Friday's $125 million IPO filing by Demand Media, the foremost content "factory" or "farm," raises the question of whether its low-cost, high-volume content creation model is the future for independent online video, or if its specialized approach is just applicable to its chosen how-to/knowledge-oriented niches.
Back in March, '09 I described how Demand's approach had enabled it to become the biggest supplier of online video to YouTube, with its ExpertVillage and eHow brands delivering the highest number of views of any YouTube partner. While not a household name, Demand pioneered a new approach to choosing which content to create, how to create it, and how to monetize and value it.
Based on multiple data sources, Demand developed a set of algorithms that could help predict the likely consumption and monetization potential of video on a given how-to/knowledge topic. When promising ones were identified, assignments would be offered out to a large freelance network of producers who would follow creative guidelines while still enjoying an ample amount of flexibility. Content is published to Demand's own sites and to 3rd parties to whom it syndicates. Social media and user contributions are emphasized as well.
Importantly, all content is search engine optimized, increasing the likelihood that some of Demand's content will rank high among the results of a given search. Finally, monetization is mainly through Google's AdSense, which matches targeted ads with the content. As a result, Demand's revenue, like many other online sites, heavily depends on Google for its revenue.
Demand's model, applied to both text and video content, stands in stark contrast to the way entertainment programming, for example, has always been created. While now informed by focus group testing and other viewer data, entertainment is still very much an creatively-driven, algorithm-free pursuit. Demand also contrasts with the "branded entertainment" model many online video series have adopted, such as "Easy to Assemble," which coincidentally is profiled in today's NY Times. With this program, the creator, Illeana Douglas, successfully brought on Ikea as the sole sponsor, also intimately weaving its brand into the plot line. The article also highlights a new $4.4 million financing My Damn Channel, the program's distributor, which works solely online, is announcing today.
Content factory and branded entertainment are two very different models, with the former an automated, high-scale approach and the latter more of a hand-crafted, customized exercise. So is one approach better for online video? I think the answer is it depends on the content category. The factory approach works great where creativity required is relatively low and the need for information quality is high. Branded entertainment works in more creative settings, where specific messages and positioning are sought-after by brands. The factory approach has the advantage of mining the highly predictive trail of online usage. Therefore, while it may be a lot less sexy, it's likely to be more consistently successful.
For more on this topic, join TDG's Colin Dixon and me on Tues, Aug 24th for our next complimentary webinar, "Demystifying Independent Online Video and Syndication Models." We're pleased to have as our guests Revision3's CEO Jim Louderback and 5Min's SVP of Business Development, Richard Bloom. It will be a deep dive into the issues above, with ample time for audience Q&A.
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