Online Video – Has YouTube’s Dominance Reached a Peak?

David Beisel wrote an interesting post today on his blog (Genuine VC), asserting that we may be entering the next phase of online video.  His post, titled “Has the tide turned for YouTube/Google? (comScore says so but doesn’t scream it) The next phase of online video“, references comScore’s latest Video Metrix in which YouTube lost share of the online videos viewed for the first time on record.  I agree with David’s view that this shift does mirror the trend we’ve seen over the past years in online content consumption patterns – with more and more content being consumed away from one-stop portals and toward more targeted/specialized content sites.  I also agree that there is no question that consumers are becoming more comfortable searching for, discovering and viewing content away from the staple online video destination, YouTube.

This is clearly just the first data point for what may or may not be a trend, but watching these numbers over the next couple months will serve as a good leading indicator for how the industry is evolving.  I also reccomend reading David’s post if you have a min – he provides a much more thoughtful view on this topic than I have here.

How the Web Was Won

Vanity Fair’s July issue contains an excellent piece titled “How the Web Was Won”. It provides an enlightening perspective on the history of the internet and how the web as we know it came to be. What makes the piece particularly unique is its format, a collection of personal accounts by many of the key people who were involved every stage of the internet’s development. While the post does not give any attention to the perhaps more interesting question – where the web is heading today?, I still think it is a must read. In the words of Winston Churchill “the further backward you look, the further forward you can see!”

There are too many good excerpts to post all the highlights, but here are a few teasers if you’re not already convinced to give it a read:

Jeff Bezos: audio commentary

Steve Case: We always believed that people talking to each other was the killer app. And so whether it was instant messaging or chat rooms, which we launched in 1985, or message boards, it was always the community that was front and center. Everything else—commerce and entertainment and financial services—was secondary. We thought community trumped content.

Howard Dean: The Internet is the most important democratizing invention since the printing press, 500 years ago. The Internet is remaking American politics, and the Republicans are in big trouble because of this. American politics is no longer a top-down command-and-control business, which people in Washington can’t get over. But it’s true. If young people want to get something done, they go on the Net. They find out some information. They find an affinity group—or if they don’t have one, they start an affinity group.

Vinod Khosla: Communication always changes society, and society was always organized around communication channels. Two hundred years ago it was mostly rivers. It was sea-lanes and mountain passes. The Internet is another form of communication and commerce. And society organizes around the channels.

AdMob Presentation on Mobile Ad Market

AdMob delivered a presentation on the mobile ad market at the Agency Summit in Austin last week (provided via iMedia). The deck provides some pretty interesting insights into the state of the (non-SMS) mobile advertising market. It is still early days, but some of the data they present highlights that the rise of smartphones is starting to have a real impact on mobile internet use. A few interesting data points:

• 40M unique mobile internet users in the US in Feb ‘08 (Nielson Mobile) – out of 87M who subscribe to mobile internet
• 23M US mobile subs with unlimited data plans in Jan ‘08 – a 35% increase from Jan ‘07 (m:metrics)
• This is still a small % of the 250M total wireless subs in the US, but the growth should only increase as device and network upgrades continue

To be fair, this is clearly a marketing piece for AdMob and some of the numbers presented have to be taken with a large grain of salt… For instance, the data provided on all of the trials only present %s and not the absolute numbers. This is likely because the absolute numbers for these campaigns are still quite small and in the experimental bucket for brands and agencies.

So while the mobile ad market is quite nascent, it is interesting to note how the carriers are approaching the market today. Last week at Reuters Technology, Media and Telecom Summit a group of carrier and advertising executives discussed the mobile ad market (Reuters article). They consistently described the market as too early to warrant significant time or attention. They note that ad inventory is limited and also fragmented between the carriers; so running significant ad campaigns within one carrier’s network is difficult to do with any scale. This is the point that I found to be particularly interesting, as it is reminiscent of how the online advertising market played out – eventually leaving the service providers completely out of the ad ecosystem. While there are obvious differences between the two markets, it does highlight how large public companies’ focus on short term profits inhibits their ability to innovate – generally leaving them vulnerable to the powers of creative destruction, rather than a driver of it!

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Clay Shirky on the “Cognitive Surplus” – 200 Billion Hours!

This is a must view for anyone interested in the internet and its impact on society… Clay Shirky is one of the clearest thinkers on the social, economic and human impacts that the Internet and emerging technologies have / can have on the world at large. The video below is from a particularly insightful speech that he delivered at the Web 2.0 Expo in San Francisco last month.

Btw – I’ve been reading his new book “Here Comes Everybody” and would recommend it to anyone interested in the implications of the participatory web. Many of the topics covered in the book aren’t particularly novel, but his clarity of thought is always insightful. I’ll try to share some of my key takeaways from the book here in the next week or two…

comScore’s April Media Metrix – Google #1 for First Time Ever

According to comScore’s April Media Metrix report, for the first time ever Google sites were the most trafficked on the web. According to Jack Flanagan, the EVP of comScore’s Media Metrix, “April was a very active month. Google took the top property position, thanks to continued search growth and rapid growth at YouTube.” This move displaces Yahoo as the long time leader in traffic. Is it just me or is there something prophetic about these numbers hitting the wire right after MSFT walked away from Yahoo and left the co to the devices of activist Carl Icahn? Feels insult to injury…

Anyway, a few other interesting data points in the report:

• Job sites surged as college students graduate and worries about the economy lead people to explore their options
• Turn (an NVP portfolio company) surged 10 spots to #32 in the Ad Focus ranking – now reaching 32% of the internet population – after first entering the top 50 in Jan ‘08
• Television sites showed large increases in traffic as new episodes aired, and the networks continue to focus on their web presence (note: CBS’s announced acquisition of CNet is for this same purpose)

Ad Rates: Declining Everywhere but the Long-Tail…

PubMatic’s AdPrice Index report showed some interesting (and gloomy) trends on the state of web monetization. Overall, their aggregate index for web monetization was down 23% from March to April. The report highlights the continued declines in eCPMs across all segments of the web. That is, except for one… “Small web sites” (what PubMatic terms sites with less < 1M pg views / mo) was the only segment to increase eCPMs from March to April (up ~9%). Whether or not this trend is a result of the rise in vertical ad networks and third party monetization solutions is unclear, but it certainly highlights the opportunity to win advertisers’ check-books by delivering a clearly segmented demographic (and selling your inventory doesn’t hurt either).

Other interesting facts… Verticals – Social networks were the hardest hit, dropping 47% m-o-m. Technology sites faired the best, holding relatively flat m-o-m, but were still ~10% down from January highs. Segments – not surprisingly, large web sites (>100M pg views) were the hardest hit segment, dropping 52% m-o-m.

Huge Boost for WiMAX – $3.2B into Sprint / Clearwire

WSJ reports that as early as tomorrow Sprint will announce that it has agreed to merge its wireless broadband unit with Clearwire. The new company has raised a $3.2B investment from technology giants, Intel, Comcast, Time Warner, and Google. These investments value the JV at $12B. While this is very much a diving catch save for WiMAX in the US, it does combine an interesting group of supporters. The key questions (as Om Malik astutely points out) are: 1) how this collection of investors, with divergent self interests in seeing WiMAX succeed, will be able to work together, and 2) if they are able to successfully roll out the service, how open will the network be? In the past these ventures with large tech companies banding together to deliver network services have not ended well (i.e. AT&T, Intel & IBM’s nationwide WiFi push in 2002).

With respect to the self interests of the parties involved, this is how I see them…

• Clearwire – WiMax has been losing the battle for the 4G technology standard to a competing technology called LTE. Although it is still in early development, many of the world’s largest operators like Vodafone, Verizon, AT&T and T-Mobile have come out in favor of it. Not surprising, as LTE builds on their GSM standard. So they are in dire need to cash to get WiMAX back in the US game.
• Sprint Nextel – the co is in the middle of a turnaround and after the continued failings of their WiMAX initiative and partnership with Clearwire last year, it can’t tell the Street that it is still planning to build a WiMAX network on its own. On the other hand, it would also be tough to scrap and write-down the effort altogether in the wake of the massive Nextel write-down.
• Cable operators – they want a way into wireless without having to make the risky bet all on their own. With more of their content being delivered over broadband that will be going wireless in the not too distant future, they need a way build a strong position in this emerging market.
• Google – no surprise that Google wants influence over a wireless network, so that it call easily offer its applications to consumers. More specifically, its search application accompanied by highly targeted, geo-relevant ads.
• Final comment – it’s been noted that Google has been buying up dark fiber around the U.S. over the past 6+ months (?). I wonder if that ties into the JV at all? It certainly could be of use…

In the end, I am happy to see WiMAX back in the running. Competition always benefits consumers, and I personally can’t wait to get my mobile broadband on!

Adify Acquired by Cox Communications for $300M

Adify, the self-service / white-label online ad network, has been sold to Cox Communications for $300M (according to a story by PaidContent).  Adify had apparently been out raising another round of funding recently, so it is not surprising that strategics entered into the process and that acquisition offers were part of the discussion.  But I am a bit surprised by both the ticket price ($300M!) and the acquiror.   Adify had raised a total of $27M (plus $4M – debt) over two rounds from Venrock, USVP, and Peacock(GE/NBC’s investment fund), so the investors made a nice return on the deal.

Adify’s platform enables other publishers / companies develop their own ad network – allowing publishers and advertisers to interact directly.  This provides media portals like Martha Stewart Living Omnimedia to create their own ad network and negotiate the ad rates and T&Cs directly with their advertisers.  This approach is another way to address the challenge of monetizing today’s increasingly fragmented online audience, and is an alternative to the vertical ad networks that we are seeing more and more of these days (Glam Media, Federated Media, Sportgenic, Giant Realm, Travel Ad Network, etc).  Both approaches are attempting to serve targeted ads to mid to long tail domains by amassing publisher ad inventory across numerous sites that attract a particular demographic or type of consumer.

While it does make sense for a cable company to get into this publisher centric ad network business, it was surprising to see Cox because Cox has very little online presence.  That said, it will be very interesting to watch what Cox does with the business, specifically as it relates to the recently announced Project Canoe – the national cable ad network…

Facebook Publishes a Guide to Viral Marketing

Facebook published an “Insider’s Guide to Viral Marketing“, which outlines how to effectively use Facebook – and more specifically, Facebook Pages – to market and brand your company, product, restaurant, band, etc. I didn’t find anything in the doc particularly eye-opening, but the key take-home is that you do need to manage your page and actively engage with your users if you want to derive real value (no big surprise there). And they naturally advise using Facebook ads to drive awareness (again, not a shocker).

But more than anything, I found it interesting to see Facebook publishing a “marketing guide”. There is no doubt that FB is continuing to build out its commercial value proposition via ads, pages, beacon, etc, but this is the first time I can remember them publishing a How To on leveraging their platform for commercial aims.

Big Shot Live: Online Contests + TV + American Idol / Model / Comedian / Athlete…

The recent traffic numbers for Big Shot Live (as reported by NewTeeVee) highlight an interesting (and somewhat compelling) approach to bridging the gap between TV and online video. According the company, six weeks after launch the site is doing 750K uniques and over 15 million page views per month. The site is produced by Madison Road Entertainment and is promoted by relationships with ~200 local CBS stations around the country.

The site works like this… Contestants across seven talent categories (Modeling, Singing, Dancing, Acting, TV Host, Comedy, and Sports) create profiles on the site and then upload their audition videos. Viewers in the community then vote on a winner for one category each day (so once a week for each category), and the winner is flown out to Hollywood where they are given a real life shot at fame and fortune – private coaching and auditions in front of a real Hollywood big wigs. The whole Hollywood experience is, naturally, captured and displayed back on the site for the community to see.

This is pretty gimmicky, but you can’t argue with the fact that creates an engaging user experience – that is, if you can activate a robust community around it. So how have they created this community? Through their relationships with ~200 local CBS stations. These local stations are telling their viewers about the Big Shot Live contests and their very own shot at Hollywood. This certainly affirms the site’s legitimacy to both contributors and viewers before a user is actually Acquired – making the conversion to Activation and then Addiction that much easier (the three As of engagement).

Madison Road Entertainment also just announced that is was going to spin off Big Shot Live as a separate company and raise $5M-$10M of private capital to launch its independent operations. The site itself could certainly use some investment, as the UI is fairly cluttered and clunky today. With regard to the business prospects… With Madison Road Entertainment producing, CBS, Entertainment Tonight and US Weekly promoting, FanRocket powering the website, I can only guess what the business economics are for Big Shot Live. But if they can get the business model to work, this becomes an interesting new approach to professional (or semi professional) online video content.

We are seeing lots of new models emerge these days, and this is certainly one of the more interesting trends going on in the digital media world today: creating engaging and differentiated video content that can attract a loyal following, while keeping the cost to produce this content low enough that online monetization can support the business model. There are a number of companies pursuing this opportunity in a number of different ways today. Some of the more interesting and notable examples of this have been: FunnyOrDie, MyDamnChannel, RooftopComedy, National Banana, Black20, Prom Queen, Operator11 and the site most similar to Big Shot Live seems to be Got Cast. It will be interesting to watch this new era of video content creation and distribution develop and see what model(s) emerge as successful / economically sustainable…