Much-Humbled Joost Takes Its Pitch to Madison Avenue

Once-Cocky Company Asks Advertisers to Take 'Cold, Sober Look' at Site

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NEW YORK (AdAge.com) -- It's been nearly two years since Joost introduced the world to the notion of free, legal TV on the web, and almost as long since Joost became irrelevant.

The story goes something like this: The founders of Skype and Kazaa, Niklas Zennstrom and Janus Friis, invent a peer-to-peer network for watching TV online and manage to persuade CBS, Viacom and much of Madison Avenue to go along with the idea. The press participates in the hype by calling Joost a "YouTube killer."
Joost's catalog can't compare to Hulu's.
Joost's catalog can't compare to Hulu's.

Soon, however, Joost realizes it's misjudged the market by asking consumers to download bulky applications -- and misjudged agencies, alienating many with a too-cocky attitude. In the meantime, the market for online TV develops faster than anyone imagined, and Joost is blown away by the likes of Hulu, ABC.com, Veoh, AOL TV and the like, which quickly gain access to network and cable-TV content.

Not too many startups get second chances, but the upside to the hype was that Joost raised a lot of money -- $45 million -- and still has enough in the bank to fund a second lease on life.

Browser experience
After nearly a year in development, the company is launching a version of the service that works in a web browser, just like most of its competitors.

"In this day and age, when users have an enormous amount of choice, if you put barriers between them and the video, it makes it much more challenging," said Mike Volpi, who took over as CEO in summer 2007.

Joost will soon dump the peer-to-peer software it initially championed, but it hasn't abandoned the concept entirely. In addition to the browser-based version of the service, it will soon start marketing a plug-in that, once installed, will allow Joost to use peer-to-peer architecture to deliver live TV.

The technical hurdles of developing the new Joost were plenty challenging. But that's not the hardest task facing Joost. That would be going back to Madison Avenue a second time, hat in hand, and asking advertisers to take another flier on it.

"I remember meeting them, and they were exceptionally arrogant," said Lori Schwartz, senior VP of Interpublic Group of Cos.' Emerging Media Lab. "I have a lot of agencies and clients that feel that way. That's going to be a whole other problem for them -- winning people back and getting people to believe in them."

Scarce inventory
The good news for Joost is that while in 2007 it was trying to convince people a market would exist for ad-supported TV and other professional video on the web, in 2008, there isn't enough video to go around. In an environment of scarce inventory, advertisers are willing to pay even more on a cost-per-thousand basis than on TV.

Why? For the most part, advertisers are getting exclusivity within shows online and the greater impact of a sit-forward experience. On the web, the viewer has chosen that video and, by extension, the ad. Plus, ads on most online players, such as Hulu's and ABC.com's, aren't skippable.

Joost understands that the first thing it must do is acknowledge what happened in the past. "We are working on rebuilding credibility with the industry," said David Clark, Joost's exec VP-advertising and marketing. "We did not live up to the hype around the company at the time, but we have always been responsible in how we structure our deals with the industry. That has gotten us back in the door. Now we are looking for advertisers and agencies to take a cold, sober look at us and place a bet."

And despite history, the door is far from closed. "The market is mature enough to understand they were trying to break ground two years ago, and from a tech perspective, they didn't do it," said David Cohen, exec VP, at Universal McCann Interactive. "They made their mea culpas. It's new product and a new day. I'd be interested in what they have to say."

But has Joost learned its lesson? Part of the problem with the initial version of Joost is that 30% of visitors chose to abandon the site rather than download and install the application. Joost has eliminated that hurdle but erected another: It's requiring visitors to register.

Necessary 'features'
Registration will more easily allow Joost to achieve what it hopes will differentiate it from other services -- namely, new community features, personalized playlists and recommendations. It also allows Joost to collect the kind of data it can use to target advertising.
Joost CEO Mike Volpi
Joost CEO Mike Volpi

But even Mr. Volpi conceded that registration is a hurdle. Nearly 10% abandon the process. He said he'd like to come up with an offering appealing enough that just 5% opt out. Then the upside of having the data would outweigh the lost viewers.

Challenges for Joost abound. Setting aside whether it's too late to launch another web-TV play, Joost has a long way to go to get a catalog that's competitive with Hulu's. For example: Joost has plenty of Viacom content but not full length versions of "The Daily Show" and "The Colbert Report." Hulu has those, and Viacom executives say the company is looking to expand its Hulu deal to other shows.

Unlike Joost, Hulu does not have full-length CBS shows, but just about everyone else does, thanks to CBS's Audience Network, and Hulu links to those sites.

By the end of the year, Mr. Volpi would like to see 2 million unique users on Joost. Hulu, by comparison, had more than 10 million unique users watching 122 million videos in August, according to ComScore Video Metrix.

But in an environment where the networks are distributing everywhere, there is a strong desire to cultivate a strong No. 2 or even No. 3 player to Hulu, which is owned jointly by News Corp. and NBC Universal. "Content owners don't want to be stuck with one website," Mr. Volpi said. "This is natural business logic for them. Aside from the owners of Hulu, everyone else wants multiple points of distribution."
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