Truth be told, online video is one big experiment. Nobody knows how it will ultimately work, but we do know this: TV ratings are deteriorating and online video consumption is soaring. That means everyone wants in. Fox, Google, Time Warner, Viacom, Microsoft and Disney are formulating (some more aggressively than others) online video strategies now, so that if or when the drought comes, they've got an online business in place.
It's a crowded space. Google-owned YouTube has a gigantic lead over competition, with an estimated 34 percent share of the online video market, according to comScore. Upstart Hulu, a joint venture between Fox and NBC, has loads of cash ($100 million in funding) and an enviable collection of content from major players, including MGM and Sony.
Veoh shouldn't be dismissed, though. Founded back in late 2004 by Dmitry Shapiro, the company has lined up some big-name backers, including Michael Eisner (former CEO of Disney) Tom Freston (former CEO of Viacom) and Jonathan Dolgen (former Viacom exec), as well as Time Warner, Intel Capital and Goldman Sachs. And unlike Hulu, which only carries content from major TV and Movie studios, Veoh has a decent supply of user-generated content in addition to a large library of broadcast and cable TV programming.
We hooked up with Veoh CEO Steve Mitgang, a former Yahoo and a longtime Silicon Valley veteran, to chat about where the online video market is going, if advertising dollars are following, and whether Veoh will go it alone.
Wired.com: Who do you view as competition?
__Steve Mitgang: __When it comes to success, the biggest thing I worry about is our own ability to execute. And I think we're doing a great job. It's about helping users discover great video to watch. I don't think any single competitor out there is making greater strides than we are. That said, I worry about YouTube. You've got to worry about Google, with its vast resources . . .
I like Hulu. I think there's a role for a narrow, walled-garden approach. AOL did pretty well with that 10 years ago. It's great for people who want to find pristine, studio-driven content. What they're missing is the fact that people don't only want to watch that.
I'll give you an example: I was out fundraising for the company a quarter ago, and there were a couple of potential investors I was supposed to meet with, so I looked them up online and found videos of them to watch. At that particular time, those videos were more relevant to me than watching 'Family Guy,' and I had to go somewhere other than Hulu to find them.
Maybe you have a bunch of climbers recording their ascent of Mt. Everest -- that could be more interesting to some people than watching 'Heroes.' You need to have both [user-generated content and studio-produced content] to be the video service of the future.
Wired.com: People always talk about YouTube's revenue problem and how challenging it's been for them to monetize traffic since big advertisers don't necessarily want their brands associated with low-quality videos. What do you think the problem is there?
Steve Mitgang: I do not believe that UGC [user-generated content] sites are a problem for marketers. I think 30-second videos are a problem for marketers -- it's pretty hard to run a mid-roll or a pre-roll [ad] on a 30-second video. YouTube has got to figure out a way to change a brand proposition -- maybe that means including longer videos -- and then you'll see a world of marketing opportunities unfold.
We don't understand where all that's coming from because we know people are buying [ads] on our site. And we know that if [any advertiser] wants to address Facebook and social media audiences, they have to be comfortable with user generated content.
You have to believe in audience targeting. If you know the audience you want to reach -- either because there's a profile based on video consumption -- say you're looking for people who love to watch sci-fi because they're technically forward thinking -- or if you want to target a behavior -- such as people who are searching for mobile phones -- the content doesn't matter. What matters is that the advertiser gets to the right audience at the right time . . . We're seeing great success with behavioral targeting.
Wired.com: Is your intention to go it alone? You mentioned you were fundraising -- are you satisfied with your funding or are you looking for more?
Mitgang: When we raised our last round of funding, we all agreed that want to make sure it was the last round we'd need -- we have plenty of cash to get us to our break-even point which is next year.
Wired.com: When would you expect ad rates online to catch up to broadcast TV?
Mitgang: I'll use CBS as an example -- they believe they're getting competitive rates today. If they're in the $20 or $25 CPMs online, that's actually very similar to offline rates. I wouldn't compare rates, though. I think what we all want to see is the day when the average marketer looks at this space as a core part of the marketing mix.
I think you've got a bunch of advertisers trying to figure it out early on so they can scale it. Once that happens, you'll see a lot more people in the mix.
Wired.com: Has it been challenging to get content providers to sign on?
Mitgang: I don't know that 'challenging' is the right word. The amazing thing about this space is that it's an incredible period of time. Content producers are trying to figure out what their future business models will be. I think everybody has very similar long-term views of the market. Some folks, I think, want to make sure they have more or less control over distribution. It hasn't been challenging to get [content partners] though -- there have been excellent discussions and collaboration.
Photo: Courtesy Veoh
See Also:
