Internet video surged into the mainstream in 2006 with the explosive growth of consumer video sharing sites. The leader in the category, YouTube, became a household name, and everyone watched in awe as they were swallowed by Google for $1.65 billion.
But 2007 showed us that video isn’t just for aggregators—it’s fundamental to the Web. The last 12 months saw an explosion in video publishing across a wide array of websites. Video is becoming so pervasive that if you have a web property without video something is wrong with it.
The deep investment in online video publishing and distribution by media companies in 2007 brought a new category of online services into the limelight: Internet TV Platforms.
Internet TV Platforms, like Brightcove, give media owners the ability to control how video is published on their own sites and syndicated across the Internet. Rather than existing at a single destination, Internet TV Platforms underlie thousands of properties and brands creating economies of scale in technology, delivery and distribution.
As an example, Brightcove is now helping thousands of commercial media owners deliver hundreds of millions of Internet video streams to more than 120 million unique viewers every month through tens of thousands of websites. Using Brightcove, hundreds of major newspaper publishers, record labels, cable and TV networks, magazine publishers, and website owners became Internet TV publishers in 2007.
2007 was the year of the Platform. So as we walk into 2008, we have an Internet video market divided into two major groups: aggregators and platforms.
Aggregators bring consumers together at a destination. Three big categories of aggregators are shaping the Internet video landscape:
Consumer Sharing Sites
Commercial Video Portals
Platforms enable website publishers and content owners to build their own online properties, syndicate video to other properties and monetize their content. The relevant platforms for Internet video break out into three major categories as well:
Internet TV Platforms
Uber Ad Platforms
Before we look at how the new Internet TV ecosystem that emerged in 2007 will play out in 2008, it makes sense to dive a bit more deeply into each of the six major categories that define the market.
All three categories of aggregators share the same core business model which is to aggregate consumer traffic at a destination and monetize it with a variety of advertising strategies.
Consumer Video Sharing Sites
Consumer sharing sites are built around user-submitted video, although they are starting to embrace professionally submitted video. This category has largely collapsed into a handful of players, with YouTube the dominant force. Others in the space with scale include DailyMotion, Veoh and MetaCafe.
All of these sites are attempting to leverage their traffic into meaningful distribution opportunities for mid to long-tail commercial producers, though there are no major success stories in terms of revenue. The Consumer Sharing Sites continue to be plagued with the challenges of piracy and the low-quality of user-generated content. Some of the 2006 players have been shut-down and others are on the chopping block.
Commercial Video Portals
Responding to both YouTube’s growth, and the multiple challenges it presents to media owners, as well as leveraging in some cases existing audiences, a number of viable commercial video portals are emerging. Within this category there are a several different models.
In ad supported content, there are now destination sites and desktop clients. Both are starting to adopt a business model that is more favorable for media owners, which uses a 90/10 or 80/20 revenue split with content owners controlling ad sales and getting most of the revenue. The portals include MSN Video, AOL Video, Yahoo TV, MySpace TV, Hulu, and Comcast/Fancast. The desktop clients include VeohTV, Joost, Adobe Media Player (AMP) and Bablegum.
The other major model is paid content, and while that hasn’t gotten the same momentum as ad-supported content, the players in this category bear some mention. The three notable solutions are iTunes, Netflix, and Amazon, but there are many other players in this space as well.
As commercial content libraries open up in response to favorable economics and business deal structures, these outlets are becoming more important pieces in the ‘distribution toolbox’ of Internet TV. However, in a world of open distribution it will be difficult for the Commercial Video Portals to differentiate with content, so they will have to depend on experience, integration with other consumer services, or other means to create competitive advantage.
Social networks like FaceBook, MySpace, Bebo and iGoogle (with its expected introduction of OpenSocial-based features) are in many ways orthogonal to the Internet video market. But as these services become platforms, they are starting to emerge as viable outlets for commercial programming. Because they aggregate so much traffic, they’re hard to ignore for any publisher trying to reach new audiences. We expect they will increasingly compete with Consumer Video Sharing Sites and Commercial Video Portals as focal points for consumer usage of online video.
In many ways, the three relevant platform categories are completely different than the aggregators both in terms of their business model and how they are deployed on the Internet. Platforms run behind the scenes making it possible for content owners and programmers to build their own branded websites and control their own distribution and destiny. They operate in a business model that is almost always built around charging for usage of their service in one way or another. In 2007, platforms came of age and that sets up important trends for 2008.
Internet TV Platforms
Unlike end-user destination sites, Internet TV Platforms act as operating platforms for online video publishing and distribution throughout the Web. At their core, Internet TV Platforms allow media owners of all sizes to operate direct-to-consumer websites and syndicate online video to aggregators. These platforms gain scale and value as more publishers use them, and are increasingly able to act as hubs for distribution, advertising and programming strategies.
Brightcove helped to define and launch this category in 2005, and we have the largest scale of any player in this space. But the category really came into its own with in 2007 with several other players including thePlatform (owned by Comcast), whose primary focus is acting as a hosted asset management system and good ingest/output mechanisms, Maven Networks, an online video startup that has gone through several incarnations to get to its current state as an Internet TV Platform, and Move Networks, whose proprietary client-side player technology is used by several major broadcasters for delivering full-length episodes.
The second major platform category that gelled in 2007 is the Community Platform. Community Platforms like KickApps, Ning, Prospero, and Pluck make it easier to build branded destinations with deep community features including profile pages, comments, ratings, blogs, forums, and chats. Where the Social Networks build community at a single destination, Community Platforms let thousands of destinations develop around specific interests, topics, niches and brands.
Community Platforms are largely complementary to Internet TV Platforms, and we see most of our customers using both along with a Content Management System to build out their web properties. But there is some competition around the area of user generated content (UGC). Many of the community platforms support services for accepting video uploads from consumers or they integrate with these services from Internet TV Platforms.
Uber Ad Platforms
If you weren’t online in the spring you might have missed the buying spree that happened as the first generation ad serving platforms were bought up by major online media players. The flurry of acquisitions was part of a much larger trend around the development of what we like to call Uber Ad Platforms.
Google, Yahoo, Microsoft and AOL are the four big players in this category. They’re all focused on building Uber Ad Platforms that provide a one-stop-shop for access to ad serving, ad networks and all sorts of strategies for optimizing yield. The Uber Ad Platforms will deliver ads in every major format across every major medium, and they are waging a battle that will reshape the technology and media industries in fundamental ways.
The reason is simple: bits plus ads is a winning combination. We all spend more and more time with digital media whether that’s on a computer monitor, TV, phone, game console, radio, etc. and the ability to deliver ads in these environments has become a massive business that will continue to grow. By integrating across screens, ad formats, targeting capabilities and sales strategies the Uber Ad Platforms hope to control how the digital world is monetized and, of course, participate along the way.
The Uber Ad Platforms are just taking shape. While they come online, niche ad network and technology players are battling each other with either unique technology strategies or specific genre and category focuses.
Trends in 2008
As video content owners and website publishers walk into 2008, we expect several major trends will shape their strategies in the Internet video market.
Nothing about the Internet changes the fundamentals of media—value is created by controlling the content or controlling access to the audience. Media companies with established brands and new start-ups will continue to build successful branded destinations so they can control the access to audiences. We expect these destinations will leverage Internet TV Platforms, Community Platforms, and Ad Platforms to compete with the major aggregators by offering consumers a more focused and differentiated experience, including exclusive content, and by giving advertisers a better environment to build their brands.
Because of the power of the big aggregators to reach new audiences, content owners will continue to develop distribution strategies that place elements of their content library into wide distribution, in most cases with advertising attached. Because there won’t be a one-size-fits-all solution, content owners will depend on Internet TV Platforms to help them manage the complex policy and technology challenges associated with implementing Internet distribution strategies. They will use audience networks to bridge the gap between aggregators and their own branded destinations, which will make the web as a whole a much more interesting place.
To date the advertising focus in the Internet TV market has been on monetizing video streams. But this focus is both shortsighted and not nearly as effective as thinking about how to monetize audience. By developing audience-centric strategies, content owners will look for new ways to blend ad formats, insertion policies, and targeting tactics across pages, short-form video clips, long-form shows, and open distribution. While they are more difficult to plan and execute these ad strategies deliver greater yield and a much better user experience, which means better sustainability. These strategies will also take advantage of both direct selling and integration with Uber Ad Platforms.
One of the key insights from the last two years is that short-form online video does best when it’s placed in a context. The context could be created by pages in a website, comments from users, line-ups in a player, etc. Regardless of how it’s done, getting the context right means you can put the right video clips in front of a viewer, which makes everyone happy. We expect that contextual in-page video publishing will grow, and that it will be extended to slideshows and audio content as more and more rich media is brought out of silos and into the core of websites.
The explosive growth that has happened with the major network episode players, and the increasing access that consumers have to long form, high-quality video will push Internet TV closer to traditional broadcast TV, and widen the opportunity for brand marketers that covet the deep engagement created by a full-screen, immersive experience.
We’re definitely looking forward to 2008. We’ve been working closely with our customers and partners to define and develop new capabilities that will let our content owners take advantage of the big trends as they build their Internet TV businesses.
-By Jeremy Allaire, Founder/CEO & Adam Berrey, SVP Marketing, Brightcove