Monday, October 08, 2007

Opportunity 1: Monetization

If there's anything that Internet video sites need to figure out, it's how to make money. Today, it's clear that the way to make money is through advertising, rather than trying to sell access to your content to viewers. You can either persuade viewers to come to your site, or place your content on popular sites where lots of viewers already go.

There are two reasons to distribute video content hither and yon:

  1. Drive viewers back to television screens, where they'll watch shows live or on a DVR, or
  2. Sell advertising on the video content.

If you're pursuing Scenario #1, all you really need are some bumpers at the beginning and end of the video to let viewers know the name of the show that they're watching, and when they can see it on television. If you're pursuing Scenario #2, however, you've got to accomplish several things:

  1. The advertising has to go with the video wherever it goes, and it should be very difficult to separate the two.
  2. The advertising should be updatable, so that if the video gets played six months from now, it plays an ad for a campaign that's running then, not a campaign running now.
  3. The video should be able to "call home," to provide at least basic information about when and where the ads were seen.

YouTube, VideoEgg and blip.tv have all deployed video advertising systems that can perform these three functions, but all three systems are "closed": Both the videos and the ads have to be served by the same company. VideoEgg and blip.tv are far more hospitable to independent video producers and sites than is YouTube, which really can't be bothered to negotiate with anyone much smaller than, say, Viacom. But, wouldn't it be nice to have a third-party solution that would perform all the needed functions without tying you to a specific video host or advertising network?

At IBC, I ran across a company called Adjustables (www.adjustables.com), with offices in The Netherlands and Sunnyvale, CA. They've come up with a third-party video overlay design tool and ad server that works with both Windows Media and Flash Video files. (A plug-in has to be installed into the Windows Media Player in order to support the Adjustables content.) Their product helps content providers to monetize their video content without locking them into one hosting vendor or ad network.

In short, the monetization opportunity is to provide a platform for producing and distributing in-video advertising that meets the three criteria described above, and that gives the content producer or Internet video site operator the flexibility to choose their own hosting services and ad networks.

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