Online Video: The Business Without a Business Model

As I looked down at my iPhone yesterday, I saw that three apps had been updated. For those keeping score, OpenTable, NYTimes, and foursquare were in need of some upgrading. At that moment, I had what I would call a minor epiphany about Web video and its future: there isn’t enough innovation involving performance, distribution, or creative.

While the iPhone and app developers creating iPhone content may go overboard with incessant updates, my last upgrade to 3.0 took the better part of 20 minutes. And that was to get a tool to cut, copy, and paste content. Money isn’t flowing into Web video because the opportunity simply isn’t compelling enough.

Since I began writing about Digital Video Advertising last year, Twitter has gone from a plaything for the cool, connected kids to a global productivity tool used by people from every walk of life. To put it plainly, I’m now more in touch with Martha Stewart (Martha @MarthaStewart) and how she can be a part of my life via Twitter than I am by going to Martha Stewart Living Omnimedia.

Even Facebook has righted its ship and seems to be a bit on the roll after Mark Zuckerberg and company had made missteps with advertising and had looked somewhat like a “me too” company. And though I’m loath to shower praise too easily, it seems that Jason Calacanis and his revamped Mahalo 2.0 are now cooking with gas.

The point is that, as with all things in our modern era, if it doesn’t work, and work quickly, change is necessary. Barring some cataclysmic change in the online video space, data suggests the sector will continue to creak along.

Because it isn’t offering anything really new, it will never break into the serious dollars that have been promised. Here’s some crack analysis published by the Business Insider that highlights many of the issues.

From a very basic point of view, the unceasing desire to replicate the TV model of creator, sponsor, production studio, and distribution hub is killing the future before it even happens. There isn’t enough money to be paid out to that many parties when the audience is finite.

Consider the news that Mountain Dew will sponsor Paramount Digital Entertainment’s Circle of 8 and it will debut exclusively on MySpace. While this announcement is exciting because it got done, it’s really just more of the same with less dollars and less eyeballs.

For my money, Alloy’s model, where a product and video is just a part of pushing that product out, feels more innovative, makes more sense, and is definitely the kind of synergy required to really get this business on a roll. Otherwise, we’re on the slow train to nowhere, working like dogs and going slowly crazy in the process.

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