Last week we lobbied bankers to pony up $500M so we could buy About.com. Shockingly, we did not get a credit memo. So this week, we’re asking for a bit less. Read on.
Revver’s Fate and The State of Online Video
It turns out that Revver’s potential sale to Brad Greenspan (who founded Intermix, then sued to try to block the sale of MySpace to News Corp., and since launched Vidilife.com and LiveVideo.com) fell through, according to CNET. Paid Content and Alley Insider are commenting on it, too. The touchy situation was Revver’s debt, which stands at $1M.
Sometimes, There’s Only a Few Buyers Than Can Reap Value
In today’s market, not everyone can assume debt, especially when there are many stronger, debt-free opportunities on the marketplace, all itching for an exit. But much like News Corp. was uniquely positioned to make an offer for Dow Jones, and Microsoft is uniquely positioned to acquire Yahoo!, I believe that the right company can integrate Revver and build on its assets to create something very valuable and compelling, in an efficient manner.
A Cluttered Landscape Amongst Video File Sharing Sites
For some time now, I’ve been saying that a lot of the video file sharing social networks would be shut down or forced to sell as a result of the over-investment in the space.
When I wrote “the fight for #3 is on” I mentioned that players like Veoh, Metacafe, Break and Daily Motion would be trying to chase YouTube and MySpace TV.
Consolidation to Come, But Are There Enough Chairs When the Music Stops?
Truth is, once Yahoo! Video, MSN Video and AOL Video decide to get serious about video, they will make the lives of independent players like Veoh, Metacafe, Break and Daily Motion very hard. Frankly, the main salvation for Veoh, Metacafe, Break, Daily Motion will be a sale to the likes of Yahoo! Video, MSN Video and AOL Video, or CBS, Viacom, NBC, etc. For the traditional media companies, it will be hard to have a change of heart and buy one of these sites, because many of these sites have thrived on “user generated content”, which is essentially a nice way of saying “user pirated content”.
Revver’s A-List Backers
Alas, I never mentioned Revver in that list, because from my vantage point (a content producer who works with all of these distribution players), it was clear that Revver was smaller. More importantly, I wondered how much longer Revver - under its current incarnation would remain under operation. Ironically, Revver was one of the first file sharing social networks to focus on video. But oftentimes being first is a kiss of death (iFilm anyone?). Given that it had raised $12.7M in funding from top notch backers like Bessemer Venture Partners, Draper Fisher Jurvetson, Draper Richards, William R. Hearst, III, Comcast Interactive Capital and Turner Broadcasting, it would probably not live long enough to survive because investors usually cut off the lifeline once they realize the company won’t command a massive return and continues to lose money.
Stalling the Engines at Revver
It’s a shame, from my interactions with the team at Revver, I see that they’re all nice people. Today CNET reports that the headcount has been halved from what it was 18 months ago. I presume with the deal falling through, no one else would really be interested because the demand and supply dynamics in Revver’s existing market are very challenging. There are over 1,000 YouTube clones out there, many with less complex and convoluted capital structures than Revver.
Of course, 18 months ago, in mid-2006, YouTube was independent too, and were it not for the sale to Google, it could be YouTube who would be falling on hard times for no other reason that its bandwidth fees far outweigh its revenues.
YouTube + Google = Lights Out
Once YouTube got acquired by Google, I said the going got rougher for YouTube competitors, including Revver. Revver had some management changes at the top. And competitor Guba’s CEO even said many people would be exiting the space because YouTube had won the grand prize.
Revver’s days, I felt, were numbered. As a content producer, I continued to root for Revver by providing them with content. However, Revver today not only competes against YouTube, Daily Motion, Veoh, Break and what not, they also compete for content producers’ attention, because content goes where the distribution is.
Video Remains Embryonic
While the explosive popularity of video consumption ensure that costs remain high, the embryonic nature of online video predicts that revenues in 2008 will remain small. Yes, online video advertising expenditures will cross $1B in billings in 2008, but they remain to scale. By 2012, it is predicted to become a $7.1B market in the US alone, but right now, online video is where search was in 2001: a major segment of the online advertising ecosystem, desperately looking for a business model.
One of the reasons why the business model remains to be developed is
a) the large majority of content out there is user-generated and of low quality
b) a lot of the videos consumed belong to old media and are pirated online
These two variables give advertisers a source of hesitation. It’s a catch-22: you need better content to attract advertisers, but advertisers won’t spend online to give owners of content an incentive to shift content online.
Content is King
This dichotomy has created an opportunity, one that WatchMojo.com has exploited perfectly. Recognizing that UGC does not lure advertisers and that old media will be wary to cannibalize their revenues by shifting content online, we have built one of the largest libraries of original video content with nearly 5,000 1 to 3 minute assets representing hundreds of hours of content across the following categories: cars, fashion, health, video games, music, comedy skits, film, travel, etc.
As we continue to grow, it was inevitable that we consider one day acquiring one of these many file sharing networks. Because of Revver’s DNA as a platform serving a network of producers (and not a platform to simply upload any UGC), I think Revver represents a very unique opportunity for WatchMojo.com. In turn, few companies can make the case to spend anything near $300K to $500K plus the assumption of $1M of debt when over 1,000 “YouTube clones” exist out there.
Leverage Assets But Reposition Revver
For us, we would certainly not be interested in doubling up Revver’s efforts to fight YouTube, Veoh, MySpace TV, Daily Motion, Metacafe, Break, Yahoo! Video, MSN Video and AOL Video etc. After all, these companies are valuable and respected distribution partners of ours.
What we would do is use the Revver technology and leverage Revver’s network of loyal content producers to create the 21st century’s answer to a media company. This would be by no means n easy feat. But we are confident in our ability to salvage and reposition Revver’s assets in a way that would create a lot of value in the years to come.
Our strength is in storytelling and packaging. While gifted content producers have chosen to leave Revver for greener pastures, we think that WatchMojo.com can in fact create a hub for content producers all over the world to offer advertisers what they have been looking for - but not been able to find - in online video. Our expertise is in advertiser relations, we do not think that Google’s AdSense, for example, represents the holy grail for Revver or for WatchMojo.com.
We also think that over time, content producers will be looking for homes where they may remain creative and be rewarded for it.
Soul Searching for Debtors
Of course, this begs the question: if I had millions in the bank, would Revver be the best place to park the money? Well, that depends on its network of producers, demographic of its users, technology, and its employees’ desire to tweak the business plan to build something of value and unique enough to stand the test of time.
If all of those things fall in place, then we are confident to be able to strike a fair and reasonable deal with the company’s Board of Directors that would leave all stakeholders happy with the resolution.
So, while this post started off as a pontification on Revver’s fate and the state of online advertising, inadvertently, it has become an open letter to Revver’s stakeholders, all of them.
If the rumors are true that there’s an amount of debt to be serviced, then clearly, the power is in the hands of the lenders.
I know who the shareholders are, but I wonder who the debtors are. I presume they’re reading this, so the ball’s in your court. If you want to chat, you know where to find me (ash@mojosupreme.com).
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