Making money from user-uploaded video: Auditude, MySpace, and MTVNetworks

This is an important announcement, but it’s one that’s hard to understand if you don’t follow this business every day — I found that out last week when trying to speak to reporters who were having trouble with this. One reporter who gets it is Jessica Guynn of the LA Times. Her piece on Auditude, quoting me, ran today. 

The basic explanation goes like this: A viewer captures a clip of a Colbert Report segment and posts it to MySpace. Auditude’s system checks the clip against a massive database of clips and properly identifies the video as a Colbert Report segment from Thursday, October 30. Auditude checks that content against MTV Networks’ list of content that can be monetized, finds it is approved, then matches an ad to it based on who has paid to sponsor the Colbert Report. When that video gets viewed on MySpace after that, viewers see the clip, with an overlay from MTV Networks promoting the show’s website and airtimes, this is followed by a brief “sponsored by” overlay from the advertiser. MySpace gets to please its visitors, MTVNetworks gets promotion for its popular show, an advertiser gets an interested viewer, and some money greases everybody’s palms, from MySpace to MTV Networks to Auditude. Win, win, win and win.

The prior solution didn’t work. It involved trying to discourage posting of copyrighted materials by taking them down quickly but also by providing the same content in high quality directly from the content owner. For example, Tina Fey’s hilarious interview with David Letterman on October 17th to talk about Fey’s Sarah Palin impersonation, was posted by CBS the day after. It has since earned 156,339 views. But the presumably illegal posting from a random viewer of the same interview went up the night before (the same night as the interview) and has since generated 588,934 views, nearly four times as many (with a much lower quality clip).

Taking those successful videos down means they don’t do anyone any good. Making money from them is a better idea. 

This is really needed for the user-posted video market which up until now had no hope of every making real money. I say real money because advertisers don’t want to touch all the video genuinely created by average people, because: 1) it’s often inappropriate, and 2) no one knows how well it engages viewers. In contrast, professional content like the MTV Networks clips that often make their way onto MySpace are advertiser-friendly. Once we can monetize those millions of video views, there’s a chance that revenue will rush into that vacuum, helping the market hit its online video advertising goals. 

Long-term, this becomes a standard approach. More networks will sign on to work with MySpace, they do all their learning and experimentation. A few will also work with YouTube (probably CBS, which has always had a cozier relationship with YouTube than the rest) in the meantime. At some point, best practices evolve and YouTube lawsuits get resolved and this becomes a standard practice.

Google uses brain science to prove overlay ads work

Although this study was released last week in hopes of bolstering the case for video overlay ads, it actually comes across as a confession to the market: CPMs on overlay ads are not as good as Google/YouTube wants them to be. Now I’m not poking fun, because that’s generally the case with a new form of online advertising, especially one that’s competing with TV-like 30-second spots running on Hulu.com, which advertisers understand and are ready to spend big bucks on. But overlay ads are not popluar with advertisers yet. 

Google’s solution to this dilemma was to work with NeuroFocus, a recently acquired part of the Nielsen family, to measure how people respond to overlay advertising at the deepest level possible: in the brain. Or in the trail the brain leaves behind, namely the peripheral nervous system. It’s a topic I’m way into, but I’ll spare you the nerdy details. This is similar to work Innerscope Research is doing, which I blogged about before. 

If this is all too spacey for you, you better get used to it. You’re going to see a lot more of this going on as advertisers and content providers want to show that they are engaging people. Funny how we used to trust Nielsen audience numbers for that, and were comfortable assuming the rest. Not anymore.

The science is actually solid, in case you doubt that. It’s just not very scalable because each person involved has to be hooked up to a machine, so it will likely remain specialized and custom (don’t expect any NeuroFocus nightly ratings anytime soon). Innerscope reduces that burden a little bit with vests that make measurements relatively unobtrusive and communicate results wirelessly. But that still means there’s a cap on the likely number of participants that can be in a study.

What do you think about measuring the nervous system for engagement? Would you wire yourself up for a study like this? Have you?

Will online video ads hit $989 million this year?

In October 2007, my very smart colleague Shar VanBoskirk, a principal analyst serving Interactive Marketers, authored our 5-year interactive marketing forecast. For the first time, she was able to break out online video separately from display ads and other interactive marketing avenues.

I won’t give away her hard-earned insight here beyond saying that in 2007, our forecast pegged the online video advertising business at $471 million, at least half of which — in my estimation — came from the 2007 advertising upfronts, where the networks aggressively bundled in online advertising to keep the broadcast ad numbers from flattening.

This forecast for 2008 put the number at double that — $989 million, close to the magic threshhold of a billion. Throughout the year I have been asked whether we think the assumptions of the model have held up. My answer is no: some assumptions fell below expectations and others came in above, chiefly: 

1. YouTube hasn’t monetized its traffic effectively enough yet. This magic vein of cash has yet to be properly tapped. We saw an interesting interim announcement on how YouTube can add some cash through click-to-buy, but it’s really advertising that can bring in the dough once YouTube figures out how to make money without Viacom asking for all of it in the form of damages. Result: online video ad revenue not as big as you would hope.
2. Online TV is bigger than expected. Remember, watching TV online is something that in 2006, only 10% of online video viewers did. By the end of 2007, it was 24% (see the report “What It Really Means To Watch TV Online”), a number we did not have in time to feed Shar’s forecast. Looking at the increased supply of online video — most of it from Hulu.com which increased supply both in amount of content and the breadth of distribution — that 24% number should double this year.  

The point is that even though YouTube didn’t come through for us, online TV has certainly more than made up for it, largely because the CPM on those shows is so awesome, ranging from $30 – $60 on a CPM basis. 

As a result, we stand by this number. As part of the validation exercise, I went through the following logic (which is summarized in the context of other valuable online video statistics in my Online Video FAQs):

• In a typical week, 109 million hours of online video are watched.
• If every hour of video has an average of 10 ads in it (video or companion banner), that means that just over 1 billion video ads are served each week, a run-rate of nearly 57 billion ads a year.
• To hit our forecast of $989 million, the average CPM on the 57 billion ads run has to be $17.45 

The big assumption here is the number of ads per hour. For long-form content, 10 seems a tad high as a 45-minute episode usually has 6 ads. But add in another 2 ads for the whole hour and the possibility of a few pause ads and companion banners and the 10 assumption is reasonable. 

The real question is the CPM. For long-form content, that’s easy. For short-form content, overlay and companion banner ad CPMs can fall below a buck if sold as remnant inventory on an ad network. What do you think? Will online video ads hit this mark? Why or why not? What evidence do you have or signs do you see? I’m interested in your comments.

YouTube joins the online TV game late

As widely reported yesterday, Google is now going to add full-length TV shows to YouTube. It’s about time. Finally, we can all watch what we really want: MacGyver. See the pilot episode below. Actually, this episode has been online for a month already, and has amassed a whopping 1,023 views. Let’s give MacGyver the Rodney Dangerfield award for Least Respect For An Online TV Debut.

(Note about above video window: this is the pilot episode of MacGyver. But YouTube embedding doesn’t seem to work for full-length episodes so you may get a message saying the video is no longer available, even though it is. Hmmm, YouTube is playing a little catch-up to Hulu.com.)

This is one of those full-circle moments. Remember when the press erroneously labeled Hulu.com (before it was even called Hulu.com) a YouTube killer? This article I dug up from Reuters from March 2007 stopped short of saying “killer” but definitely pitched them as rivals. I went on record in that article disputing that idea:

“It’s not actually going to take away from YouTube because it’s as much about the social experience as the video. So YouTube is going to be fine,” said James McQuivey, an analyst with Forrester Research.

I stand by that statement. Clearly, at 5 billion videos a month, YouTube is doing just fine, responsible for 44% of all videos streamed in the US (according to that NYT article above, but probably closer to 25% of minutes, given the short nature of its clips).

But with the tremendous growth of Hulu.com, ABC.com, and the rest, it’s no surprise YouTube would finally give in and put full episodes on; in higher quality than normal YouTube fare; and with ads before, during, and after (what good are those? as Michael Eisner said on stage last week, “Those aren’t commercials, those are credits”). 

The question I got Friday from a major news outlet was: Can YouTube dominate the online TV space? It’s a valid question but the answer is this: No. 

Certainly not as long as CBS and its properties are the primary TV content featured. It’s not a knock — CBS content can rock — but CBS content is everywhere. You can see it on Joost, you can even come across it on IMDB when searching for “MacGyver” (which I’m sure you do nearly daily).  Oh, yeah, and on CBS.com.

The answer is still no even once other network content shows up there — which I’m sure it will eventually, remember Hulu.com offered itself to YouTube from the beginning, an offer which Google CEO Eric Schmidt smugly declined.

There’s little reason for people already on YouTube to interrupt the site’s social, clip-focused experience to watch a full-length episode. And if you hit the Web knowing you want a particular TV show, you’re as likely to go to its home page as you are to go to YouTube.

I’m not saying YouTube won’t stream millions of TV shows. It will. I’d guess at least 25 million in the month of December, roughly half of what NBC.com or a similar site streams in an average month. But it won’t dominate. So put it this way: YouTube won’t be a Hulu.com killer…

Add your thoughts: will you watch full-length episodes on YouTube? (Other than MacGyver, of course, which we know you’ve already watched there).

So YouTube Will Make Money With, um, Retail?

For those of us who have been waiting impatiently for YouTube to effectively monetize its traffic, it came as a bit of a surprise that the the most recent effort to cash in on millions of video views is, surprise, to sell MP3s and videogames. The official Google Blog announced this yesterday (with a teasingly apropos title, by the way, “I clicked to buy and I liked it”).  

It works like this: For content provided by EMI, Electronic Arts, and others, these partners will be able to add “buy this” links for sites like iTunes and Amazon. Easy enough.

Where this really gets cool is if the music labels use Google’s automatic Content ID system to identify and monetize when someone uploads a video with a label’s music as a soundtrack. 

Google/YouTube’s goal is to train content providers to think, “user-generated content=source of revenue” instead of “user-generated content=evil pirates who should be cast down to infernal realms.” This is the right idea. But, sadly, it’s not something content partners are excited about, precisely because rethinking UGC is tough for the media companies, whether on the music side or the video side. The anti-piracy vigil is strong, rightly so, but it’s also unreasonable from time to time.

The next step for automated Content ID is in video: once media partners allow Google to identify user-posted versions of its video content, they will hopefully see the wisdom in letting Google place some ads adjacent to or on top of the videos, sharing the revenue with the content provider. That’s when YouTube will really make money off these millions of viewers.

My son runs for president, or, does he?

If you haven’t seen this, you should check it out. It’s a gag video that also functions as a sign of things to come. 

 

Vodpod videos no longer available.

more about “2008 Election Coverage“, try this yourself at tsgnet.com

Lachlan — the candidate featured in the above — happens to be my one-year old. Don’t know if he’ll seek political office one day, but just in case, I inserted his name into this video so he has a track record of grassroots support.

I posted this because, despite how cheeky is it, it’s a handy example of one of the things that’s likely to come out of an OmniVideo world (for more on OmniVideo, the future of Video, read the What Is OmniVideo page). A world in which video is as flexible and malleable as the word processor made text and Photoshop made still images.

Video is only going to get easier to manipulate. The phrase “seeing is believing,” hasn’t held sway since Terminator 2 made a man turn into molten metal.

At least back then, that little stunt cost hundreds of thousands to plan, shoot, and add effects in post production. Today, with 30 seconds of work, I put a virtual tattoo on the small of a senior citizen’s back promoting a fictional campaign for my toddler. Wow.

SpiritClips.com — making money off Aunt Patsy

We all have that aunt, sister, or cousin — you know, the one who forwards every inspirational story or heartwarming photo of seals kissing she finds online (or that is sent to her by her network of women just like her). Mine is Aunt Patsy. And although we find ourselves deleting many of these emails without reading them, every once in a while, we get suckered into opening the email and either regretting we did or winding up with a tear in our eye.

Right? At least that’s what SpiritClips.com is banking on. This company launched in September with a simple mission: turn these sappy yet moving stories into short films that will warm your heart and hopefully get Aunt Patsy to subscribe to watch (and forward) as many of these videos as she possibly can. SpiritClips has produced a series of videos already and hopes to release a few each month into the deft hands of Aunt Patsy’s everywhere. Newsweek quoted me on the topic just a few weeks back, and I thought it worth amplifying my comments here.

Some valid criticism has been made pointing out that people don’t pay to watch video (unless you’re a laptop warrior buying iTunes videos for the road). Online video is free.

But that’s the whole point with SpiritClips. They don’t need millions of people to pay. They just need a lot of Aunt Patsy’s.

Fewer than a million will do nicely. One sly way SpiritClips hopes to attract more Aunt Patsy’s — they are inviting their audience to submit favorite heartwarming tales for consideration to be produced as high quality short films. A nice twist on user-generated content.

If you click here or on the picture to watch “Sally,” the flagship short film SpiritClips founder Rob Fried invited me to watch when he briefed me on his launch, you’ll see exactly what I mean. (Cool note: Sally is played by Rob Fried’s wife, delightful actress Nancy Travis, whom you may remember as the flighty mother in Three Men and a Baby among many other things.) This content isn’t designed for cool teens or oversexed males as so much of what’s online is. It’s targeted at Aunt Patsy, wherever she may be.

SNL does Sarah Palin, again

Just two hours ago I watched the second Tina Fey take on Sarah Palin. It was funny, not nearly as brilliant as the first one, which netted NBC a 7.4 rating in broadcast, but by the Wednesday after had scored 5.7 million viewers online through NBC.com, not including Hulu.com. Just in case you can’t get enough of the Palin/Clinton opener, here it is again in its glory. (Sorry I can’t embed it here, hulu and wordpress don’t get along.)

Curious to see how quickly NBC.com would post the new parody, I checked the site at 2:44AM ET (after it would have aired on the West Coast, but not before Hawaii and Alaska). Not surprisingly, it wasn’t there yet, but on good ol’ YouTube, it had already been posted twice. However, both posts I could find had already been taken down (the pink bar below shows the takedown notice, the video I tried to load is the third one down).

 Amazing how quickly those YouTubers can move. But also surprisingly amazing how quickly NBC (presumably with YouTube’s help) can identify and pull down the video.

Enough of this, I’m going to bed.

UPDATE, 8:50AM ET SUNDAY 

Just a few hours after Hawaii and Alaska have seen SNL and the clip has now been posted to Hulu and NBC.com. If last time the Palin sketch generated 5+ million viewers on NBC.com in a few days, expect this one to do half that, because it’s half as good. 

YouTube now has several dozen versions of the clip also playing. My speculation as to why they aren’t being halted by a takedown order: 1) most of them are of the “I filmed this by pointing a camera at the TV” variety, which makes the video harder to detect automatically using algorithms; and 2) so many people now know they can get a high quality version on official sites that maybe NBC isn’t as concerned about manually combing through the search results. The video I found with the most views only had 704 views as of this morning.