest hanging fruit in the video landscape (from a level of difficulty to pull off) because you need the least amount of storytelling capability. The danger in How To Videos is that there are eerily very little barriers to entry.
- Why a Content Strategy Around How To Video Is Hard: Obviously, this requires some know-how and expertise, which is not always obvious.
Enter the User-Generated Content Variable
I have always been highly cynical of UGC’s ability to win ad dollars. YouTube (we’re a content provider on YouTube) is proof of that. Despite the $1.65B price tag, in 2006, YouTube generated $15M in ad dollars even though its inventory suggested that it could do at least $7.5M per month according to our numbers then.
Anyway, despite my belief that UGC is loser generated content in advertisers’ eyes, I think that How To videos are conceivably the only category where UGC works in consumers’ eyes… which means that 5Min can probably compete against Video Jug, but Expert Village too is UGC-based… so regardless of 5Min’s management’s spin, it will be hard for them to really make a dent in the space.
Not Lumping All Video Content in Same Basket
What this is showing, more than anything else, is that video content is starting to evolve and the sub-segment is blooming. The first sites displayed UGC of all kinds (think America’s Funniest Videos), you are now seeing the maturing of the How To Space for the reasons we outlined above… the next wave - if I dare make this prediction - is that you will see more and more storytellers migrate to the Web and create businesses around their video content (storytelling as opposed to demonstrating, which is what how to videos are).
Overall, this is a great sign that VCs are seeing value in video content… though I remain doubtful that How To’s are the most valuable kind of content, because the barriers to entry are quite low, as evidenced by the cornucopia of players that 5Min will be taking on. In fact, last year HowCast garnered some buzz, but then it failed to launch in time. and subsequently merged with Zipidee and TotalVid merged, part of the reason for the consolidation was probably that the landscape for a tad too cluttered.
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April 4th, 2008 at 5:32 pm
Your statement:
“In fact, last year HowCast garnered some buzz but then it failed to launch in time and subsequently merged with Zipidee and TotalVid, part of the reason for the consolidation was probably that the landscape for a tad too cluttered”
is not true. Zipidee acquired TotalVid, but did not merge w/HowCast. The reasons for our acquisition are well publicized. But I do agree that the landscape for how to sites are cluttered. We’ll look back in 10 yrs and think of the how to cos w/the same disdain afforded the online ‘pet’ stores of the late 90s. Luckily Zipidee is much more than just how to content, but also health and fitness, action sports, anime, etc etc and also not just video.
Henry, CEO of Zipidee.com
April 4th, 2008 at 6:23 pm
Henry, sorry for getting that wrong, and thanks for taking the time to pass by and correct that.
Ash