Hearing about Metacafe’s founders leaving and Google’s CEO Eric Schmidt admitting that it does not know how to make money off YouTube, I realized how random success is, in business in general and online video in particular.
I like to think that as a content producer, we have a business model that makes sense, and the signs are that indeed, it does make sense. But to be perfectly truthful, I wonder if this was exactly what I envisioned in January 2006 when we launched WatchMojo.com and while the broad strategy is the same, I’d be lying if I said everything has gone according to plan.
What is more impressive is that apart from YouTube, online video is a cemetery of VCs attempts to profit from online video but persistently missing the target. Revver and Grouper (renamed Crackle) are the other two notable exits: Revver was a bit of a disaster for the VCs, who invested $13M but got $4M out. It’s now part of Brad Universe’s Live Universe. Grouper sold to SONY for $65M. It is trying different things, starting with a rename to Crackle. That is in the aggregation/distribution space, the CDN, CMS and hardware segments will fare off pretty bad, I think, because many companies were just way too early and got costs ahead of themselves: look at Akimbo, who after $47M of funding is more clueless than ever. Do we need more boxes people?
Of course, the video landscape is very broad, let’s look at YouTube peers alone (we syndicate our clips to all of these players so we want them to do well in the trenches, but some of these companies will ultimately be left for dead in the trenches by those holding the purses):
Metacafe launched as early as 2003, two full years before YouTube, but it fails to gain traction. Metacafe oddly enough continues to focus on oddball and goofy UGC… even though everyone has left that ship, including two of the company’s three founders.
Vimeo made the classic textbook mistake of going niche and highfalutin. Vimeo was founded by Connected Ventures, the guys behind CollegeHumor.com, who incidentally also launched CampusHook.com before Facebook/MySpace but failed to focus on that. If you think about it that way, CampusHook.com was a MySpace for the Facebook crowd, and Vimeo could have been YouTube. Ultimately, Connected Ventures sold 51% to IAC for $10M, valuing the whole shebang at $20M. Not too shabby, but not FU money, either.
Revver interestingly had the pay model down early on, but thy totally mishandled the method by going CPC. Performance based advertising methods don’t work with video.
If you want the bong-in-hand reason, it’s simple: search captures intent whereas entertainment captures interest. Interest is for branding advertisers, search for performance based one.
If you want the consumer behavior reason, it’s simple: when you read an article, your hands are on the mouse, trigger happy to click on a link, any link. When you watch a video, you lean back… lean back… and your hands are off the mouse.
Revver even has the best URL taxonomy, who, for example, would think that this URL
http://www.youtube.com/watch?v=VQM0OTVcPlw
is better than this URL?
http://revver.com/video/853637/travel-guide-finlands-wilderness/
Yeah, pretty odd. Mind you, YouTube’s SEO mojo has little to do with its URLs and more with the fact that it had all of the videos in the world that you could ask for.
YouTube proved that the saying “it’s easier to ask for forgiveness than it is to ask for permission” is deadly accurate.
Break.com is already an asset of Lions Gate. They own a right to buy the company outright, which makes them a bit of a moot player in this rundown.
Veoh’s got the big name media backer: Michael Eisner. Heck, it even has the media and entertainment-oriented venture capital group, Spark Capital. Yet as much as I like Veoh and praise its recent growth, Veoh, I doubt, will exit via a grand slam sale.
There’s also Daily Motion. Daily Motion is also one of those sites that changes tactics and strategy, and I would too, if I had a decent sized audience and lots of content, even though a lot of the content is questionable in quality or too racy for advertisers to like. I can see a media company like Lagardere buying Daily Motion… not because they have to or need to, but because big companies do that: they make big random bets that leave many to scratch their heads but at least shift the focus away from not doing enough to trying to make sense of why they are doing to what they are doing. Mind you, maybe Vivendi will buy them. Why do I think a French company will buy Daily Motion, frankly, because I can see strings being pulled to get some VCs some liquidity.
The video market is odd, I tell you. A lot of sites have decent traffic but they have no clue what to do with it or how to make money. The only way, it seems, is raising more money to lock in a valuation. Then again, with Metacafe asking the two founders to leave and only giving them $5M for their 5% stake, that means even internally, the Board does not see much value in the company, which is a bad message to send out.
When YouTube got bought out by Google, Guba’s CEO all but tossed in the towel. The game was over, he argued. He left Guba shortly thereafter.
I think if you are an independent player in the aggregation/syndication space, you have to start looking for dance partners, and you have to do that soon.
Thankfully, MySpace TV is a unit of Fox Interactive Media and News Corp., so it can adopt a long-term strategy in building an entertainment hub.
Hulu is another News Corp. joint… a joint venture with NBC Universal. I think I know what Hulu’s purpose and raison d’etre is. That is coming in a separate post.
There are new players coming in this space, the How To space is crowded… that requires a stand alone piece, too.
This begs the question: in one year’s time, who will remain standing when video advertising starts to scale and marketers continue to flock to quality content and the audience/eyeball is valuable in itself argument fizzles alongside the soaring cost of serving and hosting crappy videos and undesirable content?
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