The short form vs. long form video holy war

As a board member of a company in the online video advertising market (FreeWheel), I regularly get to chat with many video content producers, owners and distributors. Without fail, the fervent “holy war” between short form and long form video zealots arises as a top of conversation. Without getting into the nuances of the debate, the short formists argue that the web audience wants its video in bite-sized chunks, unlike a traditional television viewing experience. They inevitably point to the popularity of YouTube as evidence for their perspective. The long formists maintain that short form video only dominates online video viewing because long form content has been slow to come online. Of late, long formists have cited recent data from Nielsen that shows the growth in the online video streaming of Hulu. Neither side seems willing to open their minds to the possibility that there might be a little grey in their black and white worlds.

 

I’ve found religion and my faith lies with the availability of high quality online video of any length. The only thing that matters online, like across all media channels, is the value that someone gets from the content. There are vast audiences for both books and magazines, arguably the long form and short form, respectively, of the print world. On television, I can get my comedy fix from 23 minutes of Seinfeld or from short sketches on Saturday Night Live. Why can’t the same coexistence of content be true for online video? After all, I’m just as happy to watch two minutes of low production value Riegel & Blatt as I am 43 minutes of Lost in high definition because each video provides me with (very different!) entertainment value. Content producers should not be occupying themselves with discussions about the appropriate duration of online video. Instead, the path to salvation is will be found by focusing on creating quality content and on working to get that content distributed, discovered and monetized.    

 

 

 

Under the Radar Conference

My friends at Dealmaker Media are hosting their Under the Radar Conference on Social Media and Entertainment this Tuesday, June 3rd. They’ve been kind enough to offer readers of my blog a $100 discount. Be sure to attend as there is a stellar group of companies presenting. And please stop by and say hello if you’re there as I’ll be roaming the halls.

Dude, that’s so meta

In recent weeks, everyone that I have spoken with claims to suffer from some form of information overload related to digital media. As content creation has become cheap and simple for the masses, and the cost of building online businesses has dropped, the volume of online content, activity and communication has grown enormously. According to a recent Deloitte & Touche study, nearly half of all U.S. media consumers are now creating content for others to see. People are not only explicitly creating content for consumption, but they are also increasingly broadcasting their online and offline activity via services like Facebook and Twitter. All of this information has led to the development of “meta layer” applications and services to help consumers filter and organize information so that they can find and consume what is most relevant and timely for them.

Examples of these meta layers can be found in many areas. Digg and Google News are meta layers for news. Friendfeed and Socialthing are meta layers for social networks. Bloglines and Google Reader are meta layers for blogs. Mint and Wesabe are meta layers for personal finance. (Even ad networks have meta layers, such as Rubicon Project and Pubmatic.) Unfortunately, the challenge for online consumers remains. Seemingly, the number of meta layers will soon present the same problem as individual sources of information do currently. Further, these meta layers take varying approaches to filtering and organizing information for the consumer. Fine-tuned algorithms, wisdom of the crowds, trusted networks, expert curation, explicit consumer actions and implicitly derived interests are all techniques utilized by meta layers.

Ultimately, consumers only care about the value that they get from using a meta layer and not the approach taken to providing that value. Consumers will want many different filters for content but will want to control when and how content is filtered and presented. Networks effects will be the true differentiator that separates the winners in the meta layer wars from the losers. If a person extracts greater value whenever another person uses the same meta layer, both the value proposition and the adoption of the layer will grow exponentially. Depending on the meta layer application, scale in the user base can provide consumers with higher quality benchmark data, greater market liquidity, more relevant results or unexpected personal connections. I haven’t come across a meta layer that really provides differentiated value via network effects. Until I do, and despite the need for them, I’m skeptical that any single meta layer application or service will reach the critical mass needed to provide outsized venture returns.

Right message, right person, right time. Wrong answer.

I met with an entrepreneur late last week and he mentioned that he had read my blog (I didn’t believe him either) and that he was curious as to why I think online advertising will continue to be effective when all of the data shows that consumers are increasingly ignoring online ads. I realized that as much as I write about online advertising on this blog, I haven’t really defined what form I think it will take over the coming years to be effective. It turns out that The Cluetrain Manifesto had it at least partially right years ago. To paraphrase and to put in the simplest terms, marketing is about conversations.


The right message. The problem with online advertising to date has been that it has taken the form of delivering a one-way message and talking to a consumer, much like in traditional media. In today’s web world, consumers realize that they aren’t a captive audience. They are free to continue doing whatever it is that they came to a website to do, either by ignoring or skipping ads. That is why the “right message” doesn’t work any more. Online advertising in the coming years will be a dialogue between brands and consumers and amongst consumers themselves within the context of a brand. Widgets and dynamic rich media in various forms, such as games, review panels, and personal utilities, will take the place of banners and text ads (although probably not for search). Interactivity, community and engagement will be top of mind when developing campaign creatives.

The right person. The targetability and measurability of internet advertising will continue to improve. With so much anonymous and user-provided data available on the web to be used for targeting, finding the right person with whom to engage in a conversation will be easier than ever. Contextual targeting and the current approaches to behavioral targeting have not proven to work well in many contexts. Certainly, new targeting models will emerge and prove effective for discrete online environments.

The right time. The traditional purchase funnel (roughly defined as awareness, consideration, intent and purchase) isn’t such a straight and narrow path any longer. The idea of finding online consumers at exactly the “right time” in the funnel (again, with the exception of search) isn’t just difficult, it’s also outdated. The focus of agencies and brands will be in building relationships with consumers at all points in time, because on the Internet, information and influence is coming constantly and from all directions. The only way to rise above the noise will be to engage consumers in a sustained conversation using the new, rich tools available to marketers.

 

So what’s the right answer? Hopefully, the right conversation with the right person whenever possible.

Online media planners and buyers lost at sea

It’s tough to be an online media planner or buyer right now. Nearly every planner or buyer that I talk to is swimming in an ever-deepening pool of data and demands. Over the past few years, the number of publishers and ad networks vying for their attention has increased dramatically. Engaging audiences through advertising has become more difficult as consumers increasingly ignore traditional display ads. Reaching those audiences at scale is more challenging because consumer attention is fragmenting across a growing number of online properties. Finally, advertisers have become more demanding about efficient allocation of their ad budgets given the assumed measurability of online media and all of the various forms that online advertising can take (display, search, contextual, behavioral, CPM, CPC, CPA and on and on). All of this is happening while agencies come to the realization that it’s impractical to separate planning and buying from creative development for online advertising.

Despite all of this rapid change, the tools that agencies use to determine how and where to spend money are still largely the same as the ones that they used early this decade. comScore, AdRelevance and @Plan (the latter two from Nielsen//NetRatings) remain the standard tools that most agencies rely on for online planning purposes. Buying is still largely a manual, time-consuming process, despite efforts to streamline the process with products such as MediaVisor. And forget about trying to optimize creative or spend on the basis of actual business results or ROI. Without the emergence of more useful tools and services to aid agencies in planning, buying, measuring and optimizing, the share of ad budgets allocated to online media (7.5% today according to Yankee Group) will continue to lag consumption of online media as a percentage of total media consumption (20% today). Innovative products and services are critical to the many businesses that are counting on ad revenue to survive. New ad-supported businesses will have a hard time seeing ad dollars flow their way without help for agencies that are dealing with a flood of opportunities and data. Today, agencies use the approach of clinging to the sites and formats that they already know. The entire industry needs to help agencies (and advertisers) navigate increasingly turbulent waters so that they in turn can find and justify throwing lifelines (in the form of ad dollars) to fledgling online properties.

Fortunately for agencies and advertisers, entrepreneurs who have lived and breathed online advertising during its early years are now recognizing the opportunity to help address these problems.  VisualIQ, Quantcast, Balihoo and Covario are examples of companies that are attempting to provide more data to agencies and to increase the efficiency and effectiveness of their processes. I’m eager to see additional tools and services and the widespread adoption of them by agencies and brands. Only then will agencies, advertisers and ad-supported businesses be able to collectively withstand the waves of change that they are facing. Please let me know if you have come across any interesting products or services that help agencies or advertisers plan, purchase and optimize online media. All of us in the online media industry will sink or swim together!

Quick hits: Target, ad networks and the Super Bowl

I’ve been remiss in posting on some fascinating things that have taken place in the digital media industry over the past month. Fortunately, the two major reasons there has been a delay are because of closing an investment that we announced early this week and because of my total engrossment in the transformation of my New York Giants from playoff afterthoughts to Super Bowl Champions (which I’ll comment on below). I’ll do better going forward (I hope). Without further ado…..

Target and customer dialogue: Last month, Amy Jussel of ShapingYouth.org published a blog post in which she shared an opinion about a recent Target billboard advertisement. She also called Target several times, to which Target responded in an email by saying that “Target does not participate with non-traditional media outlets.” Now whether you agree with Amy’s perspective or not, I think we can agree that corporations are doomed if their response to feedback from customers, in any form, is to dismiss it outright. If Amy had written a letter or sent an email, would Target have responded similarly? My guess is only if the customer service representative wanted to lose his or her job. The impact of customer service on word-of-mouth, brand perception and profits can’t be overestimated, particularly in a digital world where switching costs are negligible and customer acquisition costs can be sky high. Emerging companies like Satisfaction and Bazaarvoice (a Battery portfolio company) are focusing on the dialogue between and amongst brands and their customers to create new commerce and service opportunities. Leveraging consumers’ increasingly visible and explicit perception of brands and products in this way is just beginning. In addition, we’ve already seen that the empowering of consumers via digital media can save television shows and change company policy. Undoubtedly, we will eventually see an online consumer uprising that results in a tumbling stock price and executive job losses. The companies that fail to take advantage of the availability of consumer data and to engage in an open dialogue with customers do so at their own peril.

OnMediaNYC and ad networks: I had the pleasure of speaking at the OnMediaNYC conference at the end of January. One of the major things that struck me coming out of the conference is the incredible challenge that advertisers and agencies face in sifting through all of the various media outlets and ad networks now vying for their ad dollars. And that is exactly why scale matters so much. With multi-million dollar budgets to deploy and limited human and research resources, advertisers and agencies can only purchase media in so many places. And the simple rule of thumb is to pay attention to the outlets that can provide them with the most reach. Until there are better research, buying and analytical tools (if you know of any, send them my way!) for them, advertisers and agencies will only spend time with the largest publishers and networks. The challenge then for the publishers and networks is to achieve the scale necessary to rise above the noise and get the attention of potential buyers. Too many of the ad networks that I saw at OnMediaNYC focused on nifty targeting technologies and whiz bang ad formats. Very few talked about how they intend to achieve the scale necessary to have advertisers and agencies even spend time learning about their approaches. There are well over 300 ad networks in the market today, but I expect that there will be far fewer that achieve the scale needed to survive over the long term.

New York Giants, Super Bowl Champions, and teams: As a life-long Giants fan, I was fortunate to attend not only one of the great games in Super Bowl history, but also a game that ended in an unbelievable victory by my favorite team. There are lessons for business to be drawn from many parts of life, but as I left the stadium that night I was struck by a particular message. It sounds flowery and obvious, but it’s worth reminding ourselves that a team of individuals committed to each other and to a common goal always have a fighting chance, even in the face of naysayers and accepted theory. As venture capitalists, we tend to place a great deal of emphasis on the teams with which we partner. The Giants’ Super Bowl victory reminded me that there is a reason that we seek traits like focus, persistence and commitment in our entrepreneurs and that we strive to give them the same in return. In our business, often times market opportunities are not obvious to outsiders or simple to address. But a determined team that believes in its abilities can sometimes achieve outstanding results, even while those on the outside criticize its ideas and approaches. Just ask the Giants.

 

Super Bowl XLII

Making a (belated) resolution to monetize social media

Looking back on 2007, I think that there is no debating that social media and user generated content were important components of the overall online media market and that they will only be increasing in significance over the coming years. After all, it has been fairly widely published that social media properties account for somewhere between 20% and 30% of all page views online and nearly 45% of all time spent online. However, advertising spend on social media is less than 2% of total online advertising expenditures. The poor performance of the monetization models that have been attempted to date is well documented. But I believe that there are a few models that are emerging that have the potential for success because they may do a better job of engaging and targeting the right audience. Of course, more compelling advertising creatives, specifically designed for the social media environment, are as important for engaging consumers as is the monetization approach.  

Here are a few models that I hope to see being tested by startups over the next few months. The models have potential for all types of social media sites, including social networks, media-sharing sites, virtual worlds, etc. 

         Leveraging the various types of data available from a social media site to target audiences, rather than context or page views, on the site. Clearly, the content alone from social media sites hasn’t been valuable enough information on which to base ad targeting.  But combining context with other data, including user activity, demographics and geography, and potentially even sharing that across social media sites, could yield strong results for delivery of advertising, commerce and content.

         Consumer endorsement of brands, products or content that begins by providing them with value from and control over the messaging initiated by them and their activities. Widgets and RSS are powerful tools to be used within this word-of-mouth-marketing model, which helps advocates and influencers spread the word about the things with which they associate themselves.

         Mining social media to better target audiences on non-social media properties. The participatory nature of social media makes it an incredibly rich platform from which to extract targeting data that is unavailable elsewhere on the web. This provides a unique opportunity for social media sites to share that data (in a privacy-friendly way) with other web publishers so that value can be generated for both groups. 

I expect 2008 to be the year in which clear monetization models emerge for the social media properties that experienced fantastic growth in 2007 (eMarketer has one or two forecasts of its own). My somewhat belated resolution is to support those companies that are taking innovative approaches to generating sustainability for a thriving, important and exciting medium.

The calm before the widget storm

After a summer where seemingly every article about the web and social media included discussions about widgets as the next big thing, there has been a relative lull in the widget hype during the fall. Given that widgets themselves are nothing new to the Internet, the period of calm should have been expected. Code and applications that can be embedded and executed in web pages have been around since the first page view counters and banner ad tags. More recent examples of “widgets” include Google AdSense, the YouTube video player and Facebook applications. But that is not to say that the whirlwind of widget press should be ignored altogether. The proliferation of social networks, blogs, media sharing sites, start pages, etc., are all indicative of an overall fragmentation of the web. Anyone interested in reaching consumers needs to be where they are, not where they want them to be.  The portability and interactivity of widgets enables the desired connection to consumers to be made simply and effectively. For that reason, and many others, what we are currently experiencing is likely only the calm before the widget storm.

 

When widgets first got the attention of the media, it was largely because of the novelty of allowing consumers to embed widgets in the same way that they were previously embedded by website owners. Companies such as Slide and RockYou established themselves as early leaders in the creation of widgets for consumers. Other companies, like MuseStorm, Clearspring and Goowy Media emerged to provide applications and services to enterprises for widget authoring, distribution and tracking. Over the past few months, each of these enterprise-facing companies seems to have reached the same conclusion….that an end-to-end solution, including monetization, is the best way to attack the market.

 

The market for banner ads provides an interesting model for the potential development of the widget market. Ad serving technologies became a commodity over time because they only enabled publishers to distribute and track banner ads. The authoring was left to agencies and the monetization was left to publishers and third party ad networks. The most value accrued to companies like Google, which provided all of the needed capabilities. Given that ad serving platforms are now embedded at most agencies and publishers, the preferred infrastructure for distribution and tracking is largely in place. The successful widget companies will integrate with and complement these existing systems by providing tracking, analytics and monetization capabilities that are unique to widgets. Consumer-facing widget companies will need these same capabilities internally to establish sustainable business models.

 

The recent monetization partnership announcements by Clearspring and KickApps may be early indicators of the maturation of the widget market and a flurry of economic activity around widgets. Like banners and search before them, and like video and mobile now, widgets are a new form of media that require their own infrastructure and monetization models. The companies that deliver those solutions will be the ones that survive the coming storm of widget activity and avoid being washed away with the widget companies that have not established a firm foundation for their businesses.

Building vertical ad networks to survive

Vertical ad networks have become all the rage over the past few months. The acquisition of Jumpstart Automotive, the pending financing round for Glam Media and the launch of network after network on the Adify platform have all contributed to rampant investment activity in the vertical ad network market. Within the past two weeks, there have been announcements for new vertical ad networks from Martha Stewart Living Omnimedia (home and lifestyle), Reader’s Digest (food) and BiggerBoat.com (entertainment). But the announcement that signaled the peak of the vertical ad network bubble for me came yesterday from NBC and P&G. If Pets.com was the peak of the e-commerce bubble, does a pets-focused vertical ad network signal the peak of the vertical ad network bubble?      

 

Historically, vertical ad networks have succeeded against traditional, broad ad networks because they aggregated a defined, highly desirable audience that could be purchased by advertisers through a single source. The focus of the networks allowed them to truly understand the audiences of their publishers and generate higher CPMs. Advertisers were provided with ease of administration and creative guidance for developing highly engaging ads. All of this worked well for the ad networks when there was a single one in each of a few high value verticals and when the only alternatives for publishers were either incurring direct selling costs or turning to a broad ad network. But the recent proliferation of vertical ad networks, and various ad networks in general, may have changed the dynamics of the business for the worse.

 

When it comes to changing ad networks, the switching costs for publishers have always been close to zero. In a market in which publishers have many ad networks to choose from, the ad inventory simply goes to the network that delivers the highest effective CPM (or provides the highest revenue guarantee). Furthermore, because ad networks don’t control the inventory that they sell, what is there today could be gone tomorrow. When a publisher reaches a certain volume of page views and unique visitors, it’s typically more economical for the publisher to begin selling ads directly. Over time, the ad network is allocated a smaller, less attractive portion of the publisher’s inventory. Further, advertisers look to buy media at scale. Publisher and inventory churn makes it increasingly difficult for a network to build and maintain the critical mass needed to attract campaign dollars from advertisers. In my view, it’s difficult for ad networks to build defensible, sustainable businesses if they don’t address these issues and do more than just aggregate audiences.   

 

I think that there are several potential strategies for creating a lasting, high-value vertical ad network: proprietary distribution, proprietary targeting, a portfolio of products and exceptional service. Proprietary distribution means either owning a significant portion of the network’s inventory or having exclusive access to it for a lengthy period of time. Google is so successful financially because much of its ad inventory, and hence revenue, is generated by Google.com and because advertisers can’t go anywhere else to buy that prized inventory. Proprietary targeting provides advertisers with a unique ability to select specific members or groups within the target audience for receipt of their ad content. When this targeting proves effective, advertisers are willing to pay significantly higher CPMs, which in turn generates more value for publishers. Advertising.com was acquired by AOL because it had developed a novel methodology for identifying which site visitors would be most receptive to the message of a particular advertiser. A portfolio of products allows a network to deepen the relationships with publishers. Publishers are then faced with having to forego value beyond monetization when considering whether to switch to another network. Web analytics, ad serving, content syndication and site search are all examples of services that publishers need, that they value and that could be provided by networks. Lastly, and potentially most importantly, exceptional service matters greatly in what is inherently a people-driven business. Decisions in the advertising business are often made based on established relationships, personalities and perceived commitment. No ad network can survive over the long term without dedicating itself to putting the customer, whether advertiser or publisher, first.

 

In today’s market, it isn’t enough to attempt to aggregate an attractive audience when your competitors are competing heavily for scale and dollars. My guess is that the majority of vertical ad networks that have launched in the past 12 months will fall by the wayside within the next 18 months because they haven’t established any true, sustainable differentiation. What are your best guesses for which companies will be the Pets.com, eToys and Webvan of the ad network category?

Setting free the Wall Street Journal Online

The entire online community is anxiously waiting for Rupert Murdoch to open the gates at the Wall Street Journal Online and provide free access to its content. At yesterday’s Web 2.0 Summit in San Francisco, he outlined his plans for the property, which included expanding national, international and cultural content to compete more effectively against newspapers such as The New York Times. As a long time subscriber who appreciates the both the quality and the breadth of the journalism, I am eager to see the Journal make the operational and economic leap to free content and execute against this vision.

 

I got a recent view into some of their plans via an online survey from the WSJ Online. What surprised me most about the survey was that the focus was on identifying packages of content and services for which I would be willing to pay (unfortunately, I didn’t think quickly enough to capture screenshots so this is mostly from memory). For the most part, the services mentioned were identical to many services that I can already get online for free, such as Digg, Techmeme and Google Alerts. The Journal’s differentiating assets are its journalists and its reputation/brand. Why try to use those assets to charge for content and services similar to what is available for free at established online properties? Given the decision to open up content, shouldn’t the goal be to provide increasing amounts of free content and drive as much traffic as possible to increase advertising inventory? Wouldn’t the WSJ be better off encouraging its loyal reader community to participate in conversations centered on WSJ authored or identified content, rather than charge it for accessing additional content? The New York Times already demonstrated through TimesSelect that only a small percentage of readers are willing to pay for additional content. Further, recent data suggests that opening up NYT content has led to enough page view growth to make up for lost TimesSelect subscription revenue.

 

I’m a firm believer in the advertising model for online newspaper content, so I’m eager to see the impact on WSJ.com traffic and advertising growth once content is indexed by search engines and increasingly linked to by blogs. The WSJ should free its content rather than spend time identifying ways to protect or generate subscription revenue through paid services that don’t leverage the Journal’s core journalistic strengths and loyal readership. If the new content and services are valuable, readers will visit the site and advertising revenue will follow. If the new products don’t strike a chord, no one would have paid for them anyway. Will WSJ.com make the leap headfirst or instead tumble towards the advertising-based model that is clearly the present and future of online content?