GoFish Says Game Over to Online Video

GoFish, a video aggregator with a complicated corporate history, is hightailing it out of the vid biz. The San Francisco-based company is refashioning itself as a vertical brand advertising network for kid-oriented casual gaming sites and virtual worlds. The video aggregation business is just too undifferentiated, explained a GoFish executive in an interview Tuesday. Because GoFish is public, the shift was catalyzed by pressure from its obligations to shareholders — a different kind of pressure than what other undifferentiated video portals would get from their money-bucket VCs. Also because it’s a publicly traded company, GoFish’s strategy shift is especially transparent.

GoFish found itself in a bit of a bind last year when it set out to acquire content and traffic by buying up video sites. Its first target was Bolt.com, a site that, post-YouTube acquisition, had a legitimate claim to being the largest video portal not owned by a public company. But page views weren’t enough to carry Bolt after it was sued by Universal Music Group. Six months after GoFish said it would pay $30 million to buy Bolt and settle the lawsuit, the deal fell apart. Not long after that, Bolt shut down its site and laid off all of its employees. And GoFish’s stock tanked, a drop from which it still hasn’t recovered.

“We ended up, in the eleventh hour, having to walk away from the Bolt deal,” said Tabreez Verjee, GoFish’s president and one of the venture capitalists who took the young company public through a reverse merger in 2006. Verjee said the deal fell apart because — in addition to settling with UMG — GoFish tried to come clean by cutting deals with all the other major music labels, but could not reach an arrangement it could afford.

Without Bolt, GoFish had no traffic. Without investor support, it had no money to pursue other deals. Hence the come-to-Jesus moment. “A video destination is just really hard to differentiate,” said Verjee. “It’s really far away from a must-buy for an advertiser or a must-go-to for a consumer.”

The company hopes to unveil its new strategy later this month; it’s adopted Bolt’s advertising relationship with popular casual gaming site Miniclip and is looking to tie up other partners. GoFish offered stock valued at $525,000 and guaranteed $4 million in 2008 revenues to clinch the Miniclip deal. Verjee describes the new business as “Glam for kids,” referring to the women’s advertising network with tremendous reach. GoFish already has some 10 million U.S. uniques in its network across the sites for which it has deals to serve ads, according to Verjee.

If you look to the income sheet, the strategy is paying off. After taking in $30,000 in the second quarter of this year, GoFish had $490,000 in the third quarter, and projects about $1.2 million for the fourth. Investors don’t seem to be responding yet, though, with the over-the-counter stock trading at 24 cents, well off its 52-week high of $6.10 when it first announced it would acquire Bolt. “There’s clearly a disconnect,” said Verjee, theorizing that the stock is still in the hands of investors hoping on a video strategy and disappointed by the Bolt fiasco. “It almost doesn’t matter what we do, they’re going to be sellers.”

GoFish has staffed up for its new venture, hiring Bolt’s laid-off sales team, as well as naming an entertainment veteran with a background in both tech and entertainment and a vertical ad sales guy as advisors.

“GoFish now has a strategy that is easier to execute than an online video strategy in the user-generated content space,” said former Bolt CEO Aaron Cohen in an interview Wednesday. Cohen, who is a GoFish shareholder, expressed regret about the squandered acquisition and said he has yet to decide on his next project.

Why is this news is coming out now? Again, blame the fact that the company’s public. Viacom’s MTV Networks took an equity stake in GoFish in December, getting stock valued at about $1.75 million for some 2 percent of the company*. That deal was in exchange for access to content from MTV, Nickelodeon and Comedy Central, as well a share of revenue generated from ads shown on that content, and was part of a larger MTV syndication initiative announced Tuesday.

But wait, isn’t GoFish getting out of the online video business? This deal sounds a lot more like the old GoFish than the new GoFish. Verjee rebutted that assessment by saying that access to Viacom’s content fits into GoFish’s longer-term strategy to distribute content bundled with ads to its network partners. “It’s a stepping stone for where we’d like to be, where we can license content not just for our site but also across our networks,” was how he put it. For now Viacom content will appear only on GoFish, but “the ability for us to distribute it to our other partners is something we’d love to do and we’re talking about.”

So what’s the lesson here? GoFish had a particular combination of public pressures, unforeseen circumstances and bad decisions that landed it in this mess. But deciding the online video business is not worth pursuing might also be the harbinger of a realization that could soon hit the private markets.

*Correction: We had previously said the share of the company was a much larger amount based on our interpretation of a securities filing. We apologize for the error.