VideoNuze Posts

One of the best hours I spent at NAB was the one listening to Hulu's CEO Jason Kilar. Too bad it was scheduled for 5pm on Day 3, resulting in a desultory crowd of only a 100 or so. Broadcasters and others could learn a lot from Kilar and Hulu's early experience.

Hulu, which was derisively referred to as "Clown Co" prior to its launch, is anything but. In my previous review of its beta, I gave it a B+. One month since its official launch, I now move it up a notch to A minus, and as I'll explain later, an A is within reach.

Hulu is as well-thought out a broadband video enterprise as currently exists, for at least three reasons:

Clarity of purpose - While Hulu evokes Google with its lofty goal, "to help people find and enjoy the world's premium content, when, where and how they want to," it has provided discipline to keep Kilar and his team focused on meaningfully supportive differentiators.

Relentless user-focus - Hulu is Apple-esque in its devotion to what Kilar called an "atypically strong user experience." The team has sweated over and uses every design and technology lever available to make Hulu easy and enjoyable and accessible to the mainstream market.

Organizational capability - Hulu has a startup mentality where every decision is do-or-die. It may feel intangible if you've never worked in a startup, but personal ownership is an incredibly important advantage. Inculcating this ethos despite a $100 million investment and $1 billion valuation is no mean feat.

Several recent spins through Hulu showed how these come together. Hulu now has 50+ content partners, but is uncluttered by UGC. This is a place for only high-quality programming. Finding and playing video is a snap. Graphics and fonts are simple and clear. As Kilar said the site's 16:9 graphics, differentiated from standard square thumbnails, suggest this place is different from the rest (no "Tokyo at night" orientation here). Here you can also easily clip and share favorite scenes, which Kilar says has been done 100k+ times on 12K sites since launch.

And how about this - do a search for "Lost" - the popular ABC program which is NOT available on Hulu - and you'll get results pointing you offsite to ABC.com. Talk about putting the user first!

Hulu's real lesson to broadcasters and others is that if you create a high-quality user environment, you open up real opportunities and options. These include getting above average CPMs from advertisers (through effective units like the 7 second introductory "brand slate"), wringing value out of programs no longer on-air (example "Arrested Development" was #1 or #2 most popular on Hulu), pre-empting non-revenue producing/non-branded environments like file-sharing sites and YouTube, allowing new programs to be easily sampled and last but not least, re-capturing users who prefer online over the traditional on-air model.

Hulu still has major challenges ahead: massively building out its content library, proving its syndication value to content partners who could as easily go direct to distributors, making its overall economics work, and of course, navigating the treacherous political waters of its big media backers. If it does all of these, it gets an A. Hulu's impressive progress to date gives me every reason to believe it will.

What do you think of Hulu? Post a comment!

During very informative presentations at my NAB panel discussion yesterday, there were 2 slides that really caught my attention. Both shared statistics, new to me, about video piracy and user behavior patterns. These statistics illustrate the important early online window just following when a TV program is aired. Capturing this audience spike can dampen video piracy and also be a big revenue opportunity for providers.

Note the far lower behavior in the other lines and it is clear that the 24 hour window during and after airing a new episode is critical. It's also interesting to speculate on whether some users are beginning to look at online availability as pure VOD. If so, that would have implications on DVRs (i.e. why record a show when you've come to expect they'll all be posted quickly online?)

The second attention-getting slide was based on recent research by Akamai and Vobile, which used its digital fingerprinting technology to track the availability of illegal copies of an episode a popular program and their download volume. In the slide below, it is clear that although illegal copies are available immediately, the volume of downloads jumps by more than 500% the following morning (13 hours after broadcast).

What all of this demonstrates is that there is a real window of opportunity for premium video providers to slow video piracy and drive many new video views. By satisfying the obvious demand that users have for this content with legitimate distribution, providers can chip away at, though admittedly not eradicate, illegal sharing. If users gain confidence over time that their favorite programs will be available quickly, in high-quality and with a positive user experience (i.e. not overburdened with ads), the rationale to pursue the illegal route lessens. Conversely, video providers not responding to these viewer needs continue to leave themselves highly vulnerable to illegal behavior.

Any question you may have had about whether the broadcast and broadband worlds are converging would be put to rest after spending a couple of days at the NAB Show being held in Las Vegas this week.

This year's NAB Show heavily emphasizes content in a technology-transformed world. For starters, NAB has set up "Content Central" a showcase section in the Main Central Hall featuring a cluster of new media vendors. Within the Content Central area is a specially created "Content Theater" where back-to-back discussion panels run throughout the show, including one I'll be moderating this morning entitled "Broadband Media Workflow: Hitting the Viewing Window," with executives from MTV, CTV and Akamai.

Elsewhere at the show, there are numerous sessions with titles like "The New Hollywood! A New World of Entertainment!", "TV 2.0 - Video When, Where and How You Want It" and "Video Search for Unlimited Channels." In short, NAB has gone full throttle toward content, which in my opinion is a very good thing. That's because a key NAB constituency, local television broadcasters, have seen their market positions impacted by broadband, particularly as network TV programs are now widely accessible online. Broadcasters today are feeling the beginning of what local newspapers have felt as the Internet's use has become pervasive.

But by elevating the focus on content, NAB is helping local TV broadcasters better understand how broadband presents opportunities, not just challenges. With strong expertise in video production, deep local roots and longstanding advertising relationships, local TV broadcasters are in some ways actually well-positioned to benefit from broadband.

The key challenge for local broadcasters is to take a fundamentally different view of their businesses. No longer constrained by their local market's boundaries, local broadcasters can play on a bigger stage, distributing compelling content to viewers living thousands of miles away. One syndication example, between CBS's stations and Yahoo, already generates over 13 million video views per month, all incremental to those at CBS's own site.

NAB's focus on content in a technology-driven world, follows a similar focus by the Consumer Electronics Association and NATPE at their respective shows over the past few months. Taken together, local broadcasters are being given many opportunities to understand the changing video landscape and how to profit from it.

SpotXchange CEO Mike Shehan explains that his company has focused on building a real-time auction model for publishers to offer inventory and advertisers/agencies to bid on it. The 2 main verticals SpotXchange is pursuing are local and casual games. Providing an easy on-ramp to video advertising is the key goal. Advertisers can load their campaigns, enter the marketplace, target by channel and/or region and determine how much they're willing to pay.

Though it's a fully self-service model, SpotXchange offers client service model as well for larger brand advertisers. Michael says there are now 300 publishers in the networks, reaching 50 million unique visitors per month. The company grew out of Booyah Networks, a search and interactive agency which has fully-funded its development.

Meanwhile, Jayant Kadambi, CEO of YuMe explains that the company spent the first 2 1/2 years from its founding in October '04 developing an ad-management platform that could handle various ad units and formats. In the absence of standards, Jayant believes this gives the company an edge in servicing advertisers and agencies that don't want to customize assets for various publisher sites' players. YuMe has built a network of 400+ publishers with 46 million uniques/month and a sweet spot of 750K-1 million video views/month and above (for a network total 150 million streams/mo).

Jayant says he's been pleasantly surprised at how much video content is monetizable, though he's not suggesting user-generated video will be monetized any time soon. YuMe's CPMs are in the $10-30 range. The company is now in the mode of building scale, which could involve marrying its ad management platform to others' networks using its "Adaptive Campaign Engine." In fact, one recent partnership that was announced to do this was with SpotXchange. YuMe has raised $16M from investors including Khosla Ventures, Accel Partners, BV Capital and DAG Ventures.

I'll have more on other video ad networks and how they fit into the larger broadband industry in the coming weeks.

The press releases began flying today, timed with NAB's kickoff. Here are a few that caught my eye:

Move Networks Raises $46 Million

Move continues its fund-raising prowess, raising a large C round. As more content providers push the HD quality bar, Move's content delivery services have increased appeal.

Signiant Powers Hulu's Distribution Efforts

Hulu, the NBC-Fox aggregator is using Signiant's media management platform to ingest content from the various content partners it works with.

Widevine Provides Content Security for Microsoft's Silverlight

For the first time Microsoft has used a third-party content security system to add a layer of protection for content providers using the company's new rich media plug-in.

EveryZing Introduced "RAMP," Signs Up Cox Radio

Building on its recent launch of EZSearch and EZSEO to enable video discovery, EveryZing has introduced a management console for the products for which Cox Radio will be the first customer.

Live Streaming Quality Bar Raised Via Mogulus-Kulabyte Partnership

One of the hottest corners of the broadband video market is the ad-supported "how-to" category. How-to lends itself well to video because, if a picture's worth a thousand words, a video is surely worth a million. Recognizing this, there's now a host of start-ups in this category which together have raised tens of millions of dollars. I wrote about some of this a couple months ago.

Several recent calls with industry participants got me to thinking the how-to category actually offers many valuable insights for all broadband industry participants. These fall into 3 key areas: content development, traffic acquisition and monetization.

1. Content: "Build Our Own" or "Offer a Superstore of Others' Videos"?

Here's one non-statistically significant example that illustrates the two approach's results: I did a search for "bbq steak video" on Expert Village, which bills itself as the "World's Largest How-to Video Site" and on WHT. EV returned 15 results, regrettably not one of which was relevant. WHT returned 357 results, and on the first page of 20 results alone, at least 12 looked relevant. These came from a wide variety of sources. Try doing a few searches and see what you find - my guess is your experience will be consistent with mine.

2. Traffic acquistion: Syndication or SEO?

All of these sites are ad-supported, so traffic is key. The sites with private libraries can syndicate to heavily-trafficked partners. Ordinarily, as a big syndication fan, I'd say that sounds like an advantageous traffic generating plan. But how-to may have a different traffic acquisition dynamic. It may well be that far more traffic will always come to these how-to video sites via searches at Google and other search sites, as compared with the sum of various syndication deals. That's because, absent a household brand-name in how-to, default consumer behavior may well be to simply type their how-to video query into Google.

If that's the case, then it will actually be those sites which have the most highly-optimized pages for all the niche videos that will gain greater traffic. Though I'm not an SEO expert, it seems to me that, taking my "bbq steak videos" example, WHT, with 357 related videos can optimize better than say EV with 15. And sure enough, when I ran the "bbq steak video" search on Google, right on the first page is a result from WHT, whereas nothing shows up for EV even after 5 pages. Bottom line: more relevant videos = more zero cost, Google-driven traffic.

3. Monetization: Video ads or Keyword-driven text/display ads?

Last but not least is monetization. How-to sites have lots of contextual ad potential. In my "bbq steak" example, any company that sells grills, steaks, sauces, etc, would love to advertise to me. It's tempting to believe that those with their own video libraries have more profit potential, because they can sell pre-roll or overlay ads, whereas a superstore site like WHT or SuTree cannot, because they're linking off to the source sites.

But consider this: how many of these potential advertisers will actually have video ads or the budget to create them? Unlike entertainment video, how-to, with its Long Tail character, seems to lend itself more to a low cost keyword ad approach which can be pursued by even the smallest advertiser. So say WHT or SuTree can build traffic in all those video niches and surround the video with keyword-driven text or display ads, all automated through a bidding system. Though yielding lower revenue per ad, my bet is that the total revenue for all ads with the keyword approach would be greater.

Summary

Today's post is from TDG's Mugs Buckley, who discusses the confusing state of video advertising projections.

The Reality of Web Video Advertising Just Doesn't Seem to Add Up

by: Mugs Buckley, Contributing Analyst, The Diffusion Group

I used to think I was pretty good at math, but after trying to make sense of recent forecasts regarding web video advertising, I'm beginning to doubt my skills. Let it be known that I'm a big believer in the growth potential of the Internet video ad business; I'm simply struggling to follow the numbers that have been reported. Since no single analysis offers an "apples-to-apples" industry comparison, I thought I'd offer up some of the available forecasts and offer a few thoughts.

So here's where I'm stuck.

The estimates and forecasts for only video ads are all over the place. For example:

• eMarketer estimates that US marketers spent $775M in 2007 and will spend $1.3B in 2008 for online video streaming and in-page ads.
• Jupiter Research predicts that 2008 online video ads in the US will yield $768M.
• comScore reported that online viewers consumed 9.8B videos in January 2008 (down from December 2007's 10.1B) of which 3.4B were Google/YouTube videos.
• In a November 2007 Financial Times article, a leading media buyer for Starcom Media Group (who is well aware of her buys and rates) predicted that the 2007 market for "The Big Four" broadcast networks was likely to generate around $120M.

So here's where it gets a bit confusing.

• If we use the 3.4B monthly view Google/YouTube view estimate for January and run that out for a 12-month period, add some growth for fun, we come up with about 45B views for all of 2008.
• YouTube charges $15 CPMs for their in-video overlay ads (down from the initial $20 CPMs used during beta testing).
• If 100% of the 45B Google/YouTube videos were sold at $15 CPMs, that would yield revenue of $675M. But that assumes 100% inventory sold, which won't happen for a variety for reasons (in particular because YouTube only sells overly ads on their contracted partner deals, not user-generated content).
• According to Bear Stearns, YouTube is set to generate $22.6M in revenue for video ads, about 3.3% of the possible $675M at 100% inventory sold.

Hmmm. So if YouTube (at 34% of all web video consumed) could generate $22.6M in revenue in 2008, and the Big Four were running about $120M in 2007, how does one arrive at these impressive near-billion dollar predictions? Where else is this revenue coming from?

Let's not rule out operator error - I'll quickly admit that I may have misinterpreted how these numbers were derived and what they represent. That being said, however, there doesn't seem to be a rational way to reconcile these disparate estimates. Can anyone out there help to square these numbers? Is it simply a matter of under- or over-reporting? Are the measurement systems currently in place so poor and mutually exclusive in methodology that they necessarily offer conflicting estimates?

Something just isn't adding up. Yes, this may seem to be a bit nit-picky on my part; the rambling of an analyst with too much time on her hands. Then again, without accurate revenue and usage estimates, it is impossible to know the real value of any form of advertising, much less an emerging model such as web-based video advertising.

Please let us know what you think!

Next week I'll be at the NAB Show in Las Vegas on Tues and Wed and still have a few gaps in my schedule if you're interested in meeting up. I'll be moderating a session on Wed morning at 9:30 in the Content Theater entitled, "Broadband Media Workflow: Hitting the Viewing Window." We have an excellent group of panelists from CTV, MTV and Akamai and we'll be doing a deep dive into the opportunities and challenges of melding on-air and online video. If you're attending NAB Show, give me a shout and let's try to find time to meet up. Separately, I'll also be writing some posts for the NAB Show blog located here.