Arik Czerniak, chief executive of Metacafe -- a competitor to video-sharing sites like YouTube, Google Video, iFilm, Heavy.com and others -- wants marketers and ad agencies to tailor messages to the preferences of viewers of short-form videos online.
"Why not five-second video ads?" he said. "I would gladly put those in front of videos. But I will never put 30-second ads in front of videos. It's too much. It ruins the experience for viewers."
As video sites ride the popularity tide begun by YouTube, the ideas of Mr. Czerniak and others in the burgeoning community will likely be seriously considered by marketers. Metacafe began offering advertising space to marketers two months ago and is already running five-second ads from H&R Block. Mr. Czerniak said more are in the works and that he has had inquiries from Johnson & Johnson and many others, including "a big media company."
In general, Internet video services rack up minimal revenue today ($200 million in 2005), but market intelligence firm IDC estimates that by 2010, revenue for the category will reach $1.7 billion. Advertising will account for almost half (46%) of that 2010 revenue, according to a report this month by IDC analyst Josh Martin.
"When kids watch videos on the Web, they're not watching TV, so increasingly as their attention shifts from TV to the Web, advertisers who want to reach them will shift too," said analyst Rob Enderle of the Enderle Group. "The popularity of these sites showcases a change in audience behavior."
Still, the shift is slow-growing. While Metacafe and its competitors have begun taking ads, they live on their venture capital investments. For Metacafe, that's about $5 million to date from Benchmark Capital, Mr. Czerniak said. Also this year: Heavy.com got $10 million from Polaris Venture Partners, and YouTube scored $8 million from Sequoia Capital.
The 'old boys'
YouTube's success has spawned a raft of new viral video companies, but the "old boys" of the overpopulated category still dominate. YouTube, currently capturing much of the buzz thanks to run-ins with NBC over "Saturday Night Live" clips, is joined at the top of category by Google Video, iFilm, Heavy.com, and Metacafe.
The category's sudden popularity has brought scrutiny, investments and complications: Amateur video postings on YouTube and Google Video are forcing the sites to deal with daily copyright issues. IFilm got snapped up by Viacom and is working to fit into the MTV Networks division, while Heavy.com is previewing a slate of original video offerings that it wants to sell using a TV broadcast upfront model.
Metacafe is looking to carve out its own niche by going for the middle ground. The company wants to play in the space between user-generated content at one end (YouTube and Google Video) and exclusive or edited video selections at the other (iFilm and Heavy.com).
"IFilm is like a DVD store with a sharp owner who chooses which videos to put up on the limited shelf space," Mr. Czerniak said. "YouTube and Google Video are like huge hangars with files everywhere and people wandering around trying to find what they like."
Metacafe manages uploaded content with "collaborative filtering" by its own viewers to enable the best videos, posted by users or professional video-content providers, to bubble up. In addition, Metacafe draws an older audience than the teen popular YouTube.
According to Mr. Czerniak, the average Metacafe user is male, tech savvy, lives in an urban community and has an above-average income. Even more importantly for marketers, the average age of users is 35.
But can five-second ads ever add up to serious money? Mr. Czerniak's scenario: 150 million monthly video impressions with five-second ads at a $10 cost per thousand delivered randomly could bring in some $2.5 million a month. In his estimation, that's more than enough to qualify as successful.