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Essay: Ad Startups Turn Away from User-Generated Video

We keep on writing about startup after startup getting into the online video space, but we’ve noticed a somewhat disturbing trend: they all say they’re looking to monetize professional content.

Professionally made video has a lot of things going for it — assurance of copyright ownership, good indexing and metadata, and, of course, advertiser and usually viewer interest. But what about the loads of sites paying to host their users’ uploads and looking for a way to earn a dime? Surely there’s a market opportunity there.

Kiptronic, an ad insertion startup that announced Tuesday it was extending its audio platform to video, is rolling out with CondéNet as its marquee customer. Why not the bevy of small-time podcasters the company originally set out to serve? “The problems of monetization on the long tail, it’s difficult for us to convince brand advertisers,” Kiptronic CEO Jonathan Cobb told us earlier this week. “The best short-term solution for us is to bundle that content with higher-end stuff.”

Companies that serve both brand and performance advertising, like BrightRoll, tell us all the action is on the brand side, where advertisers seek placement on top-tier websites rather than matching against relevant user-generated content. (Disclosure: BrightRoll is funded by True Ventures, as is GigaOmniMedia.)

When we interviewed Digitalsmiths, one of many companies trying to peek inside videos to match them to relevant advertising, for an article about its $6 million funding round this week, we asked CEO Ben Weinberger the same question. “User-generated content is what a lot of people are viewing as the holy grail of video search,” he said. “Our focus is not there right now.” This with his two venture capitalists on the conference call. Again, Weinberger cited the “sensitivity of advertisers” as a limiting factor.

Clearly Google is getting into this market, what with the need to pay back its multi-billion-dollar YouTube investment. But I’m surprised players like Adap.tv (which in trials in gimme verticals like travel) YuMe Networks (which has also told us it is focusing on professional content) and Broadband Enterprises (which is even producing its own video shows to sell ads against) aren’t being more aggressive. The only company in the space I can recall not dissing the opportunity to monetize user-generated content is ScanScout.

C’mon, people, where’s the ambition?

24 Responses to “Essay: Ad Startups Turn Away from User-Generated Video”

  1. Vquence video search, sampling and socialisation tool has now had its public beta release! Down the track it will let UCC and professional content be monetised…in the interim have a play!

  2. Liz,

    all great points, and I wanted to offer a slightly different perspective in support of UGC AND “professionally produced content” (however this community describes network and other “pro” content creators).

    We are embracing all forms of content, including UGC, and Professional “top TV hits, etc” because we are looking at the holistic consumer.

    By looking at an individual consumer as the whole of their various consumption and demands (and habits), our system mirrors actual behavior of real people. As a longtime reader of Om’s papers (some of which I understand, some I admit that I am still catching up), we embrace the “chunk” theory of content he has long written about.

    A “chunk” can be a long-form Network TV show, like Grey’s Anatomy, or it can also be a short consumer created video, or even a consumer created ad, or it can be a highly polished (ok, let’s say “high quality”) from someone like Kara Swisher, for example. It can also be a music video from a studio or a garage band. It can be a video of one of Bill Tai’s friends like Pierre Wolf doing an acrobatic move on one of those Kite Surfing rigs on the SF Bay.

    In this sense, we collect “all” of the chunks that a consumer will accumulate, view and share, and create a holistic view of the consumer.

    This will naturally include a mix of UGC and “hits” (professionally produced content), and whatever comes in between. Some consumers will be more in one camp than others… through “discovery” and our “community” effect, lots of people who fall mostly in one camp will organically be introduced to some new forms of content… just as it is in “real life” at the water cooler and in the blogosphere “hey did you see the new Will Farrell / Pearl video?”)….

    Our approach allows us to do a lot of things that advertisers and publishers can’t do today, because they are stuck on what “the” content category is….(“if it’s UGC, then it falls into this targeting and CPM/CPA formula…”

    Because our system predicts behavior of an individual consumer in and around a “set” of content chunks (in addition to the usual baked-in contextual and behavioral data sets), we can boost CPMs and CPA rates of both types of content (UGC and Pro)….

    What the advertisers want is access to The consumer, not access to the content. Think of the drill bit. Nobody wants a drill bit when they buy one. They only want a hole.

    We provide the hole. Well, not really. We provide data that allows the advertiser and the publisher to work together to predict which consumers, around which bundles of content will act in ways that make the advertiser happy (high response and outcome ratios), the publisher happy (higher CPMs and CPA rates due to more defensible targeting and audited outcomes ratings) and consumers happy (more control of their content, more relevant and welcomed ads).

    Until others join us in approaching consumers holistically, the divide between Online Video that is “pro” (or Network) and UGC will widen to reflect the disparity between today’s CPMs of Network TV and UGC, and the poor folks trying to earn a living on thirty cents to seven dollars per CPM (those are real ranges) won’t be able to make it. That’s why you’ve noticed the big sea-change in the board room of these start-ups… the VCs are saying “follow the money” but they are only looking at CATEGORY CPMs and CPAs, not the holistic consumer. That’s the miss. We fix this.

    So unless they join us in this approach these great start-ups that were founded to address UGC run the risk of drifting into hobbyist and lifestyle or enthusiast portals, and the networks will bleed right over to Online with their CPMS and, incidentally, their tendency towards hedgemony, intact. They can’t help it–it’s in their DNA. They really, honestly, belive that they know what’s best for us. Anyone familar with how cable and satellite companies sell ad time will understand that they “package” their hit shows with their long-tail or “not popular” (euphamism for loser) shows. Buyers are stuck with the bundle. We hope that the Web breaks that concept into bits forever.

    Certainly EyeTMedia is hoping to help advertisers and publishers get out of that old model and out of those old “broadcast” traps that look at chunks, not at the holistic consumer.

    For example, I am happy for The Platform team but guarded about what Comcast has in mind, as far as openness and embracing the total consumer.

    But that’s another rant.

    Keep up the great work.

    There is yet hope to monetize Online Video! All of it.

    Stay Tuned!

    Matt Weeks
    Founder & CEO
    EyeTMedia
    http://www.eyetmedia.com

  3. I don’t know if it’s a lack of ambition as much as it’s following the money. I think Frank has the right idea; even if we don’t know exactly what the old TV viewers are doing online, it’s safe to assume they’re going to their PC’s instead. And the networks are finally putting two and two together and embracing online video, both by putting their content online and experimenting with user-generated videos. Smaller UGC sites tied into big media don’t need to monetize UGC because their revenues will come elsewhere.

  4. Re: the VIDEOEGG comments — it is because they are doing MORE than technology and pre-roll that they look like a winner. They are truly venturing into being a “network” vis a vis coordinating sponsorships for professional (or prosumer, or whatever you call it) content, as they did with THE BURG.

    Basically, they are adding the human-touch factor to fulfill the overall functions required by a network (sorry, but, technology will not be the final factor in success).

    Regardless as to what technology they have (who cares if they hire an Editor to glue ads to content, which was done, up until 2005 by those who preceded the current crop of players in the market), they will have advertiser relationships and an ad inventory they can push across the tail of UGC.

    Too bad the other “networks” aren’t as forward thinking.

    If anyone remembers VIDEOEGG (when they were in Rhode Island, or Connecticut?), they just had a clever transcode system, and they weren’t competing with the emerging networks like BRIGHTCOVE, REVVER, YOUTUBE, etc.

    I have no relationship with VideoEgg, and, don’t even run any content through them (yet).

  5. VideoEgg was previously using BrightRoll (which was mentioned in the article) for ads but I’d hope they’ve built their own thing by now. You’re right, I should check in with them.

  6. marc_again

    Ah! Clearly, this is NewTeeVee’s audience — this is what we’re all In Search Of…

    Monetization.

    The comment re: VIDEOEGG is spot-on — I don’t think it was by design, but, they have broken apart from the pack.

    Biggest problem is that NONE (with minor exception of VIDEOEGG dabbling in this area) are being pro-active in facilitating Professional or Prosumer content FINANCE that will be the Dog that Wags the Tail.

    Most of the new “networks” (which are really just ad serving technology companies who host UGC and Pro content as a loss leader) have utterly failed in grasping what a Network needs to do to succeed. They believe that technology and technology ad/content matching is the Holy Grail.

    In many respects, the question is: Do any of NewTeeVee’s readers care about UGC, if they are not in the Start Up ad serving business? Or, is the audience here (ok, sorry, “community”) REALLY PRIMARILY CONCERNED WITH MONETIZATION OF PROFESSIONAL AND SEMI-PRO content?

  7. Liz,

    First off, I think you’re neglecting VideoEgg which is taking on monetizing UGC head on and making some good headway.

    Secondly, I think that there are a lot of “shades of gray” between professional and user generated video. Its worth while parsing out some of the issues that separate the two; some of these have been mentioned above:

    Professional content tends to be able to guarantee no “Objectionable content” that would be problematic for an advertiser (e.g. hate speech, risque content, violence etc)

    Professional content tends not to have copyright/rights issues

    Professional content tends to have higher production values than UGC

    Professional content tends to have better metadata for targeting advertising than UGC

    IMO, the first two of these are show stoppers. The other two just affect CPM. So e.g. Diggnation, which comes close to UGC on production values and has limited metadata for targeting has no problem getting advertising.

    If UGC can address the first of these two issues, and can alleviate some of the concerns around the second two (especially targeting) I think that there is a path to monetization

  8. This is because most user-generated content has the reputation of being low quality in both production and content value.

    However, as more “prosumers” begin creating content that is as good as anything you see on TV in terms of production quality, the pendulum will swing back and the line between “professional” content and that created by independent folks will blur to the point of being unrecognizable.

    Tim Bourquin, Founder
    Podcast and New Media Expo
    http://www.NewMediaExpo.com

  9. Big ad dollars will go to big sites which are easy for media planners to place their buys on. Or the ad networks. But advertisers are experimenting with branded content that doesn’t run as pre-roll or on TV. Just as user generated content on video share sites. Think Never Hide Films for Ray-Ban and their success with “Guy catches with glasses with face.”

  10. @marc: I agree totally. But defining the terms is difficult as self-publishing collapses clear boundaries. I’ve been leaning towards ‘prosumer’ since first reading the term linked to video cameras years ago.

    There is certainly a large group of people in the world who dabble in video productions professionally, and are tempted by the idea of making money, yet have their feet firmly planted in the consumer market.

    And then there are Vlogs and ‘Internet TV’ — not just the talking head, cult-of-personality kind of vlogs, but purposeful, well produced, smartly edited media. By amateurs. Or, prosumers. Or professionals. Which is it?

  11. I agree with you guys about the more granular distinctions between what consitutes professional or non-professional content. However, we are talking about a world where advertising deals are generally transacted with hosting sites, and little-to-no indie video producers host their own video. What I am hearing from the ad startups, on the other hand, is that they want to provide their services to sites like NBC.com — where the binary distinction between pro and UGC is clearly ingrained.

  12. Also, Vlogs / Internet TV are starting to get some traction in terms of advertising – like Ask A Ninja! :) – because there is a regular show with a regular audience (i.e. predictability).

    We’ve actually been defining three categories:
    1) Viral/One-offs – this is the typical user uploading their home video (UGC).
    2) Vlogs – otherwise known as “Internet TV” where the video is episodic in nature (this area still requires a lot of definition, as there are many different types of vlogs).
    3) TV on the Web

    “Mainstream” has been dipping their toes into Vlogs lately with “minisodes” and “webisodes”, which are really just vlogs with a different name. The convergence of vlogs and TV on the Web is happening, much like the convergence of mainstream news and blogs has happened over the past few years.

  13. Maybe it’s time to start defining terms?

    “Professional” means you are looking to earn a buck.

    So, “User Gens” looking to earn money from ad revenue are folks looking to turn “professional,” right? “User Gens” who just do this for fun and games are by definition “amateurs,” not interested in earning money from their hobby…

    Advertisers like “professional” (maybe not mainstream, but, high production value and RELIABLE DELIVERY) because they base their media buys around Campaigns and need to know that their ad will have something to be glued onto; so, “amateur content,” that may be uploaded, or may not, depending on whether someone shoots, edits and uploads, or, instead, decides to hang at Starbucks and pick up Baristas is not a comfortable place for Advertisers to work.

    Why not let User Gen/amateur content just be ad-free? Advertisers will never be able to coordinate media buys with popular User Gen content, so why build the infrastructure?

    But, how about if someone builds an ad-driven (which may NOT mean Pre Rolls alone) network that can achieve what “old networks” achieved — the mechanisms to fund content production? That would be the tipping point for internet TV…

  14. Australian video search engine and socialisation tool Vquence will allow monetising of all content, user generated or professional. The public beta with authoring tool should launch in a couple of days…

  15. Interesting. Mainstream (i.e. “professional” content) is bleeding viewers, at least in terms of ratings and thatpeople are moving online to watch video. Are they moving online to watch the same shows they used to watch on TV? I’d like to see some statistics (neutral stats, not something funded by MSM) on if that is the case, or are they switching over to watch more UGC? I would guess it is a mix.

    In the end, advertisers will go where the viewers go.