Posts for 'Advertising'

The Wall Street Journal reported yesterday that NBC will announce next week that the starting price for a 30 second ad during the 2009 Super Bowl will cost $3 million, a 10% increase over 2008. For sure one thing this means to me: broadband video's role must grow in order to earn Super Bowl advertisers a return on these outsized rates.

As some of you know I've been writing about this topic for the last few years, even preceding the launch of VideoNuze. In Jan '06, in "The $10 Million Super Bowl Ad?" I argued that Super Bowl ad prices were heading nowhere but up given the historic opportunity to fuse the best of brand advertising with the best of online advertising.

I thought the linchpin would be brands recognizing that broadband video elements (e.g. larger campaign narratives, user contests, etc.) should precede and/or follow the game ad, creating a far larger engagement and ROI scenario. With more potential benefits, Super Bowl ad buying would be far less risky and therefore more advertisers would be compelled to buy, thus driving prices up.

While prices have risen, it's been more because audiences have continued fragmenting, making the Super Bowl truly a once-a-year advertising opportunity. NBC's willingness to raise prices by 10% over '08, in the face of a difficult U.S. economy is further testament to the big game's luster.

Back in '06 I forecasted that creative lightbulbs would be going off on Madison Avenue for how to capitalize on broadband's potential to add value. Sadly in the last 2 years this hasn't materialized. In Jan '08, in "My Rant About Super Bowl Ads" I lamented the fact that of the 52 game ads, only 5 (later revised to 6) ads had a broadband component. While the ads themselves were viewed for weeks after in online galleries, the stark reality was that tens of millions of dollars of client ad spending was being dramatically sub-optimized by not incorporating any broadband video elements.

It may be unfair of me to say, but I place the disproportionate share of the blame for this on the agencies behind the Super Bowl ads. They seem oblivious to how their clients' ad strategies must change to reflect broadband and online's importance.

So here's my message to brands considering a Super Bowl '09 ad buy: with 8 full months until game day, if your agency is not presenting you now with at least a half dozen compelling ideas for how to incorporate broadband elements into your Super Bowl ads, switch agencies now. I mean it. They are under-serving you. Find an agency that gets it, not one that is stuck in a time warp. The brands that will really score in the '09 game will have ads that reflect today's broadband realities.

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.

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!

Yesterday brought the public release of Adobe Media Player 1.0, first announced almost a year ago. AMP enters a very crowded space of other media players including its own Flash player, plus Windows Media Player, RealPlayer, QuickTime, SilverLight and others.

At a time when the broadband video industry in general and mainstream users in particular crave standardization and simplicity, can another media player, with a "walled garden" content strategy to boot, add new value? While it's awfully tempting to say "no," I think there are reasons why AMP could well matter, subject to how well Adobe delivers on its vision. Here's why:

AMP offers 2 things that, in my opinion, the market still needs. First, a widely used downloadable app that specializes in delivering on FREE video content. Before some of you jump up and say, "Will, what about iTunes?" keep in mind that iTunes offers primarily a PAID video catalog (though to be sure there are some free video podcasts). Second, and related, AMP' provides a download environment in which advertising can be properly inserted, measured and reported on.

These are important because together they open up an entirely new consumer use case for broadband video: offline, free, ad-supported viewing. I've been saying for a while that an odd dichotomy has taken root in the broadband industry, particularly for network programs: users can get either free, ad-supported streamed video at lots of places (provided they're online) OR they can get paid, downloaded video (iTunes model) which allows offline viewing. But this has meant that someone who wants to watch a show offline, but isn't willing to pay for the pleasure of doing so is out of luck (one exception is NBC Direct). Having media stored locally in AMP would allow the offline, free use case I'm describing. This would open up a boatload of premium ad inventory that advertisers savor.

If that's AMP's opportunity, then the question is how well are they executing on it? Though it's never fair to judge a version 1.0 on its first day, my experience with AMP shows there's room for improvement. First is the currently thin content selection that needs to be massively built out to be appealing and competitive. Second is an inconsistent user experience in which some shows are downloadable, yet many are not (e.g. CSI, Hawaii Five-O, Melrose Place). Third are getting the basics right. In my case, when I did download some episodes successfully (blip.tv's "DadLabs" and "Goodnight Burbank") they didn't show up in my download section at all. Ugh. I'm hopeful that Adobe will be able to address all of these.

On the ad side, I think there will be plenty of enthusiasm from ad technology firms to integrate with AMP as Adobe proves it can drive millions of AMP downloads (in fact Kiptronic announced its integration yesterday and other will surely follow). Plus, advertisers should be expected to get on board.

It should be noted however, that even for a mighty brand like Adobe, winning the hearts and minds of users to download and use AMP isn't a trivial undertaking. I have some personal experience with this from my early days consulting at Maven Networks, which offered an eerily similar download app as AMP when the company started up. Though that was in the Mesozoic broadband era of 2003 and Maven was an unknown entity, the company never got much traction with its download app and eventually transitioned over to a streaming model. Since then I've come to believe that premium content must drive the download process, not vice-versa. One successful example of this is ABC.com using its shows to drive millions of downloads of the Move Networks player.

Net, net, AMP is a timely product that could well matter. How well Adobe executes on its vision will determine to what extent it does.

Continuing VideoNuze's series of posts about the online video advertising industry, last week I spoke to Alistair Goodman, who's the VP of Strategic Marketing at Exponential Interactive, a media services company with hundreds of advertising clients and publishers in the digital media space.

Exponential recently released the results of a survey of 100 ad agency media planners' perceptions of online video advertising. To the best of my knowledge, the survey, "The Trials and Tribulations of Online Video Advertising," is the first one focused on what the people actually responsible for spending money in this new medium think (the survey is evenly split between those who have bought and those considering buying). Most prior research has focused on users' or publishers' attitudes. The research confirms many things I hear each day, and also reveals some new insights on the market.

I'm very pleased to offer a complimentary download of a subset of the Exponential's slides exclusively here at VideoNuze. If your business is reliant on video advertising, I highly suggest reviewing them. If you have questions or want to receive the full deck, there is contact info on the last slide.

The top 2 issues for planners who have actually bought video ads are operationally-oriented: "smooth delivery" and "detailed reporting." As Alistair described it, these factors (and others cited) confirm the complexity of executing a campaign at scale. The complexity results from lack of standards, multiple players/formats, fragmentation of viewership and non-standard metrics. None of this is unexpected in a market as nascent as online video; the challenge is addressing and resolving these quickly for online video to reach its full potential.

In the past I've mentioned repeatedly that monetization is the number 1 priority for both established and early stage video content providers. This is an urgent issue because lots of energy and money is being invested in creating online video content, but the financial returns are not there yet. These payoffs need to materialize if the enthusiasm around this new medium is to be sustained.

Click here to download the Exponential slides.

(Note: I have created a new section in VideoNuze to offer all downloads of all relevant market research. If you have complimentary industry data please contact me and I'll add it to the page.)

I frequently hear the same segmentation framework used to describe today's broadband video providers. Between the small group of premium providers (e.g. broadcasters) and user-generated sites (e.g. YouTube), lie the so-called "mid-tail" (in "Long Tail" terminology) providers such as newspapers, magazines, online publishers, and indie producers. BobVila.com is a perfect example of a mid-tail provider. Dan Newberry, the company's VP Advertising and Marketing, who I recently spoke with, discussed these opportunities and challenges.

Some of you may know that Bob Vila hosted a hugely popular PBS program from 1979-1989 called "This Old House." He then set up his own production company and produced 2 syndicated shows, "Bob Vila's Home Again" and "Bob Vila." At the end of the latter's run, he decided to shift his focus exclusively to online, to his BobVila.com web site which had been growing since the Internet's earliest days.

As Dan explains, one of the motivations (in addition to Bob Vila's personal reasons) was the improving climate for online advertising in general and video advertising in particular. The economics of creating quality programming for TV vs. for online, plus the CPMs available online, made the case for shifting to online only. The site now generates 1.7 million unique visitors/mo and 600K-700K video streams/mo, with 1,700 video clips available.

Responding to its audience's desires, BobVila.com now produces 5-7 minute step-by-step how-to videos for the site. It has created about 100 since June '07. While broadband enables this new model, Dan is clear about the challenges.

First and foremost is making the financial equation work. This involves producing videos on a disciplined budget and maximizing ROI. Their target cost to produce each video is $4-5K, which requires a different approach than with TV production. Given current viewership and CPMs, Dan calculates that break-even on an individual video is projected at 24 months.

To monetize their video, BobVila.com uses an internal sales team and is able to generate pre-and mid-roll CPMs in the $25-40 range. If there's unsold inventory then it uses a network to sell it, usually garnering $7-12 CPM. In addition, it also selectively uses overlay ads from Google AdSense. Setting the ad strategy to maximize revenue is key. As Dan noted, staffing and managing an internal sales team in this highly competitive environment is a challenge that startup sites need to fully recognize.

Increasing video views is another key challenge. Acknowledging the limitations of search and on-site generated traffic, BobVila.com is ramping up an aggressive syndication effort. While offering lots of upside, Dan explains that this syndication will present new operational and financial complexities such as ensuring BobVila.com gets paid, content is distributed where and when it should be, enforcing various rights issues, etc. Dan pointed out the importance of having a solid technology partner (BobVila.com used PermissionTV) which enables syndication, flexible players and content management.

When you put it all together, it's clear that while broadband offers mid-tail providers like BobVila.com huge new opportunities, it also creates new challenges and responsibilities that many content providers have not typically dealt with. Surmounting these will determine how well these mid-tail providers ultimately fare.

Over the next few weeks I'll be doing a series of posts on broadband video advertising's key opportunities and challenges, based on briefings with industry players. Advertising has increasingly become the industry's business model of choice, so understanding its future development is critical.

Just as there are advertising networks for Internet display or banner advertising, there are now a number of independent ad networks dedicated to broadband video advertising. These ad networks perform a crucial role in aggregating and selling inventory, creating efficiencies for both publishers and advertisers alike. These are particularly critical functions given how fragmented video is online.

I recently had a chance to catch up with Tod Sacerdoti, CEO/co-founder of BrightRoll, a big independent video ad network, who's in the trenches every day and is as knowledgeable as anyone about today's market and key challenges. BrightRoll is focused on building a network of high-quality publishers offering advertisers full transparency about which sites their ads run on. It is flexible to support all formats, players and units and has served over 1 billion ads to date.

Though BrightRoll just introduced an HD in-banner ad unit, it generally shies away from pioneering new formats, leaving it to publishers to drive the market. Tod believes that technical leadership will be a key differentiator and so BrightRoll builds all its own technology in-house.

For ad networks, the size and quality of their publisher network is obviously critical. BrightRoll's sweet-spot are premium branded sites that it can sell for around $15-25 CPM. This is the middle part of the market, below the "super-premium" sites but above the vast amount of user-generated video which is tough to sell.

Tod breaks down the market's current 10 billion streams/mo. Of the 40% non-YouTube videos, about half of the streams are monetizable, yielding about 2 billion streams. Tod thinks about half of these are sold. Two reasons for such a high unsold ratio are that many premium sites are maintaining minimum CPM requirements and because there are usage spikes that create unsold inventory. One of BrightRoll's key goals is to get the "unsold" server call from premium sites which want to maximize yield on usage spikes.

From Tod's standpoint a big challenge remains lack of standards, and therefore the reluctance of big publishers to fully integrate with ad networks. The IAB has been focusing on video standards which are expected soon. I have thought for a while that broadband video advertising will be driven by big brands diverting budget from TV ad spending. This contrasts with search, where Google in particular has relied on tens of thousands of smaller, ROI-focused advertisers. Tod sees it the same way and therefore is focused on driving high-quality online reach that brands require, along with reliable tracking and reporting.

I had 3 key takeaways from the 2008 Media Summit which just wrapped up in NYC. The event just keeps getting better - great keynotes, terrific informal hallway chit-chats/networking and tons of well-directed energy. Though the event's agenda is broad, I was focused on the video-related elements. Here are 3 takeaways:

1. Iger and Moonves Get Tech; Lots of Innovation/Growth Ahead

A clear highlight for all attendees was the 2 morning keynote interviews, day 1 with Disney CEO Bob Iger and day 2 with CBS CEO Leslie Moonves. Both were ably conducted by senior Businessweek editors. Until a couple years ago, big media was in a defensive crouch regarding technology's uninvited incursion into their businesses. No more. Iger and Moonves are obviously convinced that technology, the Internet and broadband video delivery are now their companies' friends. Iger in particular really pounded this theme home.

An example of how technology helps which Iger repeatedly touched on was how Disney will leverage the platform of Club Penguin, its recent acquisition, to build communities for other properties (e.g. "Cars", "Pirates," etc.). These moves are intended to engender ever-greater levels of engagement. By the way, if you're a parent of youngsters and you've ever bemoaned how Disney's gotten its hooks deeply into your kids, you ain't seen nothing yet!

Moonves was emphatic that the Internet extends the value of CBS properties. March Madness was an example he offered. Three years ago it generated $250K of broadband subscription revenue. Two years ago CBS converted to ad-support and generated $4M. Then last year it generated $10M and this year is projected for $23M. And as Moonves pointed out, other than bandwidth, it's all incremental profit for the company. Echoing another conference theme, he further added that "the Internet should not be used to just regurgitate TV," but rather for the medium's unique capabilities.

Iger's and Moonves's mantras are no doubt being sent down to the troops from the executive suite. That suggests we can all expect a whole lot of tech-based innovation springing from these media giants.

2. Engagement and Originality: Buzzwords or More?

Two touchstones in many sessions were "engagement" and "originality." Both reflect the evolving viewpoint that broadband video has its own unique capabilities and that breaking through requires going far beyond traditional, passive programming approaches. With respect to engagement, the concept of introducing "social media" opportunities was often cited as the key tactic. An amorphous term, social media refers to all manner of user participation: content sharing, interactivity, personalization, mashups, uploading, commenting, rating and so on. Basically it's anything that gets viewers to do more than just sit back and enjoy the show. (For those looking to learn more, note next week's webinar on social media, presented by VideoNuze sponsors KickApps and Akamai)

Regarding originality, this relates back to Moonves's comment about not using the medium for regurgitation of TV shows (though to be sure there's value to that). Many people echoed that theme, emphasizing broadband must be used for original programming. The proliferation of independent "broadband studios" is encouraging early evidence that the originality bar will keep rising, prompting established and startup players to harness broadband's limitless possibilities.

3. Missing in Action: Paid business models

It wasn't that long ago that discussions about broadband video business models focused evenly on paid and ad-supported. No more. The paid model was completely missing in action at the event. I think I can count on one hand the number of times the concept was raised in sessions. Also MIA was DRM, the paid model's enabler (or torturer, depending on your perspective).

I detect a broad consensus that the broadband video industry has hitched its wagon to free ad-supported video for the foreseeable future. Many of you know I've been a long-time and enthusiastic proponent of this approach and I'm extremely happy to see things unfold this way. Though the broadband video ad model is still immature, all macro trends point to a bright future. One in particular is video syndication, which I wrote about 2 days ago. Syndication was a dominant theme, as panel representatives from both large and small content providers enthusiastically embraced it. See my post earlier this week, "Welcome to the Syndicated Video Economy" for more on this.

Ok, there you have it. There's plenty more tidbits I took away from the summit, so feel free to ping me if you'd like. And if you attended, post a comment and share your takeaways as well!

I am ever mindful of the old adage about "missing the forest for the trees" as I try daily to understand the often minor feature differences between competing vendors or the nuances of startups' market positioning. As we all know, when you get too close to something, it's quite easy to lose the larger perspective. So periodically I think it's essential to take a huge step back to try to identify the larger patterns or trends that crystallize from the daily frenzy of deals and announcements.

As a result, I've come to believe that recent industry activity points to an emerging and significant trend: the early formation of what I would term the "syndicated video economy." By this I mean to suggest that I'm seeing more and more industry participants' strategies - in both media and technology - start from the proposition that the broadband video industry will only succeed if video assets are widely dispersed and revenue creatively apportioned.

For content providers the notion of widespread video syndication big change in their business approach. In the past year I think we've observed content providers of all stripes transition from "aggregating eyeballs", to "accessing eyeballs," wherever they may live now or in the future: portals, social networks, portable devices, game consoles, etc. Underlying this shift is the realization that advertising-based revenues are going to fuel the broadband video industry for the foreseeable future. The ad model requires scale and syndication is the best way to deliver it.

This shift by content providers has been accompanied by a loosening of traditional tightly-controlled, scarcity-driven distribution strategies, an acknowledgement that fighting newly-empowered consumers is a futile exercise. The evidence of this shift abounds. Consider the broadcasters like CBS, NBC and Fox, which through their affiliates (Hulu, CBS Audience Network) are syndicating programming to many portals/aggregators (e.g. Yahoo, MSN, AOL, YouTube), social networks (e.g. Facebook, MySpace, Bebo) and others. And Disney's Stage 9 digital studio, which premiered with YouTube and explicitly plans to tap into broadband video hubs. And cable networks like MTV Networks, which is pursuing a plethora of distribution deals. And traditional news-gatherers like local TV stations, newspapers and news services (e.g. Reuters, AP) which have stepped up their activity to scatter their video clips to the Internet's nooks and crannies. And the list goes on and on.

Taking their cue from the media companies' strategy shift, technology entrepreneurs and investors have ramped up their focus on this market opportunity. The prospect of the syndicated video economy blossoming drives news/information distributors such as Voxant, ClipSyndicate, Mochilla, TheNewsMarket and RedLasso, an ad manager such as FreeWheel, and a content accelerator such as Signiant, plus many others. Then there are more established companies guiding areas of their product development process by the prospect of the syndicated video economy's growth: Google, WorldNow, Akamai, thePlatform, Anystream, Maven Networks, Brightcove, PermissionTV and plenty of others (apologies to those I've left out!)

All of this suggests that the eventual "value chain" of the broadband video industry will look quite different than the traditional one (for more on this, I've posted some my slides from late '07 here.) As with all economies, in the nascent syndicated video economy there is vast interdependence among the various players, not to mention shifting market positions and degrees of pricing power and negotiating leverage. It is far too early to gauge who will emerge as the syndicated video economy's winners and losers. But make no mistake, lots of energy and investment will be expended trying to nurture its growth and exploit its opportunities.

Do you see the syndicated video economy forming as well? Post a comment and let us all know!

(Note: This is the second in a series of posts with companies participating in the 2008 Media Summit, a premier industry event which will be held next week in NYC. VideoNuze has partnered with Digital Hollywood, the Media Summit's organizer, to provide select analysis and news coverage.)

Heavy Corporation, which operates Heavy.com, one of the most popular independent broadband video destinations for 18-34 males, is poised to make a push into the ad platform/network business through its Husky Media unit. I spoke to Eric Hadley, Heavy's chief marketing officer yesterday who filled me in on their plans.

The Husky platform is currently used today by Heavy.com. If you go to the site, you'll see how it operates, showing just one ad with the video selected. As Eric explains, the video is wrapped in the advertiser's skin, so upon starting the video player exposes a big interstitial ad for 2 1/2 second that sort of feels like "barn doors" before opening to the video itself. Then when the video plays, display ads surround the content. Additional related content is queued up and automatically starts playing subsequently. This approach has resulted in a 270% lift in videos viewed as compared with the pre-queuing implementation. This of course means more video usage and more advertising exposure.

Looking ahead to the Media Summit, Eric plans to explain more about the upcoming Husky push and how content providers and advertisers can benefit from it. He also sees the Media Summit as an ideal forum to learn from others what's making a difference in the industry and what's hot.

Readers of VideoNuze know that for a long time I've been a big proponent of syndication as a key building block for broadband video success. In last week's webinar I explained that I see this trend only accelerating as content providers increasingly shift from aggregating the most eyeballs to accessing the most eyeballs. That means syndicating video far and wide through social networks, portals, broadband aggregators and others is fast-becoming a key success factor.

Yet aggressive syndication presents a complex set of issues around how to control and optimize the advertising to all those dispersed viewers. Absent the right set of tools to administer each deal's terms, there's a bias toward simplicity and hence, under-optimization. For example, I continually hear that all the broadcasters' syndication deals are 90-10 ad revenue splits. In some cases a plain vanilla approach like this may be fine. More likely though, to have a biz dev person's hands tied to very limited deal terms because of a lack of technology solutions significantly constrains the ecosystem.

FreeWheel is a new company aimed at unlocking these constraints with its "Monetization Rights Management" or MRM technology platform. MRM is a full ASP platform that empowers content providers' biz dev teams to cut creative revenue/inventory sharing with syndication partners and then have ad sales teams follow through with far more intelligence about how to implement these deals and sell inventory. The result is revenue optimization for all parties. I caught up with CEO Doug Knopper, co-CEO and co-founder of FreeWheel last week to learn more.

FreeWheel sits on top of existing ad management systems, as a sort of cross between a digital traffic cop and a green eyeshade - dynamically managing and allocating ad inventory, while keeping track of all ads and revenue across the content provider's syndicated network. MRM interfaces to a content provider's and partner's content management system through FreeWheel's API, allowing MRM to implement its predetermined business rules alongside the content being sent to partners. Clearly there's a huge network affect opportunity for FreeWheel - the more partners its early content provider customers get to implement MRM, the easier FreeWheel's sale will be to subsequent content providers.

FreeWheel reminds me a lot of Signiant, which I wrote about recently. Signiant is more focused on content distribution in a syndicated economy, while FreeWheel is focused on ad management. But both companies share a common purpose of greasing the skids for both content providers and distributors to play ball with each other with the intention of driving more video views and advertising revenue.

FreeWheel has signed up Next New Networks, Joost and Jumpstart Automotive Media as initial clients. The company was founded by three former DoubleClick executives, has 40 employees and has raised 2 rounds from Battery Ventures, though the total is undisclosed.

At the end of each month I plan to step back and recap a few key themes from recent VideoNuze posts. Here are three from February '08:

Brand marketers embrace broadband video

One clear theme from the past 4 weeks has been brand marketers' accelerating moves into the broadband video space. This was on full display by select Super Bowl and Oscar advertisers. We are witnessing an unprecedented commitment by brands to create their own entertainment/information video content and also to induce consumers to create brand-related video through user-generated contests. As I detailed in yesterday's webinar, examples in the former category include Kraft/Tassimo, J&J, CIT Financial and GoDaddy.com, while examples in the latter category include TideToGo/MyTalkingStain.com, Heinz/Top This, Dove Cream Oil Body Wash and T-Mobile/Current TV.

Through VideoNuze I track all brands' broadband video initiatives, and it is clear that their involvement in this new medium is intensifying. Faced with splintering audiences, ad-skipping DVRs and changing media consumption habits - particularly by younger demos - brands have no choice but to get into broadband video. This results in an entirely different awareness/engagement paradigm than we're accustomed to from the world of interruptive TV advertising. Brands today increasingly recognize that a key way to create loyalty (and generate sales!) is by engaging the audience on its terms, using broadband and other technologies to accomplish this.

Monetization is the #1 challenge

Another key theme of the past month was the ongoing quest for broadband video monetization. As I also mentioned in yesterday's webinar, this is the number 1 business challenge for all broadband video industry participants - both content and technology providers. Two companies I wrote about this month, EveryZing and Veveo, are focused on improving content discovery, which leads to more consumption and revenue-generating opportunities. I also wrote about Jake Sasseville, a young entertainer who is pioneering multi-platform initiatives to forge a new revenue model.

Innovation is key in this space. Next week I'll be writing about Freewheel, an innovative startup that's just surfaced, which is providing a new approach to managing broadband video advertising. And yesterday, Magnify.net, one of my favorite early-stage companies, which focuses on enabling video content distribution, announced that it has raised an additional $1 of financing.

In addition, the big dogs of the technology and media landscape are in hot pursuit of improved video monetization as well. This month alone brought news of Yahoo's acquisition of Maven Networks, an ad-centric video platform, Google's beta rollout of AdSense for video, and the hostile bid by Microsoft for Yahoo, a deal that has vast longer-term implications for online and broadband video advertising. In short, monetization is a key focus for all large and small industry participants - cracking this nut is crucial to the long-term health of the industry.

Net neutrality re-surfaces

Lastly, this month also brought a lot of news on the regulatory front. Twice I wrote about "net neutrality," a regulatory concept its proponents believe will keep the Internet free from discrimination by broadband ISPs. While I don't agree with their viewpoint, what is clearly true is that net neutrality is being spurred by the massive adoption of broadband video, which places an unprecedented load on broadband ISPs' networks.

So that's it for this leap year month. Three themes you'll be hearing much more about going forward: brand marketers' broadband video initiatives, video monetization and net neutrality. See you on Monday for the start of a new month!

For me, Google and its initiatives in broadband video advertising and distribution have conjured a comparison to the lion of the jungle. Like the lion, Google often seems to be slumbering in this hot space, yet every once in a while it wakes up, raises its head and roars to the market with a new video advertising announcement. These roars serve as a reminder to others that it is, of course, the king of the online jungle.

But then, rather than following up these periodic roars with steady follow-on news of accomplishments, financial success and new features, Google inexplicably seems to go back to its slumber, thus returning the jungle to the startup antelopes and established elephants to do the spade work of building the broadband video ad market.

Yesterday, Google roared again, this time announcing the "beta" release of its AdSense for Video product and the launch of its destination "Video Advertising Solutions" center, which explains all of Google's video ad opportunities and offers very well produced explanatory videos.

Video ads have been previously announced by Google, and AdSense for video builds on these by allowing a broad range of content providers to tap into AdSense for graphical or text overlay ads on their video streams. Google announced a large network of content and platform partners, augmenting the massive inventory already available on YouTube.

By tying AdSense for Video to its AdWords capability, advertisers have a one-stop shop for text and video ads contextually placed across web pages and video streams. Since participating publishers can expose a percentage of their streams to AdSense, they enhance their overall monetization opportunities.

I spoke with a number of people in the advertising/technology/content communities yesterday and there was a consensus that Google's actions help validate the broadband video advertising market opportunity and overlays in particular (note Google doesn't support pre-rolls). I agree with those who said that with the overall market growing fast, Google isn't terribly competitive with other contextual ad firms; there's clearly room for more than just one player.

On the content provider side, of course any initiative to better monetize video streams, particularly by an established player like Google, will always be welcomed. This feeling is offset somewhat by the underlying anxiety that all content providers have vis-a-vis Google - it is part competitor on the content side, and also part competitor on the ad sales side. This is particularly true of YouTube, which offers significant distribution benefits to content providers, but while also competing for eyeballs.

For content providers' advertising revenues, while AdSense promises improved monetization, it might also lead to channel conflict as advertisers may try to pay less for targeted ad inventory available through Google rather than from the provider itself. This has been less a concern in traditional web publishing, because Google hasn't sold display ads. The risk is that over time AdSense for video could lead to a "hollowing out" of content providers' crucial ad sales capabilities. This dynamic reinforces why it's so important that those who work with AdSense for video set business rules and then adhere to them, rather than be too tempted to grab the easy, short-term money Google can provide.

With the beta of AdSense for video, Google has again reminded the market that its unparalleled technology, content, monetization and financial strength makes it the lion of the online jungle. It is well-positioned to also become the lion of the broadband video ad jungle. Let's see if Google keeps on roaring, or if it appears to lapse back into slumber.

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.

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!

Ending the week on a slightly lighter note, if you happened to go to WSJ.com or NYT.com yesterday, you would have seen that Apple bought out all the top of page ad inventory at both sites for its latest "Get a Mac" video spot (also known as the "Mac vs. PC" ads), which have been hugely popular on TV and online.

Apple's so-called "roadblock" strategy yesterday meant that every single visitor to these 2 sites were exposed to the same leaderboard/skyscraper video ad highlighting WSJ writer Walt Mossberg's opinion that Apple's latest Leopard OS release is "better and faster than Vista." Apple has a whole gallery of its "Get a Mac" ads here, though this new one is not yet posted.

In the online ad business, this type of video ad is referred to as "rich media." I haven't spent much time in VideoNuze discussing rich media ads, instead concentrating on pre-rolls and overlays ads which are actually adjacent to video content. Rich media ads show that there are many different ways to leverage video's emotional and informational impact even when there is no underlying video content to be adjacent to. Given the limitation of high-quality video content against which to run video ads, rich media has become an important and growing segment of the overall online ad business.

While, some rich media ads are way too "in your face" and spoil the user's experience, I think the way the yesterday's roadblock was executed is well within bounds. The video begins playing when the site loads, but the audio is muted. The user has to click the audio icon, and then the spot replays from the start. This means there's been an opt-in decision, which leads to higher engagement. Also, unlike many other rich media spots, the ad is composed solely of a leaderboard and skyscraper, so it doesn't have any obnoxious "pop-ups", "floating" or "expandable" components that block the underlying site content. These are the types of things that drive users crazy.

Rich media ads are an important part of the mix for fully understanding what's happening with video online, especially for advertisers who want to explore all options for leveraging video's emotional impact. I see the category continuing to grow. If ads are well-executed like Apple's, there will not only be minimal user pushback, but rather genuine opportunities for branding and interactivity.