VideoNuze Posts

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!

Hey, maybe I should go into scripted programming...no sooner did I post "Branded Entertainment is Upon Us" this morning, than AdAge is running "Dorm-Life Opens Doors to Initiative."

The piece is all about how Initiative Media has partnered with the webisode's producer, Attention Span Media to do secure sponsor tie-ins. Initiative sports clients such as Carl's Jr, Cadbury-Schweppes and Victoria's Secret, all of whom are no doubt eager to reach the program's target audience.

Echoing the theme of my post, and Shelly Lazarus's presentation at NATPE yesterday, AdAge quotes Jon Haber, director of Initiative Media's innovations department as follows: "...for your advertising to be noticed, your advertising has to be content."

If you had any doubts that brand marketing and entertainment programming are converging, an hour spent listening to a presentation at the NATPE conference yesterday by Shelly Lazarus, Chairman and CEO of Oglivy & Mather Worldwide would have quashed them in a hurry.

This new reality is a direct result of the audience-fractured, advertising-averse world in which we now live. Ms. Lazarus believes that for agencies, "the challenge as stewards of brands is to help them tell a better story." In fact, telling a better story (the traditional agency imperative, I would argue) is no longer sufficient, as Ms. Lazarus continued: "Now brands need to be a part of the content story."

As such, she envisions far tighter links between ad agencies and the Hollywood creative community. Drawing a meaningful distinction about these industries' respective roles, she explained to the audience of content types: "We need all of you desperately...we can come up with a brand idea, but we can't do programming."

She emphasized repeatedly that to optimize the branded entertainment relationship, agencies and the advertisers they represent should not be called upon to "write a check" when production is virtually wrapped up. Rather, they should be brought in as early in the creative process as possible, and be provided an opportunity to help shape the story narrative and become a vital part of it.

Even while recognizing the role that brands have played since the early TV days of sponsored "soap operas", this proposed tight intertwining of advertising and programming will no doubt strike creative purists as heretical, while sending consumer protection advocates to DEFCON 5.

Regardless, the branded entertainment initiatives Oglivy is now encouraging its clients to selectively pursue reflects nothing more than the hard realities of today's complex and brutally competitive marketplace. Empowered by ever-stronger technologies - broadband chief among them - consumers are getting choosier in their media consumption habits, with advertisers and their messages getting the short end of the stick. With technology increasingly defining young people's lifestyles, this is a trend that will only intensify.

Faced with this daunting prospect, leaders in the agency world like Ms. Lazarus have astutely recognized that by carefully placing their clients' brands within the story line itself, they are creating a much-needed firewall, not to mention a breakthrough new consumer engagement opportunity. To be sure, branded entertainment is not a willy-nilly pursuit, at least not at Oglivy. The agency has set up a unit solely to create, execute and manage these opportunities. Listening to Ms. Lazarus, it was apparent that for all her enthusiasm for branded entertainment, she knows it's neither universally appropriate for all brands nor a catch-all cure to all that ails the industry.

Branded entertainment and broadband video are a perfect match in many respects. Broadband video's nascent development, combined with its still unclear monetization mechanisms and flexible/interactive capabilities make it fertile ground for agencies such as Oglivy to experiment.

So where specifically does all this lead? Three things I would bet on: more product-centric viral video initiatives like Dove's Evolution (presenting an opportunity for Dove - an Oglivy client - to "have a point of view about beauty," as Ms. Lazarus put it), more product sponsored and conceived programming (e.g. Hellmann's "In Search of Real Food" on Yahoo; Hellman's is another Oglivy client) and more user-generated video contests around products (e.g. Frito-Lay, Heinz, etc.).

Broadband video is flowering just as traditional advertising and entertainment forms are under increasing duress. As such, it will be an enormous sandbox for agencies, brands, content creators and their audiences to all play in.

Jeff Zucker, NBCU's president and CEO gave a stirring, candid keynote at the NATPE show yesterday, in which he essentially said that all the rules that the broadcast TV industry has lived by for six decades have now changed. It was a pretty blunt assessment, given in terms not often heard from PR-cautious CEOs.

I thought Zucker nailed it on the head when he said that "technology is transforming every part of our business," suggesting that to succeed in the future the company must re-engineer itself from top to bottom. The technology drivers - DVRs, broadband distribution, VOD, mobile and inexpensive production equipment are all leading to fundamental changes in distribution, advertising sales, marketing and content development.

Zucker said that the "historic economic model supporting broadcast TV is wounded." This is well exemplified in the broadband space, where networks have eagerly pushed their hit programs online. Yet in referring to its broadband initiatives, Zucker acknowledged, "Our challenge with all these ventures is to effectively monetize them so that we do not end up trading analog dollars for digital pennies," noting "This is the Number 1 challenge for everyone in this industry today."

I believe many of the steps Zucker's taking will help surmount this challenge. They include: Improving the allocation of resources and efficiency of the pilot process to help NBC maximize the opportunity that the mass-scale broadcast business still provides. Expanding the marketing of its programs beyond traditional influencers to help tap into the water coolers of the digital age. Broadening the role of its stations encompassing all local media opportunities instead of just selling TV ad space to enhance their competitiveness. Setting up digital studios to produce content geared for the broadband and mobile to tap new audiences.

Listening to Zucker, I felt myself being optimistic about his leadership and the likelihood that his game plan will ultimately lead to a successful transformation of the business. It won't come without plenty of bumps in the road, but it did strike me as clear-headed thinking which was sensitive to the network's traditions, but not obsequious to them. Throughout his keynote, he repeatedly reminded the audience that great storytelling and content is what all matters. The story of how NBC and the other networks will learn to succeed in the broadband era is definitely one worth following.

As MTV Networks' Executive VP of Digital Distribution and Business Development, Greg Clayman is the company's main digital deal-maker, striving to reach far-flung audiences in the broadband and mobile era. Given MTVN's stable of powerhouse brands and the myriad opportunities that cross his desk daily, Greg's goals, and the strategies he uses to achieve them, have far-reaching implications.

In this interview on the cusp of the NATPE show, Clayman explains how MTVN has organized its digital deal operation for success, why broadband video's benefits can't always be easily quantified, what the company looks for in syndication deals and why advertising is poised to play a big role in mobile video. An edited transcript follows.

Greg Clayman: I'm the EVP of Digital Distribution and Business Development for MTV Networks. I manage distribution of our content across all digital partners, such as AOL, MSN, Bebo - basically our whole digital syndication business. Just prior to this I ran just the mobile group, which I actually I still do. I report to Mika Salmi, who runs everything digital at MTVN.

VN: You have a pretty broad role, how do you organize things?

GC: We have a group of biz dev people, some dedicated to broadband, some to mobile. Same on the operations and product development side. We learn a lot from each other by being all together, though these areas do diverge in certain ways. Remember, video is just one piece of what we do. We're also in ring tones, games, voting, you name it. But there's a lot of things that broadband and mobile video have in common - I'm always amazed.

Also, our partners were a real motivator for us to organize this way. Some of our key mobile partners like AT&T and Verizon started getting into broadband in a big way around a year or so ago. We wanted to make sure we were all aligned so we worked most productively with them.

VN: Let's talk specifically about broadband - what are MTVN's goals?

GC: Well, there are really two. First is to make money - if that isn't too obvious. We think there's a terrific ad-driven business that's growing nicely. We can measure our performance very well and are getting a pretty good handle on how to grow revenues.

Second, we want to use broadband to drive traffic and awareness to our other platforms, specifically on-air and our various web properties. The latter is a significant business now in its own right. So for example, if someone sees a video of The Daily Show somewhere online, that may entice them to come to TheDailyShow.com and maybe start doing searches for other stuff. We also want to drive awareness of our shows in general. The fact is that the TV business is still where essentially all of our revenue comes from right now. So if we can spark interest in shows and move the ratings by even by a little bit, that pays great dividends for us. So we're balancing how to achieve both goals.

VN: How do you measure the success of the promotional stuff?

GC: Admittedly, that can be tough. Certainly we look at ratings, and what we think is contributing to them. For example, we had excellent ratings for the Movie Awards. But it's hard to say, is that because we had excellent talent? Or because we did a big partnership? Or was it billboards? It's hard to know specifically.

VN: Is MTVN's syndication push a recent phenomenon and how important is it?

GC: It's very important, we're embracing it equally, alongside building out our own destinations. Look, MTV has some of the top online brands, obviously growing them further is a top priority. We want to do everything we can to achieve this.

We've always been interested in getting content in front of lots of consumers, but it's really been only the last few years that broadband video has exploded in a significant way and some of these social networking spaces have taken off. So we want to work with lots of people - people we have good relationships with. Where we see eye-to-eye with them. And importantly people who respect copyright - which by the way is becoming more commonplace these days. This is trending in the right direction I'm happy to say.

VN: Talk about business models in these broadband syndication deals - what do you favor?

GC: In the majority of cases we provide video streams and a player and we serve ads on top of that content. We're experimenting with ad formats - lower third, bugs, pre-rolls, etc. For the most part we sell the ads and give a revenue share to the partner. That's the most basic model. Getting to a point where we have multiple partners and we can turnkey this stuff is a goal. But there's a lot of integration work still to do.

VN: Let's shift to mobile video - how developed is it really, particularly compared to broadband?

GC: Look, we're still very early in both, but certainly earlier in mobile. For example, look at MediaFLO (Qualcomm's initiative) - it's only supposed to launch this quarter. But what's interesting in the mobile space is that people pay for things. I think that matters. So it has the potential to become a pretty material business quickly. And for better or for worse, there's a finite number of players - both carriers and providers. So it's more akin to the cable model in some ways.

Contrast this with broadband - in that world there are tens of millions of users, but they're dispersed across so many different properties. And they don't want to pay. So actually making money can be a lot more difficult.

VN: You're touching on the "closed" nature of mobile video today - how and when will that change?

GC: One of the things we'll start to see more of soon is direct-to-consumer, off-deck video. But platforms for this don't necessarily exist in a big way right now. We're years away from a huge critical mass. In the next few years we'll see developments around open platforms like Google's Android, but it's not going to be material for a while to come. And remember, carriers have tens of millions of happy subscribers, who are willing to pay for services. There's a strong incentive to maintain that. To make this market really take off, we think standards are needed, the same as we've seen online and in broadband to some extent.

VN: So net, net, do you think mobile video remains largely a paid medium?

GC: I think advertising can and will play a big role. We're seeing a big movement in mobile ads. That's because there's a role for advertisers to play in subsidizing content development. But advertising has to be done in a way that's not incredibly annoying to the user.

Where we have done research, we've found people really like mobile video, and they watch it everywhere. The bathroom. The bedroom. Waiting for the schoolbus. Even at work! People are doing it. Bite-sized clips work very well. We see this all the time. So no question, there's a bright future for mobile video.

VN: What's your panel about at NATPE?

GC: I'm moderating a session with a great group of folks who are driving mobile video forward. They have tons of experience and love to talk! Attendees are sure to gain a lot of insights about the mobile video opportunity.

VN: You've been gracious with your time. Thanks and good luck.

(Note: Greg Clayman will be moderating "Mobile Content: What's Hot? What's New? What's Next?" on Tues, Jan. 29th at 3pm)

Some brands are so ubiquitous that they become the touchstone reference point for others that follow. TV Guide is such a brand. With broadband video choices exploding, many companies would love to become the "TV Guide of the broadband era."

Well it turns out that TV Guide itself wants to be the TV Guide of the broadband era. The company's Online Video Guide (OVG), launched in April '07, shows that it is quite serious about morphing its brand as the boundaries between TV and broadband continue to blur. Recently I caught up with Christy Tanner, who is TVGuide.com's VP of Marketing and Editor-in-Chief to learn more.

The key to understanding OVG's approach is that it not another pure algorithmically-driven video search engine. Rather, TV Guide is leveraging the company's strong editorial capability. First, it selectively chooses which video sites to index. Then it organizes/exposes the results in a way that makes sense to users, particularly those in the mainstream. It is also mixing in its own editorial content to give further context to the videos themselves.

A visit to OVG shows that it puts access to networks' programs front and center, along with a prominent search bar. Christy explained that TV Guide has learned users' strong affinity for programs, not networks, is driving their search/discovery behavior. Clearly OVG's growth is intertwined with the surging interest in accessing programs online.

OVG serves up results in both grid and list formats, with relevant metadata exposed. Conveniently, OVG has a tab for "Full episodes" and "Clips". If you click on "Full episodes", it will either display the choices or simply say "We did not find any videos matching your search" when the network hasn't made full episodes available (such was the case for "Mad Men", AMC's new hit, whose last 2 episodes I missed, and have been searching for ever since).

OVG shares its own top picks, top 5 and 10 lists, provides a launch point to purchase programs, and highlights certain celebrities (currently Britney Spears, to nobody's surprise...). It also offers an e-newsletter, the Online Video Daily Scoop, with lots of highlights. OVG now indexes over 60 video sites, with videos from 25,000 shows, movies and celebrities, adding up to a total index for 200,000+ videos.

Another smart thing about TV Guide's strategy for OVG is that it is putting a big push behind syndicating the product. It can syndicate the entire experience, just the front end, or the full data set. This leads to a mix of revenue streams - advertising, licensing and hybrids.