AOL is announcing this morning version 2.0 of its connected TV app, which will include a refreshed UI and advertising support for the first time. The app has been known as "AOL HD" but will now be known as "The AOL On" app. It is available on Samsung and Sony connected TVs and devices, plus Roku, and within a few weeks on TiVo Premiere DVRs. The move is another sign of how major content providers are getting more serious about migrating the online video experience from the desktop to the living room.
With the new Apple iPad receiving wall-to-wall coverage this week, it was easy to overlook other significant news. Here are 4 items worth noting for the January 25th week:
1. Netflix Q4 earnings increase my bullishness - On Wednesday, Netflix reported blowout results for Q4 '09, adding almost 3 million subscribers during the year (and a million just in Q4), bringing their YE '09 subscriber count to 12.3 million. Netflix also forecasted to end this year with between 15.5 million and 16.3 million subscribers, implying subscriber growth will be in the range of 26% to 33%. Importantly, Netflix also said that 48% of its subscribers used the company's streaming feature to watch a movie or TV show in Q4, up from 41% in Q3 and 28% a year ago. Wall Street reacted with glee, sending the stock up $12 yesterday to a new high of $63.04.
VideoNuze readers know I've been bullish on Netflix for some time now, and the Q4 results make me more so. A key concern I've had has been around their ability to gain further premium content for streaming. On the earnings call, CEO Reed Hastings and CFO Barry McCarthy addressed this issue, offering up additional details of their content strategy and how the recent Warner Bros. 28-day DVD window deal will work. On Monday I'm planning a deep dive post based on what I heard. As a preview, I'm now convinced that Netflix is the #1 cord-cutting threat. Cable, satellite and telco operators need to be watching Netflix very closely.
2. Nielsen announces combined TV/online ratings plan, but still falls short - This week brought news that Nielsen intends to unveil a "combined national television rating" in September that merges traditional Nielsen TV ratings with certain online viewing data. This is data that TV networks have been hungering for as online viewing has surged, potentially siphoning off TV audiences. I pointed out recently that the lack of such a measurement could seriously retard the growth of TV Everywhere, as cable networks hesitate to risk shifting TV audiences to unmeasurable online viewing.
Nielsen's move is welcome, but still doesn't go far enough. As reported, it seems the new merged ratings will only count online views that had the same ads and ad load as on-air. That immediately rules out Hulu, which of course carries far fewer ads than on-air, and sometimes uses custom creative as well. Obviously if the new Nielsen ratings don't truly capture online viewership they'll be worth little in the market. Ratings are a story with many future chapters to come.
3. AOL acquires StudioNow in bid for to ramp up video content - Also not to be overlooked this week was AOL's acquisition of StudioNow for $36.5 million in cash. StudioNow operates a distributed network of 3,000 video producers, creating cost-effective video for small and large companies alike. I'm very familiar with StudioNow, having spoken with their CEO and founder David Mason a number of times.
AOL is clearly looking to leverage the StudioNow network to generate a mountain of new video content, complementing its Seed.com "content farm." In addition, AOL picks up StudioNow's recently-launched Video Asset Management & Syndication Platform (AMS) which gives it video management capabilities as well. For AOL the deal suggests the company is finally waking up to video's vast potential. But with the rise of online video syndication, it's still a question mark whether creating a whole lot of new video is the right strategy, or whether AOL would have been better served by just partnering with a syndicator like 5Min.
Meanwhile, AOL isn't the only portal realizing video is the place to be. In Yahoo's earnings call this week, CEO Carol Bartz said "Frankly, our competition is television" and as Liz wrote, Bartz also said "that makes video really important." Yahoo just partnered with Ben Silverman's new Electus indie video shop, and it sounds like more action is coming. Geez, the prospect of AOL and Yahoo competing on acquisitions? It would be like the old days again.
4. Net Neutrality webinar next Thursday is going to be awesome - A reminder that next Thurs, Feb. 4th at 11am PT/2pm ET The Diffusion Group and VideoNuze will present a complimentary webinar "Demystifying Net Neutrality." The webinar is the first in a series of 6 throughout 2010, exclusively sponsored by ActiveVideo Networks. Colin Dixon from TDG and I will be hosting and we have 2 fabulous guests, who are on opposing sides of the net neutrality debate: Barbara Esbin, Senior Fellow and Director of the Center for Communications and Competition Policy at the Progress and Freedom Foundation and Chris Riley, Policy Counsel for Free Press.
Net neutrality is a critically important part of the landscape for over-the-top video services, and yet it is widely misunderstood. Join us for this one-hour session which promises to be educational and impactful.
Enjoy your weekend!
Following are 4 items worth noting for the Nov 16th week:
1. FCC raises "Open Access" possibility, would further government's control of the Internet - As reported by the WSJ this week, the FCC is now considering an "Open Access" policy that would require broadband Internet providers to open up their networks for use by competitors. The move comes on top of FCC chairman Julius Genachowski's recent proposal for formalizing net neutrality, a plan that I vigorously oppose. Open Access gained steam recently due to a report released by Harvard's Berkman Center that characterized the U.S. as a "middle-of-the-pack" country along various broadband metrics. The report has been roundly dismissed by service providers as drawing incorrect conclusions due to reliance on incomplete data.
The FCC is in the midst of crafting a National Broadband Plan, as required by Congress, aimed at providing universal broadband service throughout the U.S. as well as faster broadband speeds. Improving broadband Internet access in rural areas of the U.S. is a worthy goal, but the FCC should be pursuing surgical approaches for accomplishing this, rather than turning the whole broadband industry upside down. As for increasing speeds, major ISPs are already pushing 50 and 100 mbps services, more than most consumers need right now anyway. Broadband connectivity is the lifeblood for online video providers and any government initiative that risks unintended consequences of slowing network infrastructure investments is unwise.
2. Broadcast TV executives waking up to online video's challenges - Reading the coverage of B&C/Multichannel News's panel earlier this week, "Free Streaming: Killing or Saving the Television Business" featuring Marc Graboff (NBCU), Bruce Rosenblum (Warner Bros.), Nancy Tellem (CBS) and John Wells (WGA), I kept wondering where were these sentiments when the Hulu business plan was being crafted?
Hulu is of course the poster child for providing free access to the networks' programs, with just a fraction of the ad load as on-air. While the panelists agreed that the industry should be dissuading consumers from cord-cutting, Hulu is (purposefully or not) the chief reason some people consider dropping cable/satellite/telco service. For VideoNuze readers, it's old news already that broadcast networks have been hurting themselves with their current online model. What was amazing to me in reading about the panel is that what now seems obvious should have been very apparent to industry executives from the start.
3. Motorola Droid sales off to a strong start - The mobile analytics firm Flurry released data suggesting that first week Verizon sales of the Motorola Droid smartphone were an estimated 250,000. Flurry tracks applications on smartphones to estimate sales volume of devices. While the Droid results are lower than the 1.6 million iPhone 3GS units sold in that device's first week, Flurry notes that the iPhone 3GS was available in 8 countries and also had an installed base of 25 million 1st generation iPhones to draft on.
The Droid's success is important for lots of reasons, but from my perspective the key is how it expands the universe of mobile video users. As I noted in "Mobile Video Continues to Gain Traction," a robust mobile ecosystem is developing, and getting more smartphones into users' hands is crucial. I was in my local Verizon store this week and saw the Droid for the first time - though it lacks some of the iPhone's sleekness, the video quality is even better.
4. AOL's downsizing suggests further pain ahead - AOL was back in the news this week, planning to cut one-third of its employees ahead of its spin-off from Time Warner on Dec. 9th. The cuts will bring the company's headcount to 4,500-5,000, down from its peak of 18,000 in 2001. As I explained recently, no company has been hurt more by the rise of broadband than AOL, whose dial-up subscribers have fled en masse to broadband ISPs. Now AOL is going all-in on the ad model, even as the ad business itself is getting hurt by the ongoing recession. New AOL CEO Tim Armstrong is clearly a guy who loves a challenge; righting the AOL ship is a real long shot bet. I once thought of AOL as being a real leader in online video. Now I'm hard-pressed to see how the AOL story is going to have a happy ending.
Enjoy your weekends!
Following are 4 items worth noting from the Oct 19th week:
1. FCC kicks off net neutrality rulemaking process among flurry of input - As expected, the FCC kicked off its net neutrality rulemaking process yesterday, with all commissioners voting to explore how to set rules regulating the Internet for the first time, though Republican appointees dissented on whether new rules were in fact needed.
Leading up to the vote there was a flurry of input by stakeholders and Congress. Everyone agrees on the "motherhood and apple pie" goal that the Internet must remain open and free. The disagreement is over whether new rules are required to accomplish this, and if there are to be new rules what specifically should they be. As I argued here, the FCC is treading into very tricky waters, and law of unintended consequences looms. Already telco executives are talking about curtailing investments in network infrastructure, the opposite of what the FCC is trying to foster. The FCC will be seeking input from stakeholders as part of the process. Even though chairman Genachowski's bias to regulate is very clear, let's hope that as the data and facts are presented, the FCC is able to come to right decision, which is to leave the well-functioning Internet alone.
2. New Cisco research substantiates video, social networking usage - Speaking of the well-functioning Internet, Cisco released its Visual Networking Index study this week based on research gathered from 20 leading service providers. Cisco found that the average broadband connection consumes 4.3 gigabytes of "visual networking applications" (video, social networking and collaboration) per month, or the equivalent of 20 short videos. (Note that comScore's Aug data said of the 161 million viewers in the U.S. alone, the average number of videos viewed per month was 157.) I'm not sure what the difference is other than Cisco is measuring global traffic and comScore data is at U.S. only. Regardless, the Cisco research continues to demonstrate that users are shifting to more bandwidth-intensive applications, and the Internet is scaling up to meet their demands.
3. Netflix reports strong Q3 '09 earnings, streaming usage surges - Netflix continues to stand out as unaffected by the economy's woes, reporting its Q3 results late yesterday that included adding 510,000 net new subscribers, almost double the 261,000 from Q3 '08. The company finished the quarter with 11.1 million subs and projects to end the year with 12 to 12.3 million subs. If Netflix were a cable operator it would be the 3rd largest, just behind Time Warner Cable, which has approximately 13 million video subscribers.
Netflix CEO Reed Hastings also disclosed that 42% of Netflix's subscribers watched a TV episode or movie using the "Watch Instantly" streaming feature during the quarter, up from 22% in Q3 '08. Hastings also said in 2010 the company will begin streaming internationally, even though it has no plans to ship DVDs outside the U.S. He added that in Q4 Netflix will announce yet another CE device on which Watch Instantly will be available (just this week it also announced a partnership with Best Buy to integrate Watch Instantly with Insignia Blu-ray players). Net, net, Watch Instantly looks like it's getting great traction for Netflix and will continue to be a bigger part of the company's mix. Yet as I've mentioned in the past, a key challenge for Netflix is making more content available for streaming.
4. Yahoo's pact with GroupM for original branded entertainment raises more questions - Shifting gears, Yahoo and GroupM, the media buying powerhouse announced a deal this week to begin co-producing original branded entertainment for advertisers. The idea is to then distribute the video throughout Yahoo's News, Sports, Finance and Entertainment sections. GroupM has had some success in the past, as its "In the Motherhood" series, created for Sprint and Unilever, was picked up by ABC, though it was quickly canceled. As I pointed out in my recent post about Break Media, branded entertainment initiatives continue to grow.
Less clear to me is Yahoo's approach to video. CEO Carol Bartz said last month that "video is so crucial to our users and our advertisers..." that "there's a big emphasis inside Yahoo on our video platforms" and that "a big cornerstone of our strategy is video." OK, but these comments came just months after Yahoo closed down its Maven Networks platform, which it had only acquired in Feb '08. Having spent time at Maven, I can attest that its technology would have been well-suited to supporting the engagement and interactivity requirements of these new Yahoo-GroupM branded entertainment projects. Yahoo's video strategy, such as it is, remains very confusing to me.
Note there will be no VideoNuze email on Monday as I'll be in Denver moderating the Broadband Video Leadership Breakfast at the CTAM Summit...enjoy your weekend!
In a quick call yesterday with FreeWheel Co-CEO and Co-Founder Doug Knopper, who was on his way to NYC for tonight's VideoSchmooze, he told me that the company is poised to manage 1 billion video ads next month, all against premium video streams.
In addition, FreeWheel has now been integrated by AOL, MSN and Fancast, among others, with Yahoo testing currently and ready to go live soon. It looks like the major portals are being encouraged to integrate with FreeWheel's Monetization Rights Management system by the company's premium content customers. The benefit to the content providers is better control and monetization of their ad inventory across their portal distribution deals. The portal activity comes on top of FreeWheel's recently-reported implementation with YouTube, allowing the site's premium content partners to sell and insert ads against their YouTube-initiated streams.
FreeWheel is another great example of the Syndicated Video Economy (SVE) I've frequently talked about. Doug says FreeWheel's progress is proof that the SVE is really "hitting its stride."
It is hard though to put FreeWheel's 1 billion number into perspective. One way of thinking about it is comparing it to the data that comScore reported for August '09 for the top 10 video sites. Assuming only 5-10% of YouTube's views are from its premium partners and maybe half of Fox Interactive's are (due to MySpace's user-generated videos being included in its 380M streams) the top 10 video providers would account for about 3.5B videos. If each video had an average of 2 ads (which is a decent assumption when averaging short clips vs. full programs), then the top 10 video sites would account for about 7B video ads.
Relative to the top 10 then, FreeWheel's 1B ads managed look pretty healthy. To get a fuller picture, you'd also have to consider how many premium streams are in the 12B+ video views that fall outside of comScore's top 10 video sites, and how many ads run against those. If anyone has any ideas for how to determine these numbers, I'd love to hear them.
What do you think? Post a comment now.
Yesterday was one of those days when meaningful broadband video-related news and announcements just kept spilling out. While I was writing up the 5Min-Scripps Networks deal, there was a lot of other stuff happening. Here's what hit my radar, in case you missed any of it:
Adobe launches Flash 10.1 with numerous video enhancements - Adobe kicked off its MAX developer conference with news that Flash 10.1 will be available for virtually all smartphones, in connection with the Open Screen Project initiative, will support HTTP streaming for the first time, and with Flash Professional CS5, will enable developers to build Flash-based apps for the iPhone and iPod Touch. All of this is part of the battle Adobe is waging to maintain Flash's lead position on the desktop and extend it to mobile devices. The HTTP streaming piece means CDNs will be able to leverage their HTTP infrastructure as an alternative to buying Flash Media Server 3.5. Meanwhile Apple is showing no hints yet of supporting Flash streaming on the iPhone, making it the lone smartphone holdout.
Hulu gets Mediavest multi-million dollar buy - Hulu got a shot in the arm as Mediaweek reported that the Publicis agency Mediavest has committed several million dollars from 6 clients to Hulu in an upfront buy. Hulu has been flogged recently by other media executives for its lightweight ad model, so the deal is a well-timed confidence booster, though it is still just a drop in the bucket in overall ad spending.
IAB ad spending research reports mixed results - Speaking of ad spending, the IAB and PriceWaterhouseCoopers released data yesterday showing overall Internet ad spending declined by 5.3% to $10.9B in 1H '09 vs. 1H '08. Some categories were actually up though, and online video advertising turned in a solid performance, up 38% from $345M in 1H '08 to $477M in 1H '09. Though still a small part of the overall pie, online video advertising's resiliency in the face of the recession is a real positive.
Yahoo ups its commitment to original video - Yahoo is one of the players relying on advertising to support its online video initiatives, and so Variety's report that Yahoo may as much as double its proportion of originally-produced video demonstrates how strategic video is becoming for the company. Yahoo has of course been all over the map with video in recent years including the short tenure of Lloyd Braun and then the Maven acquisition, which was closed down in short order. Now though, by focusing on short-form video that augments its core content areas, Yahoo seems to have hit on a winning formula. New CEO Carol Bartz is reported to be a big proponent of video.
AEG Acquires Incited Media, KIT Digital Acquires The FeedRoom and Nunet - AEG, the sports/venue operator, ramped up its production capabilities by creating AEG Digital Media and acquiring webcasting expert Incited Media. Company executives told me late last week that when combined with AEG's venues and live production expertise, the company will be able to offer the most comprehensive event management and broadcasting services. Elsewhere, KIT Digital, the acquisitive digital media technology provider picked up two of its competitors, Nunet, a German company focused on mobile devices, and The FeedRoom, an early player in video publishing/management solutions which has recently been focused on the enterprise. KIT has made a slew of deals recently and it will be interesting to watch how they knit all the pieces together.
Product news around video delivery from VBrick, Limelight and Kaltura - Last but not least, there were 3 noteworthy product announcements yesterday. Enterprise video provider VBrick launched "VEMS" - VBrick Enterprise Media System - a hardware/software system for distributing live and on-demand video throughout the enterprise. VEMS is targeted to companies with highly distributed operations looking to use video as a core part of their internal and external communications practices.
Separate, Limelight unveiled "XD" its updated network platform that emphasizes "Adaptive Intelligence," which I interpret as its implementation of adaptive bit rate (ABR) streaming (see Limelight comment below, my bad) that is becoming increasing popular for optimizing video delivery (Adobe, Apple, Microsoft, Apple, Akamai, Move Networks and others are all active in ABR too). And Kaltura, the open source video delivery company I wrote about here, launched a new offering to support diverse video use cases by educational institutions. Education has vast potential for video, yet I'm not aware of many dedicated services. I expect this will change.
I may have missed other important news; if so please post a comment.
I highly recommend reading Saul Hansell's piece in last Friday's NY Times, recapping the ridiculously optimistic quotes senior executives at AOL and Time Warner have made over the years (and be sure to peruse readers' consistently vitriolic comments). For anyone who's watched AOL's rise and fall, the quotes are a stroll down memory lane. But while the picture that emerges is that hubris cursed AOL and contributed mightily to its downfall, in reality it was broadband, and AOL's colossal mismanagement in transitioning to it, that crushed the company.
The chart below shows that AOL's dial-up subscribers topped out in Q3 '02 at 26.7 million, and have been in a free-fall ever since, sitting at just 6.3 million at the end of Q1 '09, a drop-off of 20.4 million or 76%. Where did those 20.4 million dial-up subs go, along with tens of millions of other dial-up and new Internet users? To broadband Internet access, supplied by cable companies and telcos. These companies have grown their U.S. broadband subs from 15.2 million in Q3 '02 to 69.2 million in Q1 '09, an astonishing increase of 54 million subscribers in just 7 years.
Cable and telco broadband providers have feasted on the carcasses of AOL and other dial-up services like MSN and Earthlink. But, here's what's both incredible and really sad: had AOL management been less arrogant and more strategic in its approach to broadband, it's quite possible that things could have turned out quite differently.
Back in the mid-to-late '90s, I had a front-row seat at AOL's initial reactions to broadband. In that period I was VP Business Development at Continental Cablevision, then the 3rd largest cable operator in the U.S. with over 5 million video subscribers. We were one of the pioneers in testing and rolling out "high-speed" Internet service. While we thought our speedy and always-on broadband connections were a better mousetrap vs. dial-up, we were very concerned about our lack of online content, video-centric branding and ability to effectively market this exciting new service.
In the pre-@Home days, I pushed to explore how we could partner with AOL to help us get our service off to a faster start. A deal with AOL would have had significant advantages to them as well. AOL at the time had a huge capex burden building out more modem banks to keep up with its swelling subscriber ranks. Even still, there was already plenty of AOL subscriber frustration with the slowness of the AOL network, and often you couldn't even get connected on your first or second tries. At least in our geographic footprint we could unburden them of their network build-out, offer better-quality connections and allow them to focus on content and brand-building. As the 3rd largest cable operator, we also offered them a valuable proof-point that they could use to build industry-wide relationships.
After much preparation and scheduling, we met with one of AOL's most senior executives. After articulating our broadband vision and opportunity to work together, he arrogantly dismissed us as if we were precocious children. To him the opportunity we were describing was far too small, and to illustrate his point he asserted that AOL would have 10 million subscribers before we had our first 100,000 (a prediction that was probably correct!).
Needless to say, no meaningful deal with us - or any other cable operator - every materialized. AOL went on to flounder around with various incarnations of AOL Broadband, none of which ever got any traction. AOL continued to grow its subscribers for a number of years and capitalized on its reach by extracting hundreds of millions of dollars from VC-backed startups eager for access to its massive captive audience (some of those deals would later come under scrutiny, as would AOL's accounting treatment for its subscriber business). AOL then bought Time Warner, and the rest as we know is history.
But what if things had gone differently? What if that AOL executive and others had seen the handwriting on the wall - that broadband would eventually render dial-up obsolete - and decided that AOL needed to figure out how to transition to it, instead of dismissing it? Had that happened, it could have forged partnerships throughout the cable and telco industries that would have let it focus on content and services in an open, broadband environment. In fact, I think it's quite possible that AOL could have pre-empted @Home and the RoadRunner venture that Continental eventually joined from getting traction (why start over when AOL, the 800 pound gorilla is in your corner?).
Instead AOL fell victim to its own arrogance and limited strategic vision. Broadband went on to become the single most powerful enabler of the Internet as we know it today (e.g. billions of spontaneous Google searches, Tweets, Amazon purchases, and more recently video views). AOL is now a crippled mish-mash of mostly second-rate properties, on its umpteenth management team, led by new CEO Tim Armstrong.
In retrospect, those fateful decisions AOL made about broadband 10-15 years ago set the stage for the company's eventual demise.
What do you think? Post a comment now.
Well, it looks as though it's official: as reported by TechCrunch and others, Yahoo is discontinuing Maven Networks's third party video publishing activities though Yahoo's statement says it will use Maven technology for internal video efforts. As I've mentioned periodically, I was an early consultant to Maven, which was a pioneer in the video platform space.
Way back then (!) in 2003 most people in the media business still had a difficult time imagining why broadband video was so strategic and game-changing. Maven's team did a lot of the early spadework in evangelizing broadband's potential and building market momentum. Its reward was being acquired for $160M by Yahoo in February, 2008 in what I believe is still the largest pure play broadband deal.
However, the Yahoo acquisition was never a perfect strategic fit, even before factoring in the well-documented chaotic mess that Yahoo has become in recent years. The problem was that Yahoo is a media company, deriving the majority of its revenue from advertising. On the other hand, Maven was a technology/products company (though some in the industry always questioned the true proprietary value of Maven's technology). The most strategic deal for Maven would have been with a larger technology/products company, where it would have become part of broader suite of video products and services. Yahoo was never really well-suited to support Maven's third party video customers (and in reality it hasn't for a while now), and with all its other troubles, this move was widely expected.
For Maven's founders and investors, the company's acquisition marked a successful exit that others in the industry envy, particularly in this crummy M&A market. Still, the Yahoo-Maven deal is yet another example that when selling a company, price isn't the sole criteria for longer-term success.
The NY Times is reporting that Yahoo is ramping up its original broadband video offerings, with the impending launch of "Spotlight to Nightlight," a new series showcasing celebrity moms, hosted by former Miss USA Ali Landry and sponsored by State Farm Insurance. The new show highlights how far Yahoo has evolved from its era of failed dreams of grandeur directed by former Yahoo Media Group head Lloyd Braun. Before you say, "ugh, its Yahoo, they'll never succeed with video," I'd suggest that their new plan has some merit.
As we all know, Yahoo has suffered through all kinds of recent challenges and significant management turnover. But it is still one of the most popular online brands - the 2nd most-trafficked web site with over 146 million monthly unique visitors, the #3 search engine (now just behind YouTube) with a 21% market share and operator of the second-largest ad network behind Platform A.
Despite these strengths, I've thought Yahoo has been somewhat unimpressive in the video area. It has focused heavily on aggregating and distributing others' content in a bland, mechanical manner though still managing to become a highly popular video streaming destination. I've sometimes wondered whether anyone really "owned" the video experience at Yahoo or whether it had been diffused over so many managers that it had been orphaned along the way. It's not been uncommon for me to see broken links, repetitious ads, 30 second pre-rolls adjacent to under 1 minute clips, and other annoyances that can quickly turn off users.
In the midst of this confusion, a bright spot on the original video front has been "Primetime in No Time" a short, energetic TV recap show that has gained a sizable following plus other series in specific verticals like sports and finance. On the flip side, in a sign of the mixed internal signals, it also killed "The 9" a recap show of top online content, which had both a following and a sponsor in Pepsi.
With "Spotlight to Nightlight" Yahoo seems to be further recognizing that it is sitting on mounds of data that, if properly analyzed, can reveal lots of clues about what kinds of programming would match up with its users' and advertisers' interests. Given Yahoo's size and resources, there are few online companies that should be better tuned in to what's hot and could be the strong basis for a new series.
Yahoo's opportunity is to capitalize on this information by creating short, upbeat (and humorous where possible) series that appeal to users' demonstrated interests. It should then promote the shows like crazy in appropriate vertical areas of its site (as "Spotlight to Nightlight" will be with Yahoo's "OMG"), and adjacent to relevant searches.
Recently I wrote about Demand Media, which has built a "content factory" by doing many of these same kinds of things. Yahoo could create a stable of inexpensively produced but high-quality broadband-only series that can instantly find their natural audiences. Advertisers looking for adjacency to premium video that aggregates sought-after audiences, would soon follow.
New Yahoo CEO Carol Bartz has a lot of issues on her plate to resolve, but also plenty of opportunities. Video is a big one that has been largely untapped by the company. If Yahoo builds a cohesive video strategy that relies on the significant data it has unrestricted access to, it may finally be on a winning video path.
What do you think? Post a comment now.
I always hesitate to conclude too much from just a couple data points, but two deals in the last week - between NBCU and 60Frames and between Microsoft/MSN Video and Disney/Stage 9 - feel to me like leading indicators of more deals of this kind to come.
In case you missed the news, last Tuesday, NBCU and 60Frames, an independent broadband-only studio I've written about, announced a comprehensive content development and ad sales deal. Critically, NBCU will take original broadband-only shows from 60Frames to brands/agencies with which it has relationships to pursue both upfront sponsorships and possible brand integration.
Then this past Monday, Disney and Microsoft announced at MIPCOM that Stage 9, Disney's in-house broadband-only studio which I've also written about, would begin syndicating its shows to MSN Video for European viewers. While smaller in scope, the Disney-MS deal is no less noteworthy.
I see at least three underlying threads to these deals that suggest broader market implications. First, the deals are further evidence that the broadband-only video model is still nascent and in need of market validation and financial support. If these deals are in fact harbingers, this support will come from established players like NBCU and Microsoft who have significant reach and access to ad dollars. Somewhat ironically these are also companies that have financial stakes (either through direct ownership of or important customer/strategic relationships with) the very incumbent media properties that the broadband-only crowd is trying to grab eyeballs away from.
Second, the down economy is a catalyst for more of these types of deals. Last week, in "5 Conclusions About the Bad Economy's Effect on Broadband Video," I asserted that the broadband-only studios would tighten their belts a bit to conserve resources in this uncertain climate. One way to mitigate their financial risk and uncertainty is through these linkups with deep pocketed partners. NBCU's backing of the 60Frames slate appears to be the most extensive of these types of deals to date. That Stage 9 - owned by well-funded Disney - is also hunting down big distribution partners which have brand relationships is still further evidence that risk mitigation is a key priority.
Third, the deals point to an acceleration of the trend toward broadband video syndication. In a presentation I give periodically to industry executives, I have a slide titled "Syndicated Video Economy Accelerates" which lists the reasons as: (1) Ongoing video explosion causes heightened need to break through to audiences, (2) Device proliferation causes even more audience fragmentation, (3) Ad model firms up, improving ROI for free, widely distributed video and (4) Social media use means surging user-driven syndication. That slide needs to be updated for a new #1 reason motivating syndication: "In a down economy, syndication could mean the difference between success and failure for broadband-only studios and even big media backed broadband initiatives."
Here's something else to consider: what role might YouTube, the market's undisputed 800 pound gorilla, play as an emerging distributor and financial backer of broadband-only video? Despite its much-avowed disinterest in being a content provider, YouTube, with Google's abundant balance sheet, is in a Warren Buffet-like position to become the go-to resource for financial backing and key distribution. (Readers who are cable industry veterans will also see a potential parallel to the M.O. of TCI back in the 1980's and 90's.) Couple Google's billions with YouTube's massive reach, desire to move up the quality ladder from its UGC roots, pursuit of new ad models and commerce models and its budding GCN initiative, and the company really is superbly positioned to play a role in the development of broadband-only programming.
Anyway, I digress. For now, it's fair to say that these two deals do not yet make a trend. But still, I think it's extremely likely that we'll see many more of these kinds of linkups in the months to come. We're living in a hunker down time, when starry-eyed creatives enticed by broadband's no-rules freedom will be tempered by business executives' no-nonsense pursuit of financial viability.
What do you think? Post a comment now.
(Btw, for a deeper dive into how broadband-only studios ride out the economic storm, join me for the Broadband Video Leadership Breakfast Panel in Boston on Nov 10th. One of our panelists will be Fred Seibert, creative director and co-founder of Next New Networks, arguably the granddaddy of the broadband-only crowd, having raised over $23 million to date. Early bird pricing ends on Friday.)
Here's a clever move from Comcast's Fancast broadband portal to create new value for users and generate excitement in the broadband market: this week it is running "Premiere Week," an aggregation of 168 premiere TV episodes. The episodes span series premieres ("Desperate Housewives," "Dexter," "The Office"), season premieres ("Fringe," "Sons of Anarchy," "Crash") and classic pilots ("Dynasty," "The A-Team," "Miami Vice"). It's great fun and a visitor could get lost on the site for hours, as I nearly did.
These are the kinds of promotions that Comcast should be all over. Given its extensive reach and programming muscle, the company has definite - though not insurmountable - advantages over other aggregators to pull this kind of promotion together.
The competition for aggregating premium programming continues to intensify. Business models are all over the board as are approaches for getting video all the way to the TV. For example, last week Amazon launched its pay-per-use VOD initiative which includes a page of info for how to watch using TiVo, Sony Bravia Internet Video Link, Xbox 360, etc. Then yesterday, Netflix announced that it will incorporate about 2,500 of Starz's movies, TV shows and concerts in its Watch Instantly feature, along with a feed of its linear channel. Still other moves are forthcoming.
Comcast's real lever though is unifying its currently siloed worlds of digital TV, broadband Internet access and Fancast. When converged they're a blockbuster; companies like Netflix, Amazon and others cannot replicate this combination. In particular, Comcast, and other cable operators are ideally positioned to bridge broadband all the way to the TV. That's the last big hurdle to unlock broadband's ultimate value. Whether they'll do so is an open question.
Earlier this year Comcast CEO Brian Roberts unveiled the company's "Project Infinity" which suggested Comcast was looking to unify its various video offerings and bring broadband to its subscribers' TV. It seemed like a promising move, though there was no timeline disclosed. Now, nearly 9 months later I can't find any updates on the status of Project Infinity. It would be great for the company to publicly release a progress report or sense of upcoming milestones.
Promotions like "Premiere Week" are a positive step from Comcast, but real competitive advantage for the company lies in launching services which are truly impossible for others to match.
What do you think? Post a comment.
Comcast's Fancast broadband portal has received a much-needed facelift, adding new features and content to compete with other well-funded players in this space. (Note: before you conclude that VideoNuze has become obsessed with covering Comcast - since just yesterday I dug into its ISP policies - rest assured, tomorrow I'll move on!)
Fancast is by far the most ambitious portal effort among the major cable operators. In fact, while other operators' portals target just their own ISP customers, Comcast's goal is to have Fancast compete for ANY broadband user's attention. That means that Fancast goes head to head with ad-based broadband aggregators like Hulu, Veoh, Joost, Metacafe, etc. And now with Fancast's new video download store, it also butts up against folks like iTunes, Amazon Unbox, Xbox LIVE Marketplace, etc. Then of course there's YouTube, the 800 pound gorilla of the broadband video world, which all aggregators, compete with on one level or another.
With such a formidable array of competitors, Fancast has a high bar to succeed. Still, I've maintained for a while that Comcast, with its 14 million+ broadband subscribers and 22 million+ cable subscribers is extremely well-positioned and needed to play aggressively in broadband video distribution. To date though I've been underwhelmed by Fancast, which seemed to have a solid vision, but sub-par execution. (For more on this, see 2 previous posts, here and here, comparing Hulu and Fancast.)
Now, with Fancast's facelift, the portal is getting some mojo. Fancast's director of communications Kate Noel recently took me on a spin through what's new. First up is a new home page (see below) that nicely showcases premium content that is curated by an in-house editorial team. Clicking on a selection reveals an oversize video player (which can be further enlarged to full screen). New features include embedding and sharing, along with a handy tool to be notified when a new episode is offered.
There's also a noticeable improvement in content selection, which Kate says now includes over 37,500 video assets; 320+ individual TV programs, 250+ movies and countless trailers and clips from over 100 content partners. Fancast is also putting a heavy emphasis on editorial differentiation, and has created sections such as "Today's Top 5," "Daily Buzz (blog)" and "Discover All Your Favorites." to help orient users on the site and provide editorial perspective.
This all plays to what Kate says is Fancast's larger mission to not just "offer TV online," but rather to "use Fancast as a cross-platform hub" that draws value from and drives value to Comcast's other offerings - digital cable, VOD and DVR service in particular.
With Comcast's huge cable subscriber base, that sounds right in theory. But how exactly Fancast fully executes on that potential still feels squishy. For example, doing a search for a current episode of "Mad Men" reveals a nice option to watch on VOD (since it's not currently on Fancast - that's a whole other story...), but is this really a game-changer? A much more significant lever at Comcast's disposal would be getting Fancast onto their digital cable boxes, so all that great Fancast content could be consumed in the living room (maybe along with YouTube, Funnyordie, NYTimes.com and other video?). The nagging question remains: will that day ever come?
One last thing that struck me about Fancast was its seemingly murky relationship with Hulu, which supplies many of Fancast's movies, and some of its TV programs. Is Hulu a Fancast competitor, a partner, both? Kate says Hulu is not competitive. Yet at the end of the day, aren't both Hulu and Fancast competing for the same ad dollars, and eyeballs? Here's another question: with Comcast's vast programming arm, why can't it procure movies directly from studios, instead of cutting Hulu in on the action? I must say, it's all very confusing.
Still, to the average user, the new Fancast is an improvement, and there is more progress yet to come.
What do you think? Post a comment now!
You'd have to have slept through yesterday to miss the big news that ESPN is now syndicating video clips from a cluster of its programs to AOL, its first-ever such deal. I interpret the deal as an extremely strong indicator that the "Syndicated Video Economy" (as I described this trend 3 weeks ago) is inexorable, even for the richest and most powerful video brands.
ESPN is one such brand. In 2007 it generated 1.2 billion video views from its own site, placing it in the top 10 of all sites. In January '08, ESPN generated 81 million views according to comScore, ranking it #9. And much of ESPN's broadband video (aside from what it shows exclusively on ESPN360, its online subscription service) is essentially re-purposed from on-air, likely making the margins on ESPN's online efforts insanely profitable.
Yet with the AOL deal, even the mighty ESPN has now capitulated to the lure of the syndicated video model. And the AOL deal is surely the first of many more deals to come. ESPN has likely come to the same conclusion as have scores of other video content providers, including the major broadcast networks: the future broadband video value chain is going to be more about "accessing eyeballs" - wherever they may live, at portals, social networks and devices - than about "acquiring eyeballs" by driving them to one central destination site. As the most stalwart proponent of the latter approach, other market participants should take heed of ESPN's strategy change.
The motivation behind video providers shifting from traditional scarcity-driven distribution strategies lies in the peculiar dynamics of the Internet: while audiences continue to fragment to a bewildering range of sites, they are simultaneously coalescing in a relatively small number of influential new brands such as YouTube, MySpace, Facebook and the traditional portals. Consider the comScore January stats again. The Google sites (dominated by YouTube) drove 3.4 billion video views or 42 times ESPN's video volume. A distant second was the Fox Interactive Media sites, including MySpace, which drove 584 million views, still 7 times ESPN's total.
These dynamics incent established video providers and startups in particular to get their video in front of all those eyeballs with more flexible business models. (For those interested in more detail on how the video distribution value chain is fast-changing due to these emerging players, I've posted slides from late '07 here. I'll have updated slides soon.)
The "Syndicated Video Economy" is creating both unprecedented opportunities and challenges for video providers. I continue to believe the future winners will be relentlessly flexible and willing to adopt new business approaches that keep them in synch with evolving consumer behaviors.
I am ever mindful of the old adage about "missing the forest for the trees" as I try daily to understand the often minor feature differences between competing vendors or the nuances of startups' market positioning. As we all know, when you get too close to something, it's quite easy to lose the larger perspective. So periodically I think it's essential to take a huge step back to try to identify the larger patterns or trends that crystallize from the daily frenzy of deals and announcements.
As a result, I've come to believe that recent industry activity points to an emerging and significant trend: the early formation of what I would term the "syndicated video economy." By this I mean to suggest that I'm seeing more and more industry participants' strategies - in both media and technology - start from the proposition that the broadband video industry will only succeed if video assets are widely dispersed and revenue creatively apportioned.
For content providers the notion of widespread video syndication big change in their business approach. In the past year I think we've observed content providers of all stripes transition from "aggregating eyeballs", to "accessing eyeballs," wherever they may live now or in the future: portals, social networks, portable devices, game consoles, etc. Underlying this shift is the realization that advertising-based revenues are going to fuel the broadband video industry for the foreseeable future. The ad model requires scale and syndication is the best way to deliver it.
This shift by content providers has been accompanied by a loosening of traditional tightly-controlled, scarcity-driven distribution strategies, an acknowledgement that fighting newly-empowered consumers is a futile exercise. The evidence of this shift abounds. Consider the broadcasters like CBS, NBC and Fox, which through their affiliates (Hulu, CBS Audience Network) are syndicating programming to many portals/aggregators (e.g. Yahoo, MSN, AOL, YouTube), social networks (e.g. Facebook, MySpace, Bebo) and others. And Disney's Stage 9 digital studio, which premiered with YouTube and explicitly plans to tap into broadband video hubs. And cable networks like MTV Networks, which is pursuing a plethora of distribution deals. And traditional news-gatherers like local TV stations, newspapers and news services (e.g. Reuters, AP) which have stepped up their activity to scatter their video clips to the Internet's nooks and crannies. And the list goes on and on.
Taking their cue from the media companies' strategy shift, technology entrepreneurs and investors have ramped up their focus on this market opportunity. The prospect of the syndicated video economy blossoming drives news/information distributors such as Voxant, ClipSyndicate, Mochilla, TheNewsMarket and RedLasso, an ad manager such as FreeWheel, and a content accelerator such as Signiant, plus many others. Then there are more established companies guiding areas of their product development process by the prospect of the syndicated video economy's growth: Google, WorldNow, Akamai, thePlatform, Anystream, Maven Networks, Brightcove, PermissionTV and plenty of others (apologies to those I've left out!)
All of this suggests that the eventual "value chain" of the broadband video industry will look quite different than the traditional one (for more on this, I've posted some my slides from late '07 here.) As with all economies, in the nascent syndicated video economy there is vast interdependence among the various players, not to mention shifting market positions and degrees of pricing power and negotiating leverage. It is far too early to gauge who will emerge as the syndicated video economy's winners and losers. But make no mistake, lots of energy and investment will be expended trying to nurture its growth and exploit its opportunities.
Do you see the syndicated video economy forming as well? Post a comment and let us all know!
(Note: This is the third in a series of posts with companies participating in the 2008 Media Summit, a premier industry event starting tomorrow in NYC. VideoNuze has partnered with Digital Hollywood, the Media Summit's producer, to provide select analysis and news coverage.)
A few months ago, in a post I wrote called "Broadcast TV Stations Most Threatened By Broadband/On-Demand," I asserted that broadband was bringing a perfect storm to the world of local TV stations.
These thoughts were in the background when I spoke last week with Jonathan Leess, President and GM of CBS TV Stations Digital Media Group. CBS owns 29 stations around the U.S. mostly in bigger markets. Leess has been in his role since April '04 and by all accounts has done an admirable job leading the CBS stations into the broadband era.
Most significant is the delicate balance he's tried to strike in centralizing certain online/broadband responsibilities while keeping others at the local level. This is no easy feat. Succeeding online requires scale and common technology platforms. Yet historically local stations enjoy wide autonomy in decision-making as long as they meet their numbers.
Leess explained that in broadband he's focused his corporate group on accessing and providing new non-local content, creating an internal syndication network for stations, developing technology and tools for all stations to use, focusing on national ad sales and training for local sales reps, and importantly generating new viewership by syndicating local stations' video to third parties.
A key part of executing the balancing act has been a relentless focus on work-flow and supporting technologies. Leess explained that the broadband activities at CBS TV Stations are a 24/7 operation involving hundreds of people around the country. Turning all of this into a well-oiled operation, particularly in the context of long-standing operational biases, has been an enormous operational challenge that Leess seems to have embraced.
His efforts seem to be paying off. CBS TV Stations drove 89 million video views from their own sites in '07, an average of around 8 million video views/mo from their own sites, a 71% increase over '06. It's gaining an additional 10 million video views/mo through syndication partners. The primary current contributor to syndication is Yahoo, with whom CBS TV Stations partnered in Oct '06. To put this in context, today's WSJ carried the adjacent graphic of select broadcasters' video views. Putting aside CBS TV Stations' 10 million monthly syndication streams, its '07 monthly average traffic would appear to rank it in the top 5, right around Discovery.com.
In addition, video clips are a big part of CBS TV Stations' success, as it is posting around 520/day and now offers a searchable library of 350K clips.
Meanwhile the Yahoo deal has been so successful that CBS TV Stations has clearly gotten syndication religion, with several significant announcements planned for the coming weeks. Leess explained how these syndication deals drive unprecedented consumption from out-of-market viewers while also creating valuable ad inventory. For pre-rolls, CBS is getting between $28-75 CPM, with banners fetching $8-18 CPM. Importantly, CBS TV Stations are aggressively bundling on-air/online/broadband packages, having sworn off broadband as a pure "value-add" some time ago.
While I stand by my assertion that local TV stations are most vulnerable to broadband's rise, it is also true that broadband offers stations fresh opportunities. CBS TV Stations' offensive approach shows that with the right leadership, strategy and operational plan, executing a successful transition to the broadband era is quite possible.
What do you think? Post a comment and let everyone know!
The rumor mill of the past 2 weeks proved correct, as Yahoo announced this morning that it has acquired Maven Networks for $160M. By my count this is the biggest pure-play broadband video deal to date, and is an excellent validation of broadband video's growing importance in the media and technology landscape.
Hilmi Ozguc, Maven's CEO and co-founder, provided me with an exclusive briefing about the deal, his first comments following the announcement this morning. (As a quick disclaimer, I did some business development and product strategy consulting work for Maven and Hilmi in the company's early days. I didn't have any current financial relationship with Maven.)
As Hilmi says below, and as I've said before (most recently in "My Rant About Super Bowl Ads"), broadband video is increasingly becoming the terrain of the big guys - the biggest brands, publishers, technology providers, networks, etc. As the broadband medium continues to mature, its ability to attract ad dollars from incumbent media, particularly TV, is going to strengthen. This process will be accelerated by Yahoo as it seeks to drive Maven's capabilities into its customer and partner base.
Following is a summary of my briefing with Hilmi:
Why did you sell the company?
Broadband video is increasingly going to be a game fought between titans because billions of dollars are at stake and the question is how do you get to the top 50 or 100 global media brands and advertisers? We've focused on building tools and technologies that these media companies need. The time to sell was excellent as was the return for our investors.
Can you describe the sale process?
We had several high profile bidders, although I can't identify them. It was gratifying to see multiple companies validate the product initiatives we put in motion 2 to 2 1/2 years ago. Yahoo has the resources to buy anyone. They took a deliberate approach and looked far and wide and concluded that Maven was the right company to buy. The whole process took several months from start to finish. The deal was for $160M, mostly in cash and it officially closed yesterday.
What group will Maven report into?
Maven will be integrated very quickly and deeply into Yahoo because video is so key to what Yahoo is doing in terms of advertising. This will not end up being a little business unit off to the side somewhere. Our engineering team will be part of Yahoo's engineering team. All Maven executives including me will be staying and have similar responsibilities to what we've been doing. A lot of work has already gone into the integration.
Who do you report into?
I'm not sure I'm at liberty to discuss that, as it would be a little too revealing of Yahoo's strategy, but I think it's in the right place to be within the company.
What does Yahoo bring to Maven?
Enormous reach, 500M visitors around the world per month. An incredible roster of advertisers and publishers who are already in their ecosystem. Interesting and complimentary engineering capabilities. A sheer ability to scale this massively. This deal is all about getting our stuff into the hands of the biggest media, publishing and advertising companies and having it exposed to a massive audience. We started as a media technology company, and evolved to mostly an advertising business. So combining with the leader in display advertising was very logical. Being plugged deeply into a company that sells close to $2B of advertising every 90 days is a huge opportunity for us. It's a massive advertising machine.
Does Yahoo-Maven portend more consolidation?
Absolutely. I just don't see how as a small startup you can have a significant enough piece of the pie when all the giants have now woken up and have video as front and center. Other big players are going to come in more aggressively.
What are the implications of Microsoft's takeover bid of Yahoo on Maven?
We need to stay focused at Maven, and as long as we do that I'm not concerned about any distractions. And I shouldn't really talk about the Microsoft deal either!
What are the 2-3 lessons you've learned about the broadband video market in 5 1/2 years since starting Maven?
When we started virtually nobody really believed in video being delivered on the Internet. We had a singular vision that said, look, once broadband is in enough homes, video is going to take off. So that was our first mission: delivery of bits, playback, HD-quality, etc. As the market evolved, the Akamais of the world solved a lot of the delivery problems, so we shifted our focus to publishing and content syndication, advertising and monetization. Basically, how does a media company generate revenue from broadband? So we evolved along with the market. We tried to stay focused on advertising, professional video and largest media companies.
This is your second successful startup - what lessons do you have for entrepreneurs?
1. Focus is the most important thing and ignoring the naysayers. It's natural to want to hedge, but you have to be bold enough to make decisions. Markets do take time to develop. We were early no question, but the market caught up and we were at right place at right time when it did. 2. Agility is also important and being analytical about what the market is saying. So the ability to shoot a direction and switch. And do it fearlessly. Trial and error is key. 3. Bet on the right people. The wrong people can steer you down the wrong path. So you essentially have to be the world's most capable talent scout, to build a team of people at all levels of the organization. A great team will figure it out.
Where's the broadband video market going from here?
Startups got this space going and created a lot of the core technology and innovation, but this is no longer a game of startups. Big media companies want to deal with big technology companies and networks. Big advertisers want to work with biggest publishers. To achieve this scale independently would be very difficult.
What are the key challenges for broadband video market?
I don't want to say the "R" word that everyone's talking about, but if it comes, I hope it's a mild one. As we know, advertisers cut back quickly in difficult economies. Though I don't think this will happen in broadband because it is so promising and it's still pretty small. Another challenge is getting ad agencies and advertisers to think of broadband as being interactive and capable of more than TV ads. You've talked about that a lot at VideoNuze. And finally the need to scale the technology and infrastructure so it's rock-solid and dependable. That's what Yahoo and Maven will focus tightly on. And I think we have all the tools between us to grab the undisputed leadership position in this, if we move fast enough.
So are you going to do startup #3?
My focus for now is on integration and marshalling all these terrific resources. Yahoo has a great team and has been chomping at the bit to have a competitive video offering to sit alongside their display offerings. They have a killer ad sales force, along with great relationships with the biggest publishers. They have mastered how to play on the media company side, and in being a partner to other media companies. We can't wait to get going.
Well, here I was waiting for news to officially cross the wire that Yahoo was acquiring Maven Networks for $150-$170 million (heavily rumored in the blogosphere yesterday and for weeks now) so that I could weigh in, when instead what emerged this morning was that Microsoft is making an unsolicited offer for Yahoo. Quite a day for Yahoo. (Note, I'll have more on Yahoo-Maven if and when that becomes official).
Today's big news is Microsoft's unsolicited $44.6B offer for Yahoo. Talks between the companies have been off and on for a long time, and it looks like Microsoft finally got fed up with the dithering at Yahoo and decided to make a pre-emptive move. Steve Ballmer's letter to Yahoo's board and today's release is here.
The deal is all about increasing scale to compete more effectively with Google in the online advertising space. Both Microsoft and Yahoo have lagged Google badly and have spent billions in the past year on ad infrastructure acquisitions. Yahoo immediately brings MSN lots of new traffic, which can be monetized with both search and display advertising.
Though Ballmer's letter also highlights "emerging user experiences" such as video, mobile, online commerce, social media and social platforms" down the list, as the fourth area of potential synergies, I would argue that the upside in video is actually the most strategic benefit of the deal. Why?
The concept of scale, i.e. being able to both reach gigantic audiences and drive massive traffic from them, is absolutely essential for broadband video advertising to become core part of the marketing mix for big brands. Unlike search-based advertising, which has been driven by long-tail advertisers, broadband video advertising is going to be driven by big brands. That's because, notwithstanding the growth of overlays and other formats, pre-, mid- and post-roll ads are going to be with us for a while to come, and they are expensive to produce. The average garage-sized business isn't going to be making them.
Big brands spend tens of billions of dollars on TV ads. Shifting a meaningful part of this spending to broadband delivery is essential for broadband's growth. Brands spend on TV because that's been the only way for them to buy enough audience reach. Though they're beginning to trickle some spending over to broadband, the central obstacle to increasing their broadband spending is that there simply is not enough high quality, targeted video inventory for them to buy in order to achieve their reach objectives and therefore materially impact their businesses.
This is a theme I hear all the time, and just heard many times in the ad-related sessions I attended at NATPE earlier this week. Microsoft knows that to tap the long-term broadband ad opportunity in branded video advertising, it must offer advertisers greater reach, along with interactivity, reporting, social features, etc. This is all the more urgent because MSN and Yahoo are already playing catch-up to YouTube which still drive approximately 40% of all video views, a dominant market position.
MSN has worked hard to cross-promote MSN video in the rest of the site, and this has driven improved user experiences and impressive traffic gains. Yahoo, which has been mired down with a dysfunctional and bloated bureaucracy, has been far less coordinated and effective in video, leaving lots of room for MSN to make improvements.
You won't hear much about video as a key motivator for the deal because Wall Street, which is Microsoft's key audience to persuade, doesn't give a whit about long-term strategic positioning. It only cares about short-term financial metrics like dilution, earnings growth, cost-reductions and so forth. But behind the scenes, I'm giving credit to Microsoft. I think it is reading the tea leaves correctly about how the broadband video ad market is going to unfold and how to get MSN positioned properly for long-term success.
What do you think? Post a comment!