VideoNuze Posts

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.

Congrats again.

The Internet's low entry barriers are again at work, this time in the video-based "how-to" category, which has recently attracted a rush of well-funded new competitors. It's no surprise: how many of us would rather watch a video of someone explaining how to do something vs. reading a lengthy and often poorly-written guide?

Like many things in the broadband video world, the players' strategies, content approaches and business models are all over the board. In the ad-supported category, the earliest entrants (and their funding) are ExpertVillage (now owned by Demand Media) and VideoJug ($30M from last May), with HowCast ($8M from Tudor/others), 5Min.com ($5M from Spark Capital) and WonderHowTo.com (undisclosed amount from General Catalyst) launching more recently. Of course there's also YouTube and DIYNetwork from Scripps, with its sister cable channel, and scores of other sites that offer free instructional video. Then in the paid download category there is Zipidee (angel round), which recently acquired TotalVid and iAmplify ($6M from Kodiak). plus countless other video download sites.

One of the lines of demarcation for the ad-supported sites is how they acquire content. Does the video come solely from "experts" or also from the community? For now, it appears that ExpertVillage and VideoJug rely on experts while the other ad-supported upstarts rely on the community as well. I spoke with Ran Harnevo, CEO of 5Min.com, who believes its highly community-oriented focus is a real differentiator. In fact, 5Min bills itself as a "Life Videopedia", a spin on the hugely popular Wikipedia, which demonstrates the power of user contributions.

The whole notion that a top-down editorially-driven approach will ever be sufficiently comprehensive seems unlikely, so my guess is that some UGC augment eventually will be required by all players. That means these sites will compete with each other for the best contributors, in the same way that video sharing sites like Metacafe, Veoh, Revver and others compete with each other in general video.

To succeed in this horse race, 5Min's focus is to offer the best overall platform, including a focus on technology. So 5Min provides strong branding opportunities, a revenue share, tools and features and of course, traffic. On the technology side, one differentiator is its "SmartPlayer", which allows zooming, super slow-motion, frame-by-frame and storyboard playback.

One of the main reasons there's so much activity on the ad-supported side is that how-to videos provide highly-targeted and engaged audiences that sponsors crave. At a minimum, marrying these how-to videos to Google AdSense provides a baseline revenue model. But the real opportunity is to aggregate enough traffic in a category to land sponsors who will be prominently featured. So for example, while 5Min already does an impressive 5M views/mo, it will likely need to be in that range per category to appeal to big-name sponsors. The company will begin running ads in Q2, and is focused on display ads and overlays, not pre-rolls, which Ran thinks are too disruptive. To build its traffic it will pursue widgetization, 3rd party distribution and SEO.

All of this how-to activity is clearly going to be a boon for users. Just as the Internet has provided an explosion of information, these video how-to sites will now make doing things a whole lot easier. How to break out of the growing pack will continue to be each how-to site's challenge for the foreseeable future.

Home Shopping Network (HSN) presents an interesting example of a strong incumbent TV-based retailer now seeking to leverage its strengths to succeed in the broadband era. I caught up with John McDevitt, VP of Advanced Services to learn how the company is adapting itself.

For those unfamiliar with HSN, it's the granddaddy of TV shopping services, generating $2B+ annual revenue, with its linear channel now carried by virtually every cable and satellite operator and telco. The Internet has significantly changed the landscape of electronic retailing for HSN, with thousands of e-commerce providers encroaching on HSN's traditional turf. Over the years HSN has continued to bolster its HSN.com web site and do significant cross promotion between on-air and online, to drive awareness and revenues.

With the mass adoption of broadband, HSN has embraced an "everywhere" strategy, comparable to many other content providers. HSN has realized that running a single linear cable channel is no longer sufficient for success. HSN wants to position itself as a credible purchase option wherever the consumer is, offering a simple, straightforward transaction opportunity. The big paradigm shift in broadband is that, while watching HSN on-air is a "destination-experience", in broadband/online, users follow a "product-focused experience." That means that often users come upon HSN not because they are already fans or intended to, but because HSN scored high in search results, particularly in price comparison services.

Delivering a strong video experience is where John sees HSN having a critical advantage given its video heritage. HSN owns all of its video, so it doesn't have any right-related issues. It has built a library of around 25,000 video clips associated with its products; it has already posted over 7,000 of these to YouTube. HSN captures every minute of its on-air experience and every single product on HSN.com has a video associated with it. As John says, shooting great video isn't trivial, between creating the sets, managing the talent and highlighting the product, but these are the things HSN is an expert in. On YouTube in particular, HSN is seeing strong viewership in its channel, with the heaviest action in the health and beauty area, and in how-to related videos.

I promise, this will be my last post on the Super Bowl ads. I suspect some of you are getting sick of hearing about them, but the reality is that there are some cool follow up tidbits emerging that I think many of you will be interested in.

First a clarification. I accidently omitted mentioning Audi as another Super Bowl advertiser that had a broadband component to their ad. Their mention of "TruthInEngineering" at the end of their spot was so quick that I didn't even notice it. That's a shame, because when you visit the mini-site there's a lot of great video, including one lasting 3 minutes all about the making of the ad.

Ken Liebeskind has a good interview with Paul Venables, who is the founder and co-creative director of the ad agency that created the spot and the videos at the mini-site. I really like how well developed the whole "Truth In" concept has been executed in the mini-site. My only gripe with the execution of the TV spot is that just flashing "Truthinengineering.com" at the end for a quick second is insufficient to really optimize traffic flow. Though Venables says traffic is way up since the game, I think it would be far higher had they focused on the URL longer.

Meanwhile, some interesting follow up stats that have bubbled up. comScore is reporting that 13% of Super Bowl viewers watched an ad online and that 13% visited an advertiser's web site. Of those who visited an advertiser's web site, 38% visited GoDaddy.com, 22% Coca-Cola and 21% Pepsi.

My first post, from this past Monday, "My Rant About Super Bowl Ads" can be seen at the site. It is a real privilege to be selected for the "Voices" section, and I'm completely thrilled!

OK, today no rant, just one more little insight to offer from Super Bowl ads.

Yesterday I highlighted the 5 ads (out of the total 52) which had a broadband component. They were:

GoDaddy - promoting Danica Patrick's "Exposure" banned ad and other videos

TideToGo - promoting "MyTalkingStain.com" a fun microsite

SoBe LifeWater - promoting "Thrillicious.com" a microsite where 2 more spots with the dancing lizards can be seen

Sunsilk - promoting "LifeCantWait.com", a microsite with a UGC contest which is not yet active

Pepsi - promoting "PepsiStuff.com", where users can download videos and music

I'm able to track click-throughs to each link I share in these emails. I thought you might be interested to see a graph of these clicks from yesterday. Note they're shown as an index, not actual numbers, with a starting index value of 100 for Sunsilk.

As you can see, VideoNuze email recipients expressed a pretty strong interest in the GoDaddy.com Danica Patrick ad. I'm sure many of you are not surprised since it has a pretty overt potential payoff for visitors.

The point is this: I think SoBe LifeWater missed a huge opportunity to keep viewers engaged, which would have both improved the ROI on their Super Bowl ad spend, and also deepened viewers' engagement with the brand. While the Campbell spot was hugely entertaining, it did little to power ongoing engagement. Contrast this with GoDaddy, which no doubt had people pouring into its web site since the spot ran, with ongoing chatter and brand-building taking place.

I love the Super Bowl ads as much as anyone. I never stop being amazed by the creativity and humor on display during each year's big game. This year was no exception: screeching squirrels, a strutting heart, shrunken heads, talking babies, the list goes on. For what Super Bowls ads are and always have been, they're terrific. My problem is that I believe broadband video allows Super Bowl ads to be much more than what they are and always have been. But the agency world does not seem to be getting this message.

Two years ago I wrote "The Ten Million Dollar Super Bowl Ad?", where I outlined a scenario under which a 30 second spot could someday go for ten million bucks. How? By combining the best of brand advertising (the big emotional play) with the best of online advertising (the big measurable, performance-oriented play).

I wrote in that post: "What I envision is that the 30-second spot during the game will become the viewer's introduction or re-introduction to the brand or product. Numerous online, broadband-centric tactics will follow, with video being the center of the action. In football terms, the 30-second spot will morph from throwing a long pass (which is accompanied by high drama, but low probability of an actual score) to executing a more consistent ground game (accompanied by lower drama, but a much higher probability of an actual score). With this added measurability and a direct feedback loop, marketers will have much less anxiety about whether to ante up for the big game (and therefore the price will spiral upward).

I thought agencies and marketers would see this light and rush toward it. Boy was I over-optimistic. After watching all 52 Super Bowl ads this morning (thanks AOL), I am completely dismayed to report that, by my count, only 5 ads had any broadband video component:

GoDaddy - promoting Danica Patrick's "Exposure" banned ad and other videos

TideToGo - promoting "MyTalkingStain.com" a fun microsite

Life Water - promoting "Thrillicious.com" a microsite with a 2nd spot with the dancing iguanas 

Sunsilk - promoting "LifeCantWait.com", a microsite with a UGC contest which is not yet active

Pepsi - promoting "PepsiStuff.com", with Amazon (ok, more focused on music than video)

All of the other 47 ads, representing tens of millions of dollars of clients' money, followed the same game plan from Super Bowls' past: go for either the clever, the funny or the gross, in an attempt to create buzz and fond memories for fans.

For me, this hidebound behavior showcases agencies at their most disappointing: unable to break out of the box, recognize new consumer engagement opportunities for their clients or embrace new technologies. Their inability or unwillingness to be more progressive is at the heart of why the whole advertising industry is in such chaos, with an increasing share of total spending shifting to online each year.