Thursday, August 28, 2008, 9:56 AM ET|Posted by Will Richmond
Two days ago, I posted "Why NBCOlympics.com's Video Ad Revenues Don't Matter." I'll take the risk today of "beating a dead dog" by writing again about this same topic, for a couple of reasons.
First, there were some great comments on the site and I received many emails both supporting and challenging my arguments. (As a sidenote, I've discovered an interesting dynamic with VideoNuze - though I've repeatedly tried to encourage readers to post comments so all readers are able to see, folks seem more comfortable just emailing me directly for a one-on-one dialogue. I'm not going to resist human nature here, but again, I would love even more if you share your reactions by posting a comment so the whole community benefits!)
Second, the real trigger for writing a follow-up part 2 today is an incident I experienced yesterday. I gave a presentation about broadband video to a group of investors. These were mainly people who are familiar with broadband video, but not necessarily steeped in it. Upon finishing up and opening the Q&A, an early question/comment was, "Hey Will you lay out great points about broadband, yet I just read somewhere earlier this week that even NBC's Olympic video, which should have been a big revenue opportunity if ever there was one, generated little money for NBC and looks like it was a total failure for them. Given that, why should people bother investing in this medium? It doesn't seem promising."
Ugh. Ugh. Ugh. This is exactly the perception that I sensed would be created out of the blogosphere's and mainstream media's coverage of eMarketer's NBCOlympics.com revenue estimate. And why it is so vital that people interested in broadband video not get distracted by this single data point. Instead, maintaining perspective about where the industry stands and what needs to be done to grow should be the real focus.
I totally get the point made by people in their comments and emails that video providers must show they can make real money in the broadband medium. Ultimately, that's paramount. In particular it's key that broadband not get tagged as the "digital pennies" medium, in contrast to the traditional "analog dollars" model.
But I'll continue to insist that the path to industry revenues and profits begins by demonstrating the technical/operational viability of the broadband medium, massive user adoption of it and differentiated engagement with it. To be sure, progress is being made on all fronts. Still, there is still a long road ahead to drive significant shifts in advertiser spending to broadband. If you're a media buyer today, you're very intrigued by broadband and are likely experimenting with it.
But you're looking for more proof points before making bigger spending commitments. Can broadband's architecture scale to handle massive traffic loads, or are the Chicken Littles right that the Internet will crash under video's massive weight? Can broadband video's quality compare with TV, and HD in particular? Given the broadband choice, will users in fact shift their consumption patterns? And if they do, how different will their awareness and engagement with ads be? Importantly, when is broadband video actually going to be widely and easily available on TVs, not just computers?
These are but a few of the questions repeatedly being asked. And many of these are what NBCOlympics.com has helped to answer. NBC could have done lots of things to squeeze more money out of its Olympics video (though my guess is that no matter what revenue they generated cynics would have still said, "Is that all?"). Instead they focused on user value/experience and pushed the broadband envelope considerably. Others are doing the same. More needs to be done, and I believe it will.
As the saying goes, "Rome wasn't built in a day." So too with this exciting new medium. Revenues will not gush immediately. Staying focused on the core building blocks is the key. In short, I'm bullish long-term, but highly realistic short-term.
What do you think? Please post a comment! Or send me an email if you really prefer!