Video Content in a Mobile World: Diet-Sized and Distributed

100 Calorie Snacks

While the tech industry was buzzing over Facebook’s $19 billion acquisition of WhatsApp, the social network’s original blockbuster deal, Instagram, was quietly making some interesting news of its own. Action-sport channel Network A, a property of next-generation media start-up Bedrocket, announced the launch of a first-of-its-kind video series called ‘#goodstuff’. The lifestyle series, which focuses on event and product reviews in its first installment, will be exclusively distributed on Instagram over the course of ten, 15-second episodes.

Instagram Video, which only launched this past June, has had a couple of other ‘firsts’ on the branded, short-form content front in recent months. In December Mass Appeal launched the first animated video series on the app followed by the launch of Instafax, a news-clip series from BBC, in January. While watching videos over the internet has become commonplace thanks to YouTube, Netflix and others, these three video series are the first to be created specifically for a mobile-first social networking audience. The combination of Instagram’s photo/video sharing experience with user engagement and growth figures that exceed those of Facebook, as well as those of rival mobile social networking apps, makes the company and it’s 150 million-plus user platform a logical place to experiment with new forms of atomized content creation and distribution.

The typical process for distributing video content online usually includes developing a branded destination website and accompanying YouTube channel to garner views. That won’t work in mobile, where apps are preferred by users and competing for attention is further challenged by siloed experiences and navigation constraints relative to the web. Instead of introducing yet another app for consumers to hopefully download, content creators have the opportunity to leverage the popularity of the most engaged social apps to efficiently reach their intended audiences.

In a day an age where smartphones have enabled content consumption to proliferated (just look at music video site Vevo’s recently revealed 2013 viewership stats), some mobile applications have imposed functional constraints (Twitter’s 140-characters, Instagram’s 15-second videos, SnapChat’s disappearing content, etc.) to create unique, and successful, user experiences. Without these limitations on the web, content creators have never had to consider developing stories to fit this new mode. While Netflix has shown us that a full season of House of Cards (about 13 hours) might be the upper-limit for online video storytelling, consuming this type of content is still best suited for TVs and laptops. Mobile devices, with their smaller screens, slower data connections and app-centric usage already lend themselves to content ‘snacking’- so why not experiment with optimizing production for these mobile confines.

The onslaught of webisodic content during the aughts, which launched such companies as Blip.tv and EQAL, eventually proved to be overly optimistic. But the issue might have been one of timing more so than anything else. The social-mobile generation is more likely to trade quality for content brevity and platform convenience in a world of streaming digital distractions.  Recasting webisodes to fit the realities of mobile could enable such experiments as lonelygirl15 to succeed longer-term. If the right content experience can be created for audiences, the quality will follow. If ESPN’s SVP of Product Ryan Spoon comments are any indication, users are willing and ready. The question is- can you successfully condense something like Modern Family into 3-minute seasons?

Time will tell if the ‘mobisode’ makes its way into your stream.

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TV Everywhere Already Exists…and it Has 1 Billion Users to Prove It

TV_EverywhereThe promise of TV Everywhere is being realized, but not where you would expect it. Towards the end of March Magine announced the launch of an internet-based, cable-like offering which allows subscribers to watch television shows live or on-demand across any device without the need of a set-top box. The caveat: it’s only available in the company’s home country of Sweden.

So what about the rest of us?

With a popular slate of original programming including Boardwalk Empire and Game of Thrones, HBO has always been considered the catalyst for unlocking TV Everywhere in the U.S. This, despite fact that the only way fans can watch these shows is by first subscribing to pay television from cable or satellite service providers before signing up for HBO at an additional monthly fee. The hope has been that HBO would eventually go direct-to-consumer with its HBO GO service (like Netflix does with its streaming service), but with pay TV partners funding the marketing for HBO’s content across their platforms, the un-bundling of HBO GO into a stand-alone service won’t happen anytime soon.

With traditional media companies not in any hurry to upset these profitable distribution arrangements, a true TV Everywhere experience will need to come from outside of this framework. Fortunately there’s a company that’s been building the digital media alternative that just celebrated its 8th birthday and hit 1 billion monthly users. Yes, YouTube, the skateboarding-dog-showing, Gangnam-Style-popularizing, space-jump-live-streaming video website is consumers’ best bet for delivering TV Everywhere.

Here’s why.

Even though YouTube has become the destination for video content on the web, its evolution has followed that of traditional television in many ways. When commercial television launched in the late 1930s in the U.S., music and variety comedy were the most popular types of content. Over time, additional programming made it to the airwaves and remained free to watch, as long as you had a television with antennas, since all the content was ad-supported. Towards the end of the 1940s the first cable channels, which required consumers to pay a subscription fee to access the content, were introduced.

Now replace the word ‘antenna’ with ‘internet’ and you end up with YouTube instead of broadcast companies. And just like broadcast television, you get to watch all of the most popular content (music and funny videos) for free because they are also ad-supported. Having checked-off additional content categories since then (such as live events and movies), YouTube launched a $100 million fund to invest in 100 channels of original online programming towards the end of 2011 and followed that up with an announcement of additional funding for 30% to 40% of the most promising channels late last year to continue improving the overall content quality of YouTube. With the company now starting to talk about allowing subscription services for video producers on the site, YouTube’s content experience has nearly completed the same evolution as traditional television- and in about the same amount of time.

That’s not to say that producers of traditional media are standing by watching this happen from the sidelines. Ricky Gervais, comedian and The Office creator, announced in March that he has signed up to provide exclusive content to YouTube. This news came on the heels of Alien and Blade Runner producer Ridley Scott partnering with YouTube-hit Machinima to produce 12 short films earlier in the month. Even old media execs see the value of YouTube, investing in services like Fullscreen that help video producers manage their presence on YouTube.

YouTube_Firefox_TabletAs important as YouTube’s ability to aggregate and curate all of this content has been to its success, providing users with any-screen access by way of PC and mobile websites as well as a variety of mobile and television applications has been equally critical. This has resulted in 25% of YouTube’s global audience watching videos via mobile devices, and a remarkable 50% of Gen C visitors. These users are connected to the video platform by more than just devices though as the social engagement around sharing video links and comments truly makes YouTube the second largest social network in the world and the largest social television experience- giving the company a unique advantage in building a TV Everywhere service.

While the bite-sized entertainment offered up by YouTube might be prefect for Gen C consumers, it still doesn’t replicate the current programming available through pay television. Fortunately for YouTube, Google has started to build out the actual infrastructure necessary to bridge this gap. Google Fiber, which promises internet connection speeds up to 100 times faster than today’s broadband as well as high-definition television, recently announced the second and third cities to deploy its service as well as adding premium subscriptions from HBO and Cinemax to its channel line-up. By combining traditional media content with digital video from YouTube, Google can create the ultimate TV Everywhere experience for any audience in a Google Fiber city going forward (which could cost an estimated $11 billion to build out if Google wants to compete with other providers on a nationwide basis- well within the possibility considering Google’s capital structure).

Regardless of whether its YouTube or even Google TV (because of its ability to incorporate media-specific apps into its framework) that drives adoption, most consumers will finally get what content they want (as well as when and where they want it) either directly from Google’s combined efforts or indirectly from market rivals being pressured into providing more competitive offerings. Until then, 1 billion YouTube users will have plenty of content to keep them entertained.

‘No Appointment Necessary’ Television

Same_Bat-Time_Same_Bat-ChannelThe recent release of House of Cards by Netflix was as much-anticipated for its production value (starring Kevin Spacey and produced by David Fincher) as for its release strategy (all 13 episodes were made available to Netflix subscribers on the same day). While traditional media outlets have questioned Netflix’s decision to release the entire first season at once, which eliminates the water-cooler effect and anticipation build-up from episode-to-episode that traditional television show experiences have been built around, fans of the all-you-can-eat approach to serialized content can’t get enough of it. So it’s not surprising to hear that House of Cards has become Netflix’s most-watched program in terms of number of subscribers and total hours according to Chief Content Officer Ted Sarandos.

But is binge-viewing the future of television then? Not exactly, though it is part of a broader trend in how content consumption habits are evolving thanks to technology. Just look at some recent stats from two new series on FOX’s network- The Following and The Americans. The Following debuted to an audience of 10.4 million viewers on FOX who watched the premiere either live or the same-day. That audience figure doubled in size though when DVR (which contributed 23% of the audience), encore showing (14%), streaming (7%) and video-on-demand (5%) viewing was also included. Much like The Following, FX’s The Americans also showed audience growth of 44% and 58% across its first and second episodes respectively when DVR viewing data for the 3 days following the original airing (the period that encompasses the original broadcast plus DVR viewing up to 3 days afterwards is relevant because it is used determine the cumulative ratings used by advertisers to determine the size of the audience that saw their ads) was counted.

The story being told by these stats is that the appointment-based model of watching TV popularized in the 1960s by the likes of the original Batman series (remember ‘Same Bat-Time, Same Bat-Channel’?) is becoming a relic of the 20th century. But to what extent? That question will finally start to get answered this fall when Nielsen, the de facto standard in determining how the $60 billion television advertising market is allocated across television networks, will begin counting TV shows consumed via video game consoles and broadband connections in its show ratings (with an eye towards including iPad and tablet viewership in 2014).

By expanding the definition of what constitutes an addressable audience, Nielsen will be legitimizing viewers of shows that are already being quantified (as The Following data shows) but not valued from an advertiser perspective. This will give broadcasters the incentive to both expand the availability of their television content through additional channels (which both ABC and CBS seem to be set to do with the launch of new streaming mobile apps) as well as aggregate these cross-platform audiences to provide more reach and value to advertisers (as Disney’s networks are doing now).

Another potential benefit in this approach to TV content distribution and monetization will be the unification of pricing across digital screens (PC, tablet and smartphone) which have traditionally seen a wide discrepancy between PCs and their mobile counterparts (especially smartphones). While digital might not reach parity with television ad rates, the increase in revenues from parity within digital should convince broadcasters to make more content available online and with less delay from the original television airing day and time (depending on how all-encompassing Nielsen’s new ratings get).

The days when broadcasters knew what was best for audiences (which really meant what was best for their advertising clients) is coming to an end as consumers are exerting more control over the pace at which they consume content and the devices they use to watch it. This will have an interesting effect on event-based content and advertising as sports (especially football and playoffs or championship in any sports) audiences along with those watching voting-oriented reality TV (like American Idol and The Voice) and award shows (Golden Globe, Grammy’s and Oscars) will become even more valuable to time-sensitive advertisers (such as movie studios promoting a new weekend release) looking to reach large audiences in one fell swoop. Conversely, it will create opportunities for ad technology platforms, along the lines of BlackArrow and Freewheel, that can both deliver ads in different formats and dynamically synch the delivery across multiple platforms for advertisers looking to reach this newly identified ‘appointment-less’ audience.

Tune-in whenever you feel like it to see how it plays out.

Photo image source: Batman

Time for Television Ratings to Get Social

The start of the current fall television season has highlighted the importance of social media in driving awareness and tune-in for new and established TV series as audience consumption habits continue to fragment across device and social platforms. With multiple apps being promoted by shows, networks and even TV service providers for checking-in to these broadcasts as well as fan pages and hashtags used to centralize the conversation around each episode, there is a growing need for audience measurement beyond the traditional Nielsen ratings.

The Nielsen Company is the de facto provider of the ratings system used to determine how the 60 billion in television advertising dollars are allocated amongst broadcast and cable network line-ups. The company relies on the behavior of 50,000 Americans across its sample of 25,000 households to extrapolate ratings for the nearly 115 million households with television sets in the U.S.  The resulting ‘share’ of audience Nielsen attributes to each TV episode on a nightly basis ultimately effects which series get renewed or cancelled (for a great primer on how Nielsen’s TV ratings system works, check out this ESPN-style animated video on the topic from local Washington, DC creative agency JESS3).

Though with the number of households with television sets dropping for the first time in 20 years, on-demand video platforms taking viewing time away from traditional television and multi-tasking across multiple screens a growing reality, traditional means of measurement are failing to capture this evolving consumer behavior. While Nielsen is working on ways to aggregate this distributed viewing audience through its ‘extended screen’ initiative, the company isn’t measuring the actual activity on the social web occurring around the episodes being watched. This represents an opportunity for services that provide a platform for social engagement as well as companies that aggregate TV show-related conversations from across the internet to address this information gap. While both Facebook and Twitter have their own media-related initiatives that allow fans to interact with one another as well as with the shows and their stars, neither network focuses on quantifying this engagement on an industry-wide basis.

Services like BuddyTV, GetGlue, Miso and Tunerfish, on the other hand, have been built in a manner that can address this need. Having ridden the check-in wave popularized by location-based service Foursquare, these event-based social networks (EBSNs) capture when consumers are tuning in to watch television and aggregating the activity being generated around each show within their respective apps and websites. GetGlue, the largest of these services, already has more users checking-in to the most popular shows on its platform than the size of Nielsen’s entire sample audience, making it statistically valuable to the ratings conversation.

Even though the demographic make-up of EBSN users is not representative of the overall U.S. population (which Nielsen does try to mirror in selecting its households), check-in services make up for this by highlighting the actual activity of the most desirable audience to advertisers (18 to 49 year-olds) and not just projections. For advertisers this represents a unique opportunity to target these consumers in a highly engaged environment by extending their TV advertising for particular shows to the equivalent social web channels and mobile devices. To bring the desired scale to this type of opportunity though, these social environments need to be aggregated somehow.

That’s where companies like Bluefin Labs, General Sentiment, Social Guide and Trendrr come into play by not only aggregating publicly available social commentary but filtering and normalizing this data from disparate sources (EBSNs, Facebook, Twitter, etc.) to identify the underlying sentiment of a broader range of web users. This provides a more complete view of the engagement associated with shows across the social web in real-time as well as beyond the initial airing time slot of each episode. The resulting findings might be just the data set necessary to become the de facto social television rating to rival Nielsen.

Even with Nielsen’s recent ratings calculation glitch, it’s unlikely that the company will be replaced as the ratings system for the television advertisers industry in the near future. But as audiences for traditional TV continue to disperse across more mediums and content experiences, the need to compliment the ratings discussion, and ultimately how advertising dollars are allocated, with additional data will only continue to increase. This creates an opportunity for actual engagement-related metrics to gain equal footing with passive stream and tune-in projections over time.

So how do we get there?

While results from a recent NM Incite (a Nielsen/McKinsey company) study confirms the correlation between social activity and TV ratings, the opportunity for social television start-ups is in identifying and explaining the variations in popularity between Nielsen’s most highly rated shows and those series being discussed online and how to benefit from it.

The combination of tune-in and conversation activity make EBSNs the most compelling data set for social television ratings. The challenge is that the company that popularized the check-in, Foursquare, only recently passed 10 million users worldwide itself, a far cry from Facebook’s 150 million users in the U.S. alone. For EBSNs to reach Facebook-like adoption, they need distribution and a more automated process for socializing around TV shows (beyond the manual download of apps and checking-in to services). While BuddyTV and Miso have partnered with AT&T’s television service offering U-verse, GetGlue and Miso have integrations underway with satellite television provider DirecTV that enables subscribers to check-in to shows through DirecTV’s remote control. Other companies, such as Dijit, are by-passing traditional TV service providers entirely and competing for consumers with their own universal remote that layers in check-in functionality.

What social analytic companies lacks in proprietary data, they make-up for in business model by already working with advertisers and media companies to help them understand the volume and sentiment of chatter occurring online about their brands and shows across the social web. Gaining access to data on an exclusive basis from EBSNs and other social communities would be a key differentiator in winning the battle for advertising and media clients- the same companies that subscribe to Nielsen’s television ratings data. With so many companies vying for client dollars and mind share, the social analytics provider that can get the right media outlets partnerships to adopt and distribute their version of social television ratings can become the industry standard through sheer perception and market momentum.

Based on these factors, Trendrr, which launched a TV industry-specific real-time dashboard before the start of the fall television season could be that company. Considering Trendrr’s breadth of data sources (Facebook, GetGlue, Miso and Twitter) and how well they’ve embedded themselves into the online media landscape (partnering with the likes of AdAge, Lost Remote and Mashable to distribute their data and findings), the company is best positioned to become the social television ratings provider of the future.

What are the most likely outcomes?

Absent Trendrr or another one of these start-ups gaining the necessary client or user clout to grow into the de facto social TV ratings provider, the most likely outcome for the companies with the most traction in this market is an acquisition.

If either Facebook or Twitter decided to focus on providing analytics as a value-add to their advertiser and media clients, they would make ideal acquirers of these types of companies. For Facebook, adding a media-oriented check-in service to their massive user base would fit nicely with Facebook’s recent overturns towards the television industry and turn the acquired ESBN into the immediate and undisputed winner in the social television data game. Twitter on the other hand would benefit from acquiring one of the leading social analytics companies, as it would fill a large analytics hole in their offering. Even though the company recently stated its intentions to stay out of the enterprise market, the opportunity might prove to be too lucrative to stay out.

Beyond Twitter, The Nielsen Company is a natural acquirer of a social analytics company since it compliments Nielsen’s existing ratings and research business. With the company having held an initial public offering at the beginning of this year, Nielsen also has the necessary capital to do this.

Beyond these entities, media companies and television platform could benefit from owning one of the EBSNs by leveraging these services to gain insight into user activity and drive additional tune-in for themselves or partners. Yahoo was the first to act on this, acquiring 12-week old IntoNow earlier this year and releasing an iPad app last week that integrates into Yahoo’s Connected TV framework. For GetGlue and Miso, who have raised capital from Time Warner and Google’s venture arm respectively, they already have likely acquirers in the fold. That being said, with the variety of relationships GetGlue (most recently with FX) and Miso (most recently with Showtime) have established with different broadcast and cable networks it’s not out of the question that one of these media partners tries to acquire either company to be their underlying social TV platform. The engagement data would be very valuable to any company negotiating with advertisers during the ‘upfront’ season as a way to justify advertising rates (beyond Nielsen’s rating data) for the next television season or provide brands with a new way to advertise to their intended audiences (for an additional cost or as a make-good).

Stay tuned. This market will only get more interesting.

Mobile Video: The Final Frontier for Ad Networks?

Earlier this month TechCrunch broke the news that mobile video ad platform Transpera had been acquired by online video ad network Tremor Media. The deal came almost exactly three months after Tremor’s last transaction, the purchase of video ad network ScanScout. The Tremor-ScanScout merger was part of a string of announcements in the online video ad space last fall which began with top 10 online display advertising network Specific Media acquiring video ad platform BBE and ending with another leading ad network, Undertone, buying Jambo Media, a video solutions company.

With advertising a major theme at last week’s Mobile World Congress in Barcelona could this latest Tremor news set off the next round of capabilities expansion and provider consolidation amongst ad networks?

With online video projected to grow 55% annually through 2014, making it the fastest growing online ad format worldwide, it’s easy to see why there’s interest from both traditional display and pure play video ad networks in acquiring online video market share. Looking at recent industry trends and projections, mobile video might be poised to follow this same type of growth trajectory, creating a similar opportunity for ad networks looking to provide cross-platform digital ad solutions to agencies and advertisers.

  • Devices: Worldwide smartphone shipments passed PCs in total volume for the first time in the 4th quarter of last year while tablet shipments, led by Apple’s iPad, are expected to reach nearly 56 million this year and 172 million by 2014.
  • Network Traffic: In Cisco’s Visual Networking Index Forecast, updated this month, the company predicted that, by 2015, two-thirds of all global mobile data traffic would be video.
  • Advertising: Mobile ad spending is projected to exceed $18 billion worldwide by 2015, representing over 15% of digital advertising’s spend. While in the U.S. video is expected to continue growing faster than any other mobile segment through 2014.

Together, these data points confirm that the PC-based era of the web has been officially replaced by the mobile web, which consumers are already taking advantage of through the proliferation of mobile device types. According to The Nielsen Company, Americans, led by teens and young adults, watch an average of 3 ½ hours of video a month on their mobile devices. To understand just how quickly video consumption habits are evolving look at YouTube’s announcement last month that it has reached 200 million video views per day on mobile devices- an increase of 300% over the beginning of 2010.

Media companies and marketers are looking at ways to quantify this audience in aggregate in an effort to bring advertising economics to parity across all “three screens” (television, web and mobile). This represents a big opportunity for ad networks willing to put forth the technical and execution effort to target mobile audiences fragmented by app-type (mobile web versus native apps), device (smartphones versus tablets), operating system (Android, BlackBerry, iOS, etc.) and ad unit interactivity (passive versus touch-screen).

Because ad guidelines and standards for the mobile web are still maturing in comparison to display and online video, ad networks interested in entering the mobile video space would benefit from acquiring video delivery expertise and an embedded distribution network. Any M&A activity would involve one of these three types of acquisition strategies:

  1. Buy capabilities and market share: This tact was used by Specific Media to enter the online video market by acquiring a top 10 video ad provider and instantly gaining reach. If leading online video advertising networks BrightRoll and YuMe, which launched their respective mobile advertising solutions last fall, don’t see adoption of their offerings, they might be forced to take this route in order to match Tremor Media’s cross-platform scale in video. From the display advertising perspective, only Microsoft and Yahoo as well as the largest ad networks will be able to afford this type of acquisition due to lofty valuations in mobile and video.
  2. Buy capabilities, leverage market share in current business: Undertone took this route by leveraging its own scale on the display advertising side with its video technology purchase to become a top 10 online video ad provider of its own within a couple of months of the acquisition. This is the most capital efficient way for any ad networks to enter the mobile video business, though acting quickly will be the key to successfully executing this strategy due to the limited number of acquisition options and venture capital being invested in the segment.
  3. Extend capabilities and market share: As for Tremor Media, already a leader in the online video advertising space, its deal allowed the company to add product expertise (video overlay ads) while growing its reach and video ad volume. Millennial Media, the largest independent mobile ad network which raised $27.5 million earlier this year, and has raised $65 million overall, is the best positioned mobile ad network to take advantage of this strategy due to its profitability, exit options and capital on hand.

While Google bought its way into a dominate position in the U.S. mobile advertising market (including interactive video ad capabilities) with its purchase of AdMob last year, the growth of YouTube’s mobile website has allowed Google to become a cross-platform provider of mobile video monetization solutions. Apple on the other hand used its acquisition of AdMob competitor Quattro Wireless to build the iAd Network solely for its own mobile operating system (iOS). With two of the largest ad networks having been acquired by the two leading mobile operating platforms what merger opportunities still exist in mobile video advertising?

  • JumpTap: The company added video to its suite of mobile ad formats last year in an effort to broaden its appeal to clients. JumpTap, which delivers ads across all major smartphone platforms (Android, BlackBerry and iOS) as well as the iPad, is considered the largest independent mobile ad network in the U.S. after Millennial Media. As such, the company will most likely have to wait and see what happens with Millennial (which will either go public or get acquired) before drawing interest from the likes of Microsoft, Yahoo and potentially Research in Motion (maker of BlackBerry) who have all been rumored acquirers of a mobile ad network and the only companies large enough to digest JumpTap’s $69 million in capital raised.
  • Mogreet: The company provides mobile video advertising solutions through SMS and MMS mobile messaging services, allowing Mogreet to address the feature phone audience as well. Considering the limitation of their offering, especially when you consider the growth of the smartphone and tablet markets, and the $7 million invested in the company thus far, an acquisition of this company would be a stretch for a U.S.-based ad network but maybe not for a network in a large developing market such as Brazil, India, Indonesia or Russia where feature phones dominate the market.
  • Rhythm NewMedia: From a pure play mobile video ad network perspective, Rhythm NewMedia has built the most envious, cross-platform network out there of the remaining independent players. The company, which recently raised $10 million, only works with premium brand advertisers and publishers across Android and iOS mobile platforms covering both smartphones and iPads. Having raised $37 million in total funding makes Rhythm a pricey acquisition for anyone not named Microsoft or Yahoo at this point though.
  • Vdopia: While the company is an online video ad network with extensive operations and market share in India, it also operates iVdopia, a mobile video ad network. Its mobile offering covers both Android and iOS platforms (including iPads) as well as mobile websites. Claiming it has reached profitability, and with only $4 million raised, Vdopia would be a prudent acquisition for an online global ad network.

Beyond these mobile video ad companies there are several other start-ups that focus on providing rich media advertising solutions for smartphones, tablets and the mobile web that could provide the framework for a video offering for ad networks interested in getting into mobile video. Greystripe which focuses on rich media banner ads primarily for the iPhone, while supporting Android  and Java feature phones as well, has raised the most venture capital of the group ($18 million), followed by Medialets ($10 million) and Crisp Media (at least $5 million). Greystripe’s strength is in its ability to transcode Flash ads into HTML5 in order to support Apple’s Flash-restriction on iOS devices. Both Crisp Media and Medialets, neither of which are an ad network but instead earn revenue from serving rich media ads to mobile devices, do provide video ad solutions for both smartphones and tablets. The biggest challenge facing these companies will be potentially pricing themselves out of the M&A market if they continue to raise capital. Based on this, Crisp Media might be an ideal technology pick-up for an ad network with a strong client-base and distribution network.

With the display inventory component of mobile advertising already being automated through demand side platforms like DataXu and real-time bidding exchanges like Mobclix, mobile video might be the last digital ad segment where ad networks can extract additional margin out of the industry through ad effectiveness and audience scale. Perfecting the online and app video experience will be important beyond just mobile as internet television, the next great digital ad opportunity, will leverage these advertising frameworks for its own platform monetization. As agencies begin to provide digital services at global scale to their advertising clients, ad networks that can deliver audiences across devices and digital formats, at scale, will garner the lion’s share of ad campaign dollars coming from these agencies going forward. To accomplish this ad network’s need to boldly go where most networks haven’t gone before.

Photo credit: fdecomite/Flickr

Rise of the Event-Based Social Networks

With interest in location-based social networks (LBSNs) hitting an all-time high with Foursquare’s recent funding announcement valuing the company at $115 million, a new type of social networking has emerged that borrows some of the mechanics and incentives from location-based services: event-based social networks (EBSNs). While LBSN users notify their personal networks where they are physically located by “checking-in” to the service, earning virtual badges in the process, EBSN users earn their virtual rewards by identifying themselves to other attendees and participants by also using check-in mechanics, but without having to actually be physically present at the event.

We see from studies and personal experiences that recommendations from social networks do influence our television viewing habits. Combined with the abundant, on-demand nature of information available on the internet today, it’s easy to understand how the changing content consumption habits, from the ‘day after’ to the ‘day of”, have affected the media industry. While much of the demise of print news media can be attributed to these changing habits (and nowhere better explained than on The Daily Show with Jon Stewart), it has actually had the opposite effect on live television event broadcasts.  Here is audience data from some of the most widely-known sports and entertainment events from this year that were broadcast live:

  • Golden Globes (January): This year’s television audience was 17 million, 14% higher than in 2009;
  • Grammy Awards January): Almost 27 million viewers tuned in, a 35% increase over last year’s broadcast and the highest TV ratings for the event since 2004;
  • Super Bowl XLIV (February): Became the most watched television program in U.S. history, beating the finale of the TV show ‘M-A-S-H’ with a total audience of over 150 million and an average of over 106 million viewers;
  • Academy Awards (March): Had over 41 million viewers, up 14% over the 2009 Oscars;
  • NBA Finals Game 7 (June): The deciding game between the Los Angeles Lakers and Boston Celtics pulled in a viewership of over 28 million, the largest basketball audience in 12 years (when Michael Jordan won his last of six NBA championships);
  • World Cup Final (July): The finals between Spain and Netherlands became the most-watched soccer game in U.S. history with over 24 million viewers, topping the previous record of 19 million viewers from United States’ match against Ghana in the elimination round only weeks earlier.

While some might argue that the economy (i.e. people staying home more often for entertainment purposes) or content quality (i.e. offensive-minded Super Bowl match-up, the popularity of Lady Gaga and Avatar for the Grammys and Golden Globes/Oscars respectively, deciding game of a classic NBA Finals match-up and final of the most-followed sporting event in the world, the World Cup) are better explanations for this renewed interest in live television programming, the fact is that most of these events are leveraging social media hubs like Facebook, Twitter and YouTube more and more as part of their tune-in marketing campaigns to engage with fans and would-be viewers.

And it’s working. The network effect caused by the interest of the most engaged fans is bringing indifferent audiences on the sideline that are connected to these fans into the viewing experience. The real-time nature of information flow on the web and the ability to extended social connections through Facebook and Twitter has made it increasingly difficult for people to avoid watching or hearing about live television event broadcasts or even attempting to try to watch them in a non-linear, time-shifted manner without having the outcome spoiled by social media channels. Combined with the social pressures around participation, additional audiences are being influenced to engage with these events via social networks.

Some recent engagement figures from Facebook and Twitter seem to confirm this. Facebook has shared that about 30% of all status updates on the site during the U.S. versus England match included a World Cup-related term. More impressively Twitter saw the number of Tweets-per-second (TPS) it handles cross 3,000 as a result of the Lakers beating the Celtics in the NBA Finals. This record was broken a week later on the heels of two World Cup matches that generated almost 3,300 TPS.  To put this into context Twitter’s normal activity is 750 TPS, which is big reason why the service has experienced over 6 hours of downtime since the beginning of the World Cup.

With live television event broadcasting benefiting greatly from social networking, can EBSNs become the next big opportunity in social media?

Even though the most well-known companies in this segment of social networking have positioned themselves in a slightly different manner from one another, at the most basic level Fanvibe, formerly known as FanPulse (sporting events), GetGlue by AdaptiveBlue (home entertainment such as movies, books and music), Hot Potato (general events), Miso by Bazaar Labs (TV shows and movies) and Tunerfish from Comcast (online video and TV shows), among others, all address some type of live event participation through their services. As ReadWriteWeb points out in its recent coverage of some of these apps, their current lack of users adversely affects the social value of their respective networks. With Facebook and Twitter already driving the lion’s share of social media status updates, and check-in functionality becoming a commodity, these EBSNs will need more than virtual badges and threaded conversation capabilities around events to drive adoption.

The “more than” is partnering with the leagues and organizations behind these events as well as the television networks with the broadcast rights. Being promoted by the events or built into the digital experiences of the broadcasts is the ideal way to drive mind share and user growth.  For this reason Tunerfish is best positioned of the group to succeed since it comes out of Comcast, which has the largest television subscriber base, and is in the process of acquiring one of the biggest TV network broadcasters, in the U.S. Being part of Comcast helped Tunerfish land its first promotional partnership with HBO when the service went live last month. Owning NBC could bring a lot more of these types of opportunities to Tunerfish. With an iPad app also in the works from Comcast, adding Tunerfish’s functionality to the application could automate the check-in process for millions of TV viewers across every television show and network available in the U.S.,creating an enviable interest graph.

There is hope for some of the other services as well. AdaptiveBlue, which has been around the longest, probably has the most robust underlying platform. The company leverages semantic technologies to generate social recommendations for its users based on their check-ins and ratings. By covering a broader range of interests than just TV shows and movies and strong platform usage resulting from its recently launched GetGlue iPhone app, AdaptiveBlue can create a much deeper interest graph than some of its competitors. Hot Potato could find early success amongst sports leagues as its founding team comes from MLBAM, the digital media arm of Major League Baseball. That being said, MLB, which is the most tech-savvy of all the major sports leagues, did announce it has integrated its own check-in functionality into its iPhone app just last week. Miso’s best opportunity for success is tied to the investment it took from Google Ventures last month. With the announcement of GoogleTV earlier this year, Miso should have the inside track in doing for GoogleTV what Tunerfish could do for Comcast- to be integrated directly into the television guide and discovery experience for set-top boxes.

What’s at stake in becoming the real-time conversation service and recommendation engine for television?

Over $400 billion in television advertising and on-demand video revenues worldwide according to a recent report published by media researcher Futurescape. As I’ve mentioned in previous posts and tweets, live TV event programming such as sports championships and entertainment award shows will only increase in value to broadcasters as produced, series-based programming becomes even more accessible on-demand in a non-linear viewing experience. Live television represents the best opportunity for advertisers to find and connect with an engaged audience in the present. Combined with real-time status updates, event producers and advertisers can receive immediate feedback from users on their TV viewing experience. This social feedback loop will be critical in delivering better television programming and advertising in the future.

With nearly half of Facebook users simultaneously watching television while on the site and Twitter showing its impact during the recently concluded NBA Finals and World Cup, it’s their game to lose at the moment as each brings a respective interest and sentiment data set that can add tangible value to traditional TV audience metrics. For EBSNs to succeed they will need to leverage Facebook and Twitter’s platforms as distribution channels, much like Foursquare did initially, in order to drive utility for its users and interest for their own services. By becoming the interface between users and their Facebook and Twitter accounts, ESBNs have an opportunity to get users to build sub-networks within their respective platforms that are unique and more valuable to those on Facebook and Twitter- once again, something Foursquare is starting to do with its own LBSN. The ultimate benefit in evolving a platform in this manner is that an event-based social network can become the audience and data provider to event creators and distributors as well as advertisers while delivering better programming recommendations and socially targeting advertising to its users in the process.

Whatever the eventual outcome, it will unfold live.

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Where Does Online Video Go From Here?

Google’s acquisition of YouTube in October 2006 was supposed to usher in a new era of opportunity for video creation, distribution and monetization that leveraged the power of the internet. Now, three and a half years later, the biggest benefactors of the boom in online video consumption have primarily been YouTube’s founders and investors as profitability still eludes YouTube and revenues are scant in comparison for most others in the online video ecosystem. With webisode creators closing up shop or changing business models, television networks removing or withholding their content from partners and distribution channels, and well-funded online video aggregators Joost and Veoh shuttering their businesses, what role will the internet play in the video content experience going forward?

Here are today’s realities:

  • Television will not go the way of the newspaper industry. Clay Shirky, an internet and media consultant and professor at NYU, recently suggested that the television industry faced the same disruption in its business models as newspapers are experiencing today. What he failed to acknowledge was that the production value of video content creation cannot be commoditized in the same manner written content can (Avatar didn’t become the highest grossing movie of all-time by cutting corners on cost). In fact the cable industry seems to be strengthening its position with consumers- delivering record audiences for sports leagues, including the largest audience for a single cable network event (last year’s Vikings vs. Packers game on ESPN) and the signing of Conan O’Brien to host his new later night show on TBS. This performance is leading advertisers to commit an even greater share of their television ad budgets to cable networks in the coming upfront season.
  • There are no free lunches for online video consumers. Cord-cutting is somewhat of a fallacy. While a lot has been written about the growing minority of consumers who have given up their cable subscriptions in favor of accessing video content over the web from the likes of Hulu and Netflix, the fact of the matter is that consumers are still paying their cable or phone company to access this video content over their networks. Though monthly internet access can cost a quarter of the price of a monthly cable subscription bill, as they say, you get what you pay for. Without the ability to watch live events (American Idol, Super Bowl, etc.), or specific content from cable networks (Mad Men on AMC, It’s Always Sunny in Philadelphia on FX, etc.), in addition to no quality of service considerations for video playback on the web (when was the last time you experienced buffering while watching television through your cable service provider?), we are starting to see stories about consumers who have given up on the internet-only video experience.
  • The internet will be one of several distribution channels, not a panacea. While many consumers expect to find all content online, and for free, these people tend to forget that television’s economics continue to drive the decision-making process for broadcasters. It’s for this reason I’ve previously suggested companies such as Blip.tv should look to traditional television networks to extend the distribution and reach for their clients’ webisodic content. With the launch of the iPad and associated apps from video providers, and discussions around broadcasters working together to build a mobile television network, the number of ways consumers will be able to access movies and TV shows will continue to proliferate. While this should drive additional content consumption opportunities for consumers, it will be done so on the television industry’s terms.

And tomorrow’s opportunities:

  • Delivering “DVR economics” will bring more premium video online. For television networks to get comfortable with making more of their content available online after its original broadcast, the revenue opportunity needs to be comparable to what broadcasters are generating from their DVR-viewing audience. This makes sense since watching video online and via DVR are both non-linear viewing experiences intended for consumers to catch-up on missed shows. This will be an important metric for online video services to achieve in order to be considered distribution partners for broadcasters and networks going forward. With online consumers showing a willingness to sit through additional advertisements and both Hulu and TV Everywhere expected to charge for certain content, achieving parity with DVR economics seems to be an achievable goal as the dual revenue model  employed by the television industry (users paying for access to programming in addition to being presented with commercials while watching that programming) proliferates into new channels. This could become a recipe for enabling virtual MSOs like Apple TV and others to gain access to television shows that haven’t been previously made available online. Over time a bifurcated business model could emerge between real-time and time-shifted viewing with different price points for each experience.
  • Social TV will be the key to enhancing the video viewing experiences. Because the internet is a proactive, lean-forward experience most of the time, it is best leveraged as a companion to live event broadcasts to create a social television experience. With more and more people spending time online while watching television there’s an opportunity for programmers to engage audiences by allowing viewers to share their experience with friends or other fans in a meaningful way, creating larger and more loyal audiences. Events such as the Grammys and Oscars have benefited greatly by combining the social features of Facebook and Twitter with live broadcasts. Apps such as Hot Potato and Miso have been launched to aggregate these types of experiences on behalf of viewers, though broadcasters are now developing these services on their own as well. Regardless of the social network or app being leveraged, these services should be incorporated into devices such as mobile phones and tablets, and not necessarily directly into the television set via TV widget platforms, to not inhibit either experience individually and allow any service to compete for audience attention.
  • Unified audience measurement will be paramount. While video ad networks have probably been the greatest benefactors of the growing online video ecosystem, with over $90 million invested between BrightRoll, TidalTV and YuMe in Q1 of this year and Tremor Media earlier this week, until there is a way to merge audiences across different platforms (television, laptop, mobile phone, etc.) online video revenues will remain insignificant in comparison to broadcast television. Nielsen announced a solution to address this problem earlier this year that is expected to be rolled out for the fall television season. Looking to make buying video inventory online comparable to traditional television, two different online video ad networks have partnered with third-parties to create  an online equivalent to Gross Rating Points, called iGRP, which is used to sell prime-time ad inventory, to match online audiences with that of traditional television. As agencies and advertisers get more comfortable with quantifying users online in a similar manner as is currently being done through traditional television broadcasting more ad dollars will continue to flow to online video. This will allow online ad networks to compete for even more upfront ad dollars during TV’s traditional outlay season.
  • Opportunities exist for online video technology providers- to an extent. Brightcove, founded before YouTube ever existed, is arguably the most well know enterprise technology provider to the online video industry. In raising a fourth round of funding recently, the company disclosed it expected worldwide revenues of $50 million this year. Considering the company already works with most major media companies, what does this tell us about the market opportunity for the most important component of the online video ecosystem? If you concur with Frost & Sullivan analyst Dan Rayburn’s estimate of $300 million in total revenues for online video platforms this year, then it’s not that significant. It doesn’t mean that Brightcove won’t have a successful IPO, it’s just that for the amount of capital the company has raised ($100 million) the revenue potential ought to be 10 times Frost & Sullivan’s estimates. That being said, companies that can automate content encoding (i.e. Elemental Technologies) and distribution (i.e. TubeMogul) across disparate platforms and formats, provide rights management (i.e. Widevine) across access points and deliver aggregated audiences and reporting for advertisers will have the best chance for success, though primarily through acquisition. Companies such as Akamai will be the biggest benefactors as they can leverage their public currency to add these services to their CDN delivery business, allowing them to move further up the value chain with clients.

Add it all together and where do we end up? Most consumers don’t differentiate between what content they are accessing, broadcast network television (ABC, CBS, Fox and NBC) or cable networks (Discovery, ESPN, MTV, etc.), since in today’s digital environment you need a set-top box from a cable, satellite or telecom company to access any television programming. The same will hold true for how consumers access programming tomorrow, be it over dedicated coaxial cables, wireless carrier networks or over the public internet. As such, consumers will have tiered pricing (as either a bundle, how monthly subscriptions are currently provided, or a la carte as Apple is attempting to do) that incorporates how content is being accessed (real-time or on-demand) and from where (television, laptop or mobile phone). Whatever the model, viewers will be able to interact with audiences around the content, creating a more fulfilling experience. Advertisers will benefit from better audience targeting capabilities already being used on the web today across all these viewing outlets with the added value of unified reporting.

While the nirvana of free access to all video content over the internet will probably never be realized (except for one-off cases like YouTube’s wildly successful live streaming of a cricket tournament) the internet will play a major role in improving the online video experience from both a consumption and monetization perspective.

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Nevermind the iPad, What’s Next for Apple?

Now that the long-rumored Apple tablet has finally been unveiled as the iPad, we can turn our attention towards figuring out what Apple’s next big product launch might be. Based on the evolution of the company’s devices, software and recent business discussions the answer actually seems pretty clear: Apple should build a true web-enabled home entertainment television experience- the iTV. Here’s why:

Apple TV has been a failure. For a company that loves to reference stats regarding the success of its products, Apple has been very reticent about the sales performance of Apple TV, repeatedly referring to the product as “still a hobby.” The device, which competes with over-the-top (video delivering over a broadband network and not through a cable box) offerings from the likes of Boxee and Roku, has not met with nearly the same success as other Apple products since its launch 2 ½ years ago- primarily because it functions as a peripheral device and not as an end-to-end Apple experience.

Apple’s corporate success has been built upon its desire to create elegant and simple user experiences around its products. The development of the iPad, iPhone/iTouch, iPod and Mac is entirely controlled by Apple from the moment a user turns them on to when the device is powered down. This allows the company to design products that tightly integrate the aesthetic design and functionality of the hardware with the software and services, making it intuitive and easy for consumers to use. All that users have to do is connect the device to a network (broadband or mobile- if even that) to get going. Apple TV on the other hand functions as a peripheral device within a broader television viewing experience that Apple does not have complete control over. This leaves consumers to deal with separate controls for Apple TV, the television set and potentially their cable set-top box, creating a very un-Apple-like experience from the integration of the hardware’s aesthetics, to the rendering of content on the display, to delivering additional value through applications.

iTunes has a robust video content offering. What started out as a music catalog for the iPod has grown to include podcasts, audio books and, most importantly, video content from television networks and movie studios. While the iTunes store has successfully been selling access to televisions shows and movies on a per unit basis over the years, there are persistent rumors that Apple is in discussions with these same video content providers to offer a subscription-based service through iTunes, mimicking cable’s content offering, but at a lower price point. Since the iTunes software is integrated with Apple’s operating system already, connecting it to an iTV device becomes trivial.

The AppStore already competes with TV and gaming consoles. One of the big trends at the Consumer Electronics Show earlier this year was web-enabled televisions that offer not only video streaming services over the internet but access to widgets through the likes of Yahoo’s Connected TV. With 140,000 apps on its platform, Apple has a massive head-start on potential competitive offerings from television manufacturers. With the iPad now expanding the opportunity for game developers while also providing a scaling solution for  apps currently in the App Store, Apple has become an even greater threat to traditional gaming consoles from Nintendo, Sony and Microsoft. By also leveraging apps or hardware, iPhones and iTouches can be turned into remote controls, enabling these apps to work in a more traditional television viewing experience as well as allowing for multi-user games to be played on a single screen, a capability that has been an exclusive feature of gaming consoles to date.

The iPad is a personal entertainment experience. While the iPad offers a great medium through which to consume a variety of content (apps, books, photos, magazines, movies, websites, etc.), because the display is only 9.7 inches it doesn’t make for a great experience when more than one person wants to participate. For an entire family to enjoy watching television or playing games together there needs to be a larger screen.

The iMac’s monitor is already big enough. Even though Steve Jobs referred to Apple as the largest mobile device company during the iPad’s launch event, the company still sells a fair amount of Macs. The current 27 inch display is large enough to already compete with smaller LCD and plasma television displays on the market today. The iMac also offers a great example of how Apple would approach designing-away the clutter associated with today’s television and gaming console cords and cables, creating a much more  aesthetic and desirable device for display at home.

With a complete line of mobile devices now available to consumers as well as content and app catalogs that render across Apple’s entire portfolio of hardware products, Apple will need to find new growth opportunities beyond its current line of ‘iProducts’ in the future. With internet-enabled televisions expected to be a $29 billion worldwide business by the end of next year, and with an average of almost 3 television sets in the over 110 million households in the U.S. alone, Apple can make a multi-billion dollar business out of home entertainment-enabled televisions- especially when you take into account the recurring revenue opportunity provided by video subscription services.

Considering Steve Jobs’ almost maniacal, hands-on approach to launching products, it’s doubtful that we would see a version of the iTV before January 2012. Until then Apple fans can enjoy the launch of the iPad and the evolution of Apple’s content offering in (hopeful) anticipation of a better home entertainment experience.

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Television Programming Will Require Better Discovery in the Future

The ability to access any television program or motion picture on demand is more of a question of ‘when’ rather than ‘if’’ as internet-based delivery of digital television (known as Internet TV or IPTV) is enabling a variety of companies to already offer converged video viewing experiences to consumers.

  • Cable & Satellite Companies. While digital television services have traditionally been delivered by cable and satellite providers, these companies have also been at the forefront of providing non-linear television and movie watching capabilities through digital video recording (DVR) and video on demand (VOD) services. Now the likes of Comcast, DirecTV and Time Warner Cable are joining forces to launch TV Everywhere, a service that will enable their respective subscribers to access their television content on the web.
  • Telecom Providers. AT&T and Verizon are leveraging IPTV to build the most direct competitive offering to that of cable and satellite television. These subscription services include DVR and VOD functionality while also leveraging internet connectivity to allow users to access social networking services and video content from web aggregators through their set-top boxes.
  • Device Manufacturers. Television sets, Blu-ray disc players, video game consoles and digital media boxes are all incorporating Internet TV into their devices to offer consumers alternatives to traditional subscription-based linear programming. LG is producing TVs and Blu-ray players with internet capabilities to enable access to certain video websites and services. Microsoft’s Xbox system is repurposing its broadband connection used for multi-player gaming to deliver a similar video experience while also extending the social nature of the console to allow gamers to watch shows and movies with other Xbox users. Devices from Apple, Roku and Vudu offer dedicated alternatives to traditional cable and satellite boxes, providing their own content catalog to consumers in some cases or partnering with other video service providers in others.
  • Internet Properties. Sites such as Amazon, Boxee, Hulu and Netflix are also leveraging the internet to provide consumers PC-based options for streaming and downloading video content as well as partnering with device manufacturers to extend their respective web offerings.

As set-top boxes and other devices become more powerful and broadband connections get faster, business models will be forced to evolve to address the control consumers have in a converged video experience. So what could slow down the adoption of on demand television by consumers? The actual user experience of finding and discovering programming.

Think about how people discover what to watch on TV today. We know what day of the week, time slot and channel a particular show is broadcast primarily through television marketing. During the airing of any show on TV the network providing the programming for that channel will advertise other shows within its portfolio along with the appropriate tune-in information (typically the show being promoted will be broadcast on the same channel on the same evening or in the same genre as the show you are watching but on another night). Word of mouth marketing from friends, coworkers, etc. fill in the rest of our content discovery needs. Now fast forward 10 years when channels and time slots in a converged video experience give way to on demand programming- how do we discover what shows and movies to watch and recommend?

Current discovery options, available primarily on video websites, are basic filters (find by name, genre, latest and most popular) associated with each site’s content catalog. Clicker, runner-up for audience favorite at TechCrunch50 recently, is trying to enhance this type of discovery by structuring the underlying data associated with video content across websites to make it easier for users to search for content as well as build their own playlists to watch.

TVGuideFiltering only provides a partial solution though. Recommendation engines that offer video suggestions to users based on particular attributes completes the discovery equation. Netflix believes in the power of recommendations enough to award $1 million to a team that was able to improve Netflix’s current movie recommendation results by 10%. While user preferences are the key to Netflix’s recommendation results, other attributes do exist. Word of mouth discovery through friends can be equally, if not more, effective. Based on the homophily principle that “birds of a feather flock together”, if your friends highlight certain shows and movies as favorites then you might be inclined to watch them as well. TV Guide, the original provider of television programming information before the internet existed, offers a web-based solution for discovery through association by leveraging Facebook Connect to allow users to access their social graph on Facebook to see what shows are their friends’ favorites.

Interestingly enough I’ve yet to see anyone combine the power of push and pull (recommendations and search filters) discovery into a single solution. The company that creates an intuitive user interface that incorporates both types of discovery mechanisms to enable the programming of a television has a tremendous opportunity to own the converged video experience across multiple providers or directly with the consumer. An internet company such as Netflix, which has distribution partnerships with video service providers, a large subscriber base and a recommendation engine, is best positioned to provide this type of solution. Some might consider Hulu an option, but it has focused its efforts on being a technology and web distribution platform up to this point. From a start-up perspective, Boxee, a favorite of the early-adopter community still lacks the service distribution partnership, established media relationships and easy set-up to be considered a serious threat in the short-term.

In an on demand environment television networks and movie studios face an equally daunting task regarding discovery- how to promote their content to subscribers. Recently launched Simulmedia is attempting to address this problem for media companies by better targeting users with on-air promotions through data mining. This methodology could easily be applied to a non-linear viewing experience that could really benefit networks and studios. Services that can leverage subscriber data to target users with the appropriate programming promotion will be important as audiences are only willing to tolerate so many interruptions while watching television. Each pre-roll, mid-roll or overlay that is used for marketing television shows takes away from potential advertising dollars that could be placed there instead.

Where networks will have leverage with audiences and advertisers is in broadcasting live events. Securing rights to sporting events, award shows and the like can mitigate some of the effects of non-linear viewership. Knowing the day and time when an audience will be watching television opens up a tremendous opportunity for timing the release of shows, movies and advertising campaigns around the event.

Regardless of whether a discovery solution being implemented for consumers or provides, in a converged video experience both parties have the benefit of leveraging various user and content data sets to create a more efficient discovery process than is available to us today.

Now if I could just figure out my remote.

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What’s the Next Act for Webisodes?

PoltergeistAs the online video market has evolved so has the content being made available on the web. Faster internet connection speeds and increased broadband penetration has opened up the ability for us to watch high-quality, full length movies over the internet. Combined with better, cheaper video recording and editing equipment, the type of content being created has also evolved from repurposing of Funniest Home Videos to the creation of original scripted video programming online- more popularly known as webisodes.

In 2007 there were three catalysts that brought attention to web series as a viable business opportunity (1) the popularity of Lonelygirl15 on YouTube (2) the launch of Vuguru by former Disney CEO Michael Eisner and (3) the airing of Quarterlife by NBC on network television. These events showed that industry newbies could gain notoriety and success from creating original video programming online (Lonelygirl15), Hollywood believed in the potential of the medium (Vuguru) and web series could make the lucrative transition to television (Quarterlife).

The result was a number of high-profile production companies receiving funding in 2007/08 to capitalize on the opportunity. The likes of Funny or Die, Katalyst Media and 60Frames were launched in conjunction with Hollywood elites Will Ferrell, Ashton Kutcher and United Talent Agency (respectively) while others such as Agility Studios, DECA and EQAL (creators of Lonelygirl15) were founded by Hollywood outsiders.

Fast forward to the present where some have already started questioning the long-term viability of webisodes, as the likes of ManiaTV (an early entrant in the space) and the aforementioned 60Frames have already shut down this year while other production companies have been sold or changed focus. While the economy is the easy excuse for what is troubling the webisode market, it has only served to expose the deficiencies in the business model faster.

The basic problem has been one of customer acquisition and retention. Actual show content and quality aside, without a sizeable enough audience to target, advertisers won’t spend the time or money sponsoring a web series. Thus, online video producers have two options for acquiring the necessary reach for advertisers:

Direct- spend money to promote a web series’ website to a potential audience. This can quickly get expensive, especially when you factor in that almost 2/3rds of a show’s audience does not return for subsequent episodes. That means additional dollars need to be spent on marketing to acquire a new audience and/or remind current viewers to return for future episodes. Without advertiser dollars to fund this acquisition or a portfolio of shows through which to cross-promote a new web series, additional funding is needed to build a sustainable audience.

Indirect- rely on YouTube and other video aggregators to drive their audiences to the web series content being uploaded onto their websites as well as provide the associated monetization. While this instantly provides a solution for both needs, audience traffic is greatly affected by site design changes and content owners only receive a portion (YouTube’s standard payout is 55%) of the associated ad revenues. Looking at data from the top 100 mid-tail video publishers on YouTube (many of which produce webisodes), on average they earn less than $50,000 per month from the site (assuming YouTube’s standard 55% revenue share and daily video views of 140,000, plus a generous 100% sell-through and $20 CPM on the ad inventory)- not a big enough business for most investors.

While there are plenty of webisodes that use a hybrid approach in combining these options, longer term this approach is inefficient. This is because the indirect channel undermines the goal, and dollars spent marketing, of the direct channel by turning a scarcely available product (with theoretically high economic value) into one that is widely available, thus reducing the economic value of each distribution point where the content is being consumed. Simple supply and demand is why ABC, Fox and NBC only make their videos available on their respective websites and Hulu.

So where does the webisode market go from here? The good news is that the opportunity will only continue to grow as video consumption habits evolve. The potential bad news is that traditional television studios might soak up most of this opportunity as the likes of CBS and NBC have started building out their own original online video presences.

For original web series producers that means they have two options: beat ‘em or join ‘em.

How to beat ‘em. Create a television network- for the online world. One of the main advantages that television studios have over a producer of a single show is the ability to aggregate TV show audiences on their network and spread the cost of customer acquisition and episode marketing Break_Originalsacross the entire content portfolio. Break Media is an example of an online property that has been able to successfully build such a network online. The company produces over a half-dozen webisodes that leverage Break Media’s network of male-focused web properties to deliver an audience to their original online video content. Because the company has built its network around a very targeted audience it has been able to differentiate itself, and thus thrive, in a YouTube-dominated market while providing some of the same video content (user-generated, 3rd-party webisodes and movies) experiences.

Another option is to compete on the networks’ terms by delivering webisodes to TV. Services like Boxee and even Hulu are providing web-based interfaces that are meant to be experienced through traditional television sets.  Blip.tv (the preferred video platform for web series producers, providing hosting, advertising, and distribution solutions) is taking this one step further by actually integrating its video platform into set-top boxes to allow Verizon FiOS users to view web video content through their television sets.

Blip.tvA truly audacious opportunity for Blip.tv, with its producer relationships, is to take the television delivery concept one step further and actually become a traditional cable television network. This would provide Blip.tv’s customers with direct access to the largest potential video audience out there and open up a new revenue stream in the process. This could be a lucrative opportunity while we wait for broader video consumption habits to evolve from today’s television network-centric experience to that of video on-demand over cable and internet.

How to join ‘em. EQAL has taken this approach by leveraging their online experience and success in developing original web series to help traditional television programs extend their TV show presences online. This makes sense, especially as it relates to primetime shows that do not produce year-round programming. Keeping fans engaged during the offseason, like NBC is doing with The Office, is more easily, and less expensively, done via webisodes. In the process of refocusing its business in this manner, EQAL retains its ability to work with multiple television networks while still retaining its ability to create its own webisodes.

Alternately, some networks like SpikeTV have decided to acquire webisodic content instead of creating it themselves and redistributing the videos on their cable channel. Having a show acquired is an all or nothing proposition for webisode producers, as the content needs to match with a network’s programming requirements. With only so many slots to fill in a daily TV schedule there will be many more losers than winners here.

Webisode producers- time to choose your story.

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