Web Video Is Worth the Investment

“Shift Happens”

The web was originally a communications medium, with email being the primary use. Then the shift began towards consumption of content, followed by social media, and now video. It is a fundamental shift. We are talking about “The Video Web.”

In one year, video consumption has become mainstream. It is part of the embedded experience. Cisco predicts a huge increase in the volume of bits being delivered around the web, driven by video consumption.

Is the Web a better way of consuming video? It is 100% on demand. It is searchable. Broad selection. There are fewer reasons to watch TV. There is also true multimedia convergence going on, driven by news content. News isn’t just text any more. It is a full multimedia experience.

What does it take to rise up in the space? It is very hard to be a generalist. The video ecosystem is evolving by specialists that are addressing discreet issues. It requires focus. Broadband Enterprises is one example. NextNewNetworks is another example. NNN targets niches with a low cost, distributed model on the web. How do you leverage that distribution? Trying to get everyone to one place – ie your site – is no longer effective.

Generate (run by WB’s Jordan Levin) operates like a studio. It creates products that work in a multimedia environment. The web has become a farm system for TV, due to the lower cost structures. Mixercast is another investment that allows people to create mashups and share them, which leverages the social media and desire to share content. There is still a need for video aggregators, like Blip and Veoh, and the need for infrastructure like Brightcove.

There are lots of different categories in the ecosystem which are all being built. We are past the boom phase, where everything is hot. Then there is a bust phase, where there is a shakeout, followed by a phase of true business development. We’re somewhere in between the bust and development phase.

Video: 2.8 minutes average, so still driven by shortform content. Hulu is much better than anyone expected, but is the exception to the rule right now.

What is holding the industry back right now is a lack of standards and metrics. The web has previously been using text based metrics, like page views. Now we are looking at establishing video based metrics. Standards will allow us to scale the industry. 20 years ago, the head of research at Nielsen said something that has stuck with me. Yes, the system is flawed. However, “It is absolutely wrong, but relatively correct.” You accept the fact that the hard data may be wrong, but the directional data provides enough info to standardize and scale. This doesn’t mean that we shouldn’t strive for better and better metrics, but as long as we have actionable information, we’re off to a good start.

We’ve seen some shakeout in the destination sites. Revver is gone. Many people are trying to produce content in different ways. There will have to be a shakeout. Same in the infrastructure sector. The big dollars will flow after there is a clearer shakeout. The risk that people worry about is that monetization will take longer. The hyper fragmentation is a challenge to scale. There also needs to be the economics to support it.

Consumption. Innovation. Monetization. That is the sequence that things will happen. But they wont happen without the targeting and standardization and scale. The dollars always follow the consumption. The more we can bring advertisers into environments that they can trust, the faster this will happen.

Q&A: CEO from MyDamnChannel. How do you compare sponsorships, CPMs on banner ads?
A: Sponsorships may get the dollars to flow, but ultimately isn’t scalable. Needs to be more about scalable solutions.

Q: What is the future of the :30 and :60 second spot? Are they a thing of the past?
A: On TV, no, on the web, yes. :30 - : 60 is tough. :10-:15 is interesting, especially targeted.

Q: Is there a distinction between monetizing UGC vs. professionally generated content?
A: Yes. For the near term, marketers want to be in environments that they can trust. As stewards for our clients brands, we want to make sure they are shown in the right way. There may be a higher degree of safety - and thus monetization – in UGC in the future. But right now, there isn’t.

Video syndicator and pre-roll provider Broadband Enterprises has raised $10 million from Velocity Interactive, a VC firm helmed by Ross Levinsohn, the former President of Fox Interactive and Jonathan Miller, AOL’s former Chairman and CEO.

According to TechCrunch’s coverage, this is the first outside money it is taking. Velocity is putting up the entire A round itself. “They are cash-flow positive and making money today,” says Miller, on tens of millions of dollars in revenues. That’s an easy investment decision.