Moderator: Michael Learmonth, Silicon Alley Insider
Jane Hu, Vuguru (Michael Eisner)
Karin Klein, Softbank Capital
Warren Lee, Canaan Partners
Neil Sequeira, General Catalyst Partners
Michael: Are we in a bubble and how will it burst?
Jane: if we are in a bubble, there’s more bubbling to be had. There isn’t a lot of monetization in the space right now.
Karin: There isn’t a lot of money being made, so things will be sorted out over the next few years. I wouldn’t call it a bubble, per se. There needs to be a monetization strategy to keep the money flowing.
Warren: There is a bubble, but it will deflate, not burst. The video content companies like YouTube have been heavily funded. They will be challenges to them building a profitable business. On the infrastructure side, there is a lot of room for improvement in delivery of video and handling the load of content that is coming.
Neil: Not a bubble. But we need more companies that make this a “real business.” We need companies like Omniture. It all comes back to making money in the end of the day. As long as we continue to invest in companies that make money and help people make money, we’ll continue to invest.
Neil: In the first inning of a 9 inning ballgame, there was a clear winner. Google. They bought a premier site and will figure out how to monetize it over time. I agree with Warren that infrastructure is an opportunity, but people that deliver high quality content to audiences will be the winners.
Warren: The baseball game analogy is very appropriate. It is important to recognize that we are in the early stages. One of the interesting trends is how companies are starting to verticalize. They question is if that is a good venture business. There are companies that have potential to be a good business. We need to find companies that will be great businesses.
Michael: Are there great companies out there now? Would you put more money into Joost?
Warren: Raising a lot of money like Joost did allowed them to experiment, but it also enables them to not be very disciplined in how they spend it. There are lot of companies that have raised a lot of money and have gone away. There is a great deal of experimenting going on.
Karin: I’m not going to pick on anyone in particular, but we are very excited about companies in the content arena. Companies that do a lot of heavy lifting – like transcoding – are the ones who can be the winners because they’ll offer full service solutions to major media companies.
Warren: Given that there are so many new video companies that have been funded, and you need to understand what stage of development they are at to gauge their success. Companies that have a critical mass will have an advantage over newer companies because they will be more attractive to partners and clients.
Jane: We tend to produce a lot of content all at once, and sell advertising against it. Anyone can distribute content anywhere. The real key is figuring out how to reach the consumer. There has yet to be a real, true hit online. There is no Superman or Grey’s Anatomy. It is partially because we are in the early stages and partially that people don’t know there is original content online.
Michael: PromQueen was sold to TV. Is that a good exit strategy?
Jane: I wouldn’t say the goal is to upstream it to TV. It really depends on the content.
Michael: Are you funding any content companies?
Neil: Yes. We’re invested in Decca. They partner with great brands and then produce content. They have a bunch of niche vertical content that will continue to grow and find an audience. There are 20-30 different properties that do pretty well, with a few break out hits. But the business as a whole is very good.
Warren: We’ve looked at a lot of content, but our personal bias is that we like to invest in companies that have technology. Its been difficult for us to get over the hump and look at pure content plays. We have invested in technology that quantifies the value of content, but not the content itself.
Karin: We’ve looked at a number of studios in the video and gaming arena, but have passed.
Jane: We are invested in Veoh, which isn’t a pure content play.
Michael: The web shows aren’t really businesses yet, right?
Jane: Everything we do we try to monetize the best we can. It may be a while before we see a lot of return, but certainly a lot of our projects are profitable.
Michael: If there is a consolidation, who is going to go away?
Neil: There will be consolidation. If you look at the players and infrastructure and platform business, there is Brightcove and Maven and The Platform. Beyond that, there are a slew of companies that are venture backed. Those three have pulled away from the rest of the pack so far that there will have to be consolidation.
Karin: Some of the video advertising companies will probably consolidate as well. We’re also invested in Huffington Post.
Neil: Content and destination companies take a tremendous amount of capital in order to be successful. So it is difficult for venture firms to invest in pure video plays. There are companies that do audience aggregation and content creation.
Warren: We need to be careful not to just take a snapshot of the industry right now. You can assume it will be cheaper to deliver video online in three years. You can assume the monetization aspect will work itself out and agencies will have an easier, clearer role. The challenge is to figure out how to thrive and prosper over the next few years while the industry shakes out.
Michael: Was it smart to invest $100 mil in Hulu?
Neil: I only watch 30 Rock on Hulu. I can’t content on $100 million, but they are definitely a unique property in a unique moment in time. I commend them for creating a hell of a product. It is our belief that people who create great products do well over time.
Karin: There is a clear winner in UGC. Now there is a clear contender in the professionally produced content space as well.
Michael: Who will be the #2 player in UGC?
Neil: Its probably someone you haven’t heard of. It is so early. Everyone is struggling to figure out the business, but it is a reality that people are consuming massive amounts of video online. That is the dynamic nature of the web.
Warren: Video is a hot, sexy space. There is no shortage of people who are interested or capable of creating a video business.
Jane: Maybe there wont be a difference between UGC and professional content. In the end, what is good content is what will succeed. And we want people to be able to watch content wherever they want to.
Michael: Is everywhere fair game for distributing content?
Jane: We are very aware of content standards. Our shows are all PG-13, so we wont be on a porn site. Beyond that, the sky is the limit.
Neil: Todou is an investment we have in china. It means “Couch Potato” in Chinese. People sit in Internet cafes and watch entire shows. It has grown 100% a month for the last two years. It is a very compelling business. Monetization is still very early. But different countries have different levels of what they will tolerate as far as advertising goes. Businesses are built by great people with unique perspective, even if that means more advertising on certain content.
Warren: The video space is very interesting. You need to work with capitalists that understand the specifics of the sector. It is both a technology and media play. That isn’t often the case for VCs.
Jane: Foreign Body is a prequel to a book by Robin Cook. 50 episodes that will stand alone ahead of the release of the book. We launched it a couple of weeks ago, and the advertiser is Honda and they are very happy so far with how it has been distributed. We’re still waiting to see how it will ultimately turn out. The measures of success will be if the content is something that people like, monetization, and tune in. You can have great shows that people can’t find or a show that a lot of people watch, but there isn’t enough monetization.
