Online Video Site Defies Recession

OVGuide Reports First Profit, but Will Others Follow?

By Daisy Whitney

The online video directory site OVGuide.com became one of the first Internet television-related companies to go into the black when it posted a profit in January.

That milestone, a vital one for any business, is particularly critical in the midst of a recession, as corporate giants and small startups alike fight for their lives.

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OVGuide.com also landed $5 million in venture funding from Baroda Ventures this month, money that will be earmarked for growing the site’s traffic and usage.

Despite the broader advertising pullbacks in the television business and overall spending contractions, other Internet TV businesses are anticipating their first profits this year as well.

Web video destinations Veoh.com and Break.com, digital studio ManiaTV, Web show “DadLabs” and online video ad network Tremor Media also say they remain on track to meet previously stated goals of profitability in 2009.

OVGuide, which operates as a portal for Web video content, reaches 2 million unique visitors in the United States and nearly 5 million worldwide each month, according to comScore data. The site’s internal metrics place it at 15 million worldwide users, said Chad Cooper, the site’s VP of sales and marketing. OVGuide makes money by selling ads to marketers such as Warner Bros., NBC and ABC.

“We don’t ignore any deals,” he said. “Any incoming ad request, we see what we can do with it. When you get a lot of smaller ones, they do add up.”

Other key elements for OVGuide in reaching its financial goals have been selling directly to advertisers, working with ad networks to land additional ad money and peddling ad space against its international traffic via deals with international ad networks.

Because OVGuide does not carry videos, the site keeps 100% of its ad revenue. Most online video sites that carry videos split ad dollars with the programmer.

ManiaTV should turn a profit in the second half of the year, said Daniel Paul, VP of business development. “Our shows are profitable by design. We don’t put a show into production until they are sponsored,” he said.

Break Media CEO Keith Richman said his company is tracking ahead of its plan calling for profitability this year. Ad spending remains strong, falling in line with research firm eMarketer’s prediction of about 45% growth in online video ad dollars this year, he said.

Veoh should reach profitability in the second half of this year, said spokeswoman Gaude Paez. “In terms of revenue, every month is our best month yet. We’re seeing more brands coming on board as well as renewing campaigns with us,” she said.

The parenting advice Web show “DadLabs” broke even last month and should be profitable by the end of this quarter, said Clay Nichols, the show’s chief creative officer. “DadLabs” is sponsored by baby gear company Baby Bjorn at least through June. But the key to long-term financial success is bringing multiple advertisers on board, he acknowledged.

“Obviously it’s a really tough time to be going after ad dollars, but our particular niche—baby gear, parenting, consumer staples—is proving to be somewhat recession-resistant,” Mr. Nichols said.

His goals for 2009 include growing the audience through new distribution, such as applications for the iPhone, BlackBerry and Android mobile phones, as well as via a book being released in April.

Advertising targeting technology company Visible World won’t disclose financials, but the company said the number of targeted TV and broadband spots it delivers more than doubled in 2008 over the year before. Despite the recession, usage of the service was up 77% in January compared with the same period in 2008, said Tara Walpert Levy, the company’s president. Scale helps, because Visible World can deliver ads to 55 million cable homes and nearly all broadcast homes, she said.

But scale is not always critical for Web video businesses, said Fred Davis, a strategic new-media adviser to companies including YouTube, MySpace and Joost. “Although the macro advertising market is reeling, the demographic that companies such as MyDamnChannel and ManiaTV are trying to reach are still a very sought-after audience for advertisers,” he said. “And these companies are still in the growth stages of their evolution, so their revenue targets are realistic and achievable.”

However, technology firms that help other companies make money on Web video could have a tougher time, said James McQuivey, analyst with Forrester Research.

“They either have enough clients and enough of a margin that they’re profitable now and just need to sustain their client base, or they’re not profitable now and won’t have a chance to be for the next year. Those are the ones likely to drop out in 2009,” he said.