Compete.com’s 2007 year in review report concludes clearly that YouTube is gathering a lot of momentum as the #1 [note: WatchMojo.com is a content provider to YouTube, who is a distribution partner of ours].
When YouTube sold to Google and did not offer itself to Rupert Murdoch’s News Corp. empire, apparently, the media mogul was miffed. The reason was not only because he felt that MySpace had helped build YouTube’s traffic, but because video is the killer app, and invariably, not Facebook, but YouTube poses a risk to MySpace’s supremacy. Indeed, MySpace continues to destroy Facebook in total traffic, but YouTube is edging closer and closer to MySpace.
This is just one reason why we selected YouTube as the most explosive web startup of all time. I think MySpace’s MySpace TV can do a lot better with a few strategic and tactical moves and with News Corp.’s resources and MySpace’s reach, they will be just fine [note: WatchMojo.com has eight channels on MySpace TV as they too are a distribution partner].
Google Envy
Anyway, if one thing is sure in the video landscape, it is that Google’s tremendous growth and jaw-dropping profits have given all aspiring entrepreneurs, financiers and startups “Google-envy”: The envy to become the platform to whatever market it is that they go after.
In online video file sharing social networks, as Compete.com suggests, there is already a runaway #1, and that is YouTube. But all laggards have fought hard in the past months for #2.
In online video ad networks, the market is a bit less developed, but not by much. You are no longer seeing early round (Series A or B) investments in online video file sharing social networks but you are seeing a few early stage investment here or there (such as Overlay.tv raising CDN$4.6M earlier this week).
But, we feel that Overlay.tv’s Series A was an exception, as most video ad networks are well into their later rounds: Video Egg is at its Series D. Brightroll, Scancout and Yume have all raised well over $10M in funding.
With 2008 being the year that online video advertising crosses the psychologically-important-but-otherwise-a-footnote $1B mark in the US, it is not surprise that online video ad networks are doubling up ammo and gearing up for warfare in the months to come.
Gunning out of the gates in 2008,
- Tremor Networks raised $11M in a Series B.
- and today, Broadband Enterprises raised $10M from Velocity, Jon Miller and Ross Levinston’s new fund.
Tremor and Broadband are direct competitors. Despite that, both are leaders. So for Levinsohn and Miller to crash the online ad network party, it makes much more sense to back an established player like Broadband than to start from scratch. That is pretty smart and this was a rumor that we had heard in 2007 as well.
Is the Market Big Enough to Return Shareholders Profits?
Will the market and demand for these online video networks be big enough? Yes and no.
Online ad networks that focused on display/banners did phenomenally well in 2007 (aQuantive, 24/7 RealMedia, Doubleclick, Right Media, Blue Lithium) but many of these companies raised relatively little funding (Blue Lithium) or were in their second incarnation as a going concern (Doubleclick, 24/7 RealMedia). Some companies like Tribal Fusion (a remaining privately held asset) might have never raised a penny in VC money (I could be mistaken on this, but if my read on the situation is right, I do not think they are VC-backed).
The bottom line is the expectation and time horizon for returns will be quite different for most of the video ad networks that are getting funded sooner and deeper than their brethren in the display/banner space.
I do not see too many, if any, new companies in this space getting funded. There are way too many competitors, way too many platforms, and not all that much differentiation to launch a new player now. In a few years, there might be (keep in mind Right Media launched in 2003, for example).
I know a few people at Tremor, Brightroll, Broadband Enterprises etc., and wish them all the best… but I think the switching costs are close to nil and ultimately most publishers tend to get greedy over time and will want to own the advertiser-relationship themselves. Of course, I could be wrong.
As a side note, I must say it is extremely odd (in a good way) when you are reading something (in this case Venture Beat’s piece on Broadband’s funding) and see a paragraph like this:
– It syndicates programs from more than 400 video producers (like the popular Cube Fabolous, above) to 2,000 affiliated partners. WatchMojo’s Ashkan Karbasfrooshan, for example, has been approached by the company (mentioned in its write-up of online video, here);
Must say pretty cool.
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