Analyzing the Online Video Puzzle

    There’s something happening here. What it is ain’t exactly clear.
    –“For What It’s Worth” by Buffalo Springfield

Price Google paid for YouTube: $1.65 billion

Current YouTube revenue estimates for 2008: $100 million

You can do the math.

It’s often been said that online video is on the same growth curve as cable TV was in its early days. While it would be wonderful to see a kind of teleology on the rise of online video, the future is somewhat less clear than that.

Why? Because we, as an industry, are in need of metrics that can help advertisers understand the value they’re getting. Because the amount of education required to seize this opportunity comes down to more than touting how you can watch video on demand. We need to show how video is but one piece of a new kind of interactive experience that involves direct communication between content owner and viewer, as well as the viewing community writ large.

And while content creators from all walks of life, from user-generated wunderkind to Hollywood superstars, are churning out ever more content, they still seem to find the bulk of their payday coming from a back end that has yet to appear — and that is a position that simply cannot hold. When service providers start proposing tiered broadband or dig in their heels in opposition to Net neutrality, this highlights the very real costs of delivering content to the customer, costs that can be borne by VC or other form of subsidy for only so long.

As ClickZ’s new online video advertising columnist, I’ll be looking at the world of online video:

  • What forms of video are getting the most traction
  • How videos are being consumed
  • Whether there’s an unobtrusive ad unit that won’t turn off legions of video watchers and will allow the various participants in the creation, distribution, and marketing industries to pay their bills
  • What, if any, kind of mix from both a content and distribution point of view seems to yield the best results

Sometimes this mix is posited more as a battle of content vs. distribution, but there’s no clear winner when you pit those two against each other. When it comes to content vs. distribution, the answer is both, and nowhere do you find better proof of this than with the recent move to put “The Daily Show” and “The Colbert Report” on Hulu. Both shows have highly robust Web sites with the panoply of embed and share features. But in today’s disaggregated media world, they needed to find more viewers, hence Hulu. Without healthy distribution, even the best content won’t be successful. And the opposite is true: even robust distribution of dreck doesn’t work, either.

But here’s the exciting thing. Instead of seeing these pieces of the puzzle as hurdles to overcome, look at them as more tools in your tool belt, more levers that can be pulled, toggled, modified, dialed up, and dialed down to yield results. This is where the fun is. And trying to discover that mix and sharing those results with you are what fascinate me. It’s this mix I hope to be able to truly explore.

This being 2008, I’d like to make this as interactive as possible. I invite you to send in your questions, concerns, thoughts, and queries. This can be anything, from issues you want to see addressed and challenges you are finding in your work to clips, series, or Webisodes that make you click; a new technology that you feel everybody must hear of; or a revenue model that earned all its participants money.

Thanks for playing. Let’s have some fun. See you in two weeks!

Join us for ClickZ Specifics: Online Video Advertising on July 22, at Millennium Broadway in New York City.

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