I've been devoting a lot of ink to AOL recently because its success has made it the poster child for the power of online video syndication and monetization. In yesterday's Q3 '12 earnings report, AOL delivered the most resounding evidence yet of syndication's value - CEO Tim Armstrong said AOL's video ad revenue jumped from $10 million 2 years ago to a projected $100 million in 2012, with more growth ahead in 2013. The results are mainly due to video syndication, powered by AOL's acquisition of 5Min in 2010.
Simply put, AOL is capitalizing on the concept of the "syndicated video economy" that I first began discussing 4 1/2 years ago. On the call, Armstrong described how AOL's large video syndication library (which has grown from 30K videos to 450K today) feeds both its owned and operated properties and its network of 30K publishers. All of these sites are hungry for video for 2 important reasons: they meet users' increasingly video-oriented expectations and their adjacent ad inventory is monetized at far better rates than traditional display.
While the network of publishers and their users clearly gain, importantly, content providers do as well, through both higher viewership and monetization. The video landscape is more fragmented than ever, with intense jockeying for viewership. Last week, using comScore data, I noted that the top 10 video sites' market share dropped from 57.5% in Sept. '11 to 42.4% in Sept. '12. That means if you're a content provider, it's harder to actually drive audience, no matter how good your video is. That raises the ante on getting your video in front of viewers wherever they are - the essence of syndication - rather than just trying to attract them to your own sites.
AOL has masterfully positioned itself at the nexus of all of this - serving the needs of content providers, publishers, users, and of course, itself, because remember AOL is a huge producer of video too. With the power of its syndication network, AOL's ability to monetize all that new video being pumped out of HuffPo and its other owned sites increases dramatically, particularly with AOL's vast reach into advertisers and agencies.
AOL is in the middle of video syndication's virtuous cycle and its Q3 results demonstrate it. Though AOL's display ad business remains under pressure, it has huge growth ahead in video advertising as well as a more influential role in the larger video landscape.
Note: I'm especially pleased that we'll have Ran Harnevo, who heads up video at AOL and was the founder of 5Min, speaking at VideoSchmooze on Dec. 5th in NYC (early bird discounted registration is available). I've known Ran since 5Min's first round of financing and nobody in the industry is more articulate or knowledgeable about the power of video syndication. I'm confident that his insights about how AOL is succeeding with video will be one of the highlights of the morning program.