Understanding the Universe of Web Video

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As a proponent of user-generated content for over a decade, most visibly in my role as the chairman of MySpace, I see the next wave of user-generated content emerging in “made-for-the-Internet video.”

I’ve also seen the value of professional video production for broadcast television, having worked briefly in the Fox family. These experiences have convinced me that there is a widening gap between traditional and online video due to monetization and distribution.

Numbers & Incentives

Put simply, monetizing LonelyGirl15 isn’t the same as monetizing NBC’s “Heroes.” TV is losing its audience to the Web in droves … so while the big dollars are with broadcast, the tide it turning–quickly.

There is a significant disparity in the cost of producing “made-for-the-Internet video” as compared to traditional broadcast-ready video. Users on the Internet do not require, and I would argue do not seek, professionally-edited big budget productions.

Internet users prefer short, targeted and interactive content that either entertains or instructs them. Traditional broadcasters are trying to reach a broad audience while “made-for-the-Internet video” can be micro-targeted and directed towards niche audiences.

The key is providing financial incentives to this burgeoning group of content creators that are seeking avenues to create and distribute their content. We are at the beginning stages of building a system of financial incentives for amateur creators where they can be paid for their content based on its real time value.

As this payment system becomes wide spread, more creators will emerge and content will proliferate across the long tail of Internet media. This will broaden the economy for the entire online publishing industry and enable more creators to earn a living from their creations.

While we are in the early stages of this evolution, Demand Media has proven the viability of this model by creating over 20,000 “made-for-the-Internet videos” on Expertvillage.com These videos were all created by independent content creators for a very low cost and has received hundreds of thousands of views across the Web.

New Strategy for Content

The strategy has changed–the motto now is HIGHLY TARGETED/LOW COST production. The investment is made in determining what the audience wants and not necessarily the quality of the video production. The Internet is facilitating connections between creators and an audience independent of any intermediary. This interaction occurs in real time.

A video can be made with little time and money and through free distribution (i.e. YouTube or MySpace) you can reach a willing audience. If your content is truly unique and engaging, the viral nature of the Web can cause it to spread to millions of viewers in a matter of days.

Great examples of this include Will Farrell’s “the Landlord”, and Ashton Kutcher’s Adidas viral videos.

The definition of “talent” has evolved from traditional actors to anyone with a Webcam, mobile phone or video camera. The quantum shift is from traditional methods of broadcasting, where media companies determine what content viewers will see, to a “bottoms up” media world. On the Web, content is created by users and if it’s popular it will bubble up to the top.

Content now comes from everywhere and the audience insists on being able to interact. The new paradigm of emerging content creators is programming and re-purposing content for 3 screens (TV, mobile and computer).

This introduces a number of factors that are not applicable to traditional broadcast television-viewing medium, including technology, rating practices, attention span of audience, global licensing and diverse methods for generating revenue.

It also creates the potential to monetize content that would otherwise not scale economically to the television medium such as B-roll footage, outtakes, or niche content with a relatively small audience. While cable TV created the vision of thousands of stations to choose from, the Internet provides an infinite number of channels and individual pieces of content.

The Wild, Wild West

This emerging online video market is a “Digital Wild, Wild West,” where innovation will be rewarded handsomely. There are many moving parts and limitless opportunities. New companies are emerging daily with new ideas and solutions on how to fuel this marketplace, but no perfect solution has emerged.

We are all waiting for the “Google Adsense of video monetization” to propel the video market as it did with the text-based Web site market.

The WebVideoReport is an exciting publication that will help the leaders of this emerging market (all of you) define the rules for online video. As producers, syndicators, programmers and talent, you have the opportunity to bring traditional television creativity to the Web and to partner with technology companies that will lead the distribution and monetization of your content. There is no pure model yet, but it will be defined in the next 12-24 months.

The movement is happening now and its time to lead the discussion and innovation into an area you all know so well.

Richard Rosenblatt, Co-Founder, Chairman and CEO, Demand Media