TelevisionWeek: What does online video consumption look like today, and what is the business model?
To make the analogy to the early days of the automotive industry, when there were 100 companies and 100 ideas for what a car would look like, this is a fertile period of massive experimentation and fairly enthusiastic consumer adoption. What will happen and what needs to happen is the emergence of standards. Not standards for the delivery of video, but standards for types of video programming, how they are classified in terms of appropriateness for various types of ads and how they are sold. Right now the biggest challenge facing the online video industry is business models, and how difficult is it to execute an ad campaign. Advertising is absolutely the business model.
TVWeek: What are those difficulties?
Mr. Geffs: You can plan a TV campaign for 3 percent of the cost of the campaign. But online, the figure is 15 percent and for video, it’s higher … The inventory is small and very difficult to project, and the planning and buying tools are still very much in development. Making a TV buy is essentially checking off boxes and sticking it on the fax machine. Planning and executing a video campaign online is like trying to organize a circus in an empty field. You have to get a lot of clowns and elephants to do a lot of things.
TVWeek: What sort of standards does the industry need?
Mr. Geffs: If you look at the TV world, it’s clear. You have prime time, early fringe and established channels. You call stations. A local rep. A national buy. When you look at how online video is bought, it’s, `Hey, we think we will have a lot of impressions, but we can’t promise it won’t be next to the co-ed waving to the world without her clothes.’ If you are a brand marketer, it’s very hard from a prediction standpoint and from a `Does my boss yell at me’ standpoint.
TVWeek: How does this get worked out in five years?
Mr. Geffs: In five years we have broadly accepted standards for how video is categorized. You have an inventory planning and order entry system on both the buy side and the sell side that makes planning and placing a buy not be 15 percent of the budget … The number of hours that have to go into planning a campaign that will be coming down and will release a large amount of money that will flow over from the $70 billion TV market.
TVWeek: There has been a whole slew of new funding announcements for online video companies. Put that in perspective.
Mr. Geffs: The old rule on Wall Street is “all things in excess.” Two years ago you could not get a nickel for online video, and Klipmart (which provides services to manage online ads) was in the wilderness crying out. Man, has it changed hard. Now there is overhype on the investment side and the fifth, sixth and seventh YouTube clone is getting funded, and they argue passionately that they have a critical difference. Overall, venture capitalists are bidding down their returns. As a group, investors who put money in YouTube will have spectacular returns, and those funding knockoff No. 5, No. 6 or No. 7 will have more modest returns.
TVWeek: What sort of shakeout will occur?
Mr. Geffs: It’s sort of like what will happen on the ad network side [online]. There are tons of companies that aggregate ad content and resell it, and there has not been a lot of M&A activity because there are so many … and the major acquirers are standing back to see which will emerge as a winner. Likewise, in the video aggregation space there will be a period waiting to see who merges, and there will be consolidation.
TVWeek: Is there a meaningful ad business for user-generated content?
Mr. Geffs: There will need to be mind-shifts on both sides and some accepted means of classifying content. And the sites will have to figure out what to do, because at the end of the day there will be a large group of advertisers who won’t run if you tell them they will be next to the topless kids at a party … there will need to be from the sell side some self-policing ways of classifying this, and on the buy side there will be shifts in mindset in terms of what is acceptable and what it not acceptable.
TVWeek: Is user-generated content a fad?
Mr. Geffs: By definition, most media is user-generated. The Internet now gives you a way to reach out and distribute that and have advertising. These videos existed before. They just weren’t distributed before … but there is value to the higher quality content over lower content. Advertisers will pay a premium to be near the higher-quality content.
Jul 31, 2006 • Post A Comment