ChasNote

At O’Reilly Radar, Tim O’Reilly picks up the thread Chad Hurley started at Davos: How will the independent content producers share in the money YouTube makes off their videos? Tim suggests an analogy where YouTube is a video distribution platform like the Internet as a whole is for blogs; ad models (such as AdSense for Content at the low end, FM at the high end) will emerge that share revenues back with the original content creators.

“Right now, even Google hasn’t figured out how to monetize YouTube. When they do, I’ll lay odds that they will provide self-service mechanisms that content producers can use to monetize their content, with some kind of revenue-sharing arrangement, just like Adsense for Content. And from there, I’ll lay odds that it will be the content providers themselves who lead the charge, just as they have done in blogging. Entrepreneurial content producers will find ways to extend whatever mechanisms are provided, and will invent new ones. And they’ll do it in-band using the service mechanisms provided by YouTube, and out-of-band by becoming celebrities monetized in other media. And there will be a rich ecology of players who grow up to help with that monetization (just like FM Publishing (in which I am, incidentally, an investor) in blogging). FM shows the right kind of collective action: build shared infrastructure for business services that exploit the opportunities that the new economy provides.”

With FM already working with content types other than blogs — UGC platforms like Digg, Metafilter and Newsvine and video sites like Ask A Ninja and Revision3’s Diggnation — maybe FM itself, rather than someone “just like FM,” will help this new indie-video economy along!

Battelle reported last week on Chad Hurley’s comments at Davos that 3-second pre-roll ads might be coming to YouTube (Searchblog).

Yesterday Mediapost cited a Harris Interactive survey that said “Nearly three-quarters of frequent YouTube users said they would visit the site less if it started including short video ads before every clip…. Of those, 42% said they would visit a little less often, and 31%, a lot less often.”

Also yesterday, Google’s head of North American ad sales said (at the Always On conference) that YouTube won’t be doing pre-rolls (also Mediapost).

“‘We don’t believe in pre-rolls,’ said Penry Price, director of North American sales for Google, at an industry conference in New York. He said Google is currently testing other methods of serving video ads, including postroll ads and interstitials, but hasn’t yet settled on a monetization scheme for YouTube.”

From WSJ, reg required. Especially since I’m posting this three weeks after the Journal ran the story!

My pal and neighbor Jeff Daniel, CEO of Rock River, put together an excellent and innovative marketing concept for Chrysler and Ford: Podcast music programs with sponsor messages mingled in among the songs. Jeff compares the concept to the King Biscuit Flour Hour, the commercial-free block of classic rock that ran on radio stations in the 1970s and 80s, but the Rock River version is portable as an MP3 podcast. And — this is the new and noteworthy part — a major music label (Sony BMG) actually consented to let Rock River, Chrysler and Ford distribute their music as DRM-free MP3 files.

“Chrysler and Ford pay Sony BMG Music Entertainment — the joint venture of Sony Corp. and Germany’s Bertelsmann AG — a flat fee, which the companies decline to disclose, for the right to distribute the podcasts for a year, regardless of how many or how few copies are downloaded. Users can keep the programs on their personal computers or MP3 players indefinitely.”

In other words, Chrysler and Ford teamed up with Rock River to make first-rate, digital anthology albums (Rock River also makes the CDs for Pottery Barn and other retailers) that will be added to listeners’ music drives as a permanent addition to the playlist, singing the Chrysler and Ford jingles for ever more.

From Mediapost.

According to Nielsen’s latest study, viewers are watching video online and on mobile devices. Shocking! And Nielsen suggests advertisers run pre-rolls, a format that roughly follows the television formula (and, by the way, pre-rolls are easier for measurement companies to track). Shocking again!!

“Larry Gerbrandt, senior vice president, general manager of Nielsen Analytics, also made a plug for pre-roll ads in the report. Such ads ‘are potentially superior to existing models because they can take full advantage of the digital environment,’ he said in a statement. He also touted the ability to disable online fast-forwarding.

“But some in the online media industry disagree with him about both the benefits of pre-roll and whether forcing consumers to sit through an ad is a good idea. Google, for one, has gone on record as saying that pre-roll ads tend to make for a bad user experience. Too, Curt Hecht, chief digital officer at Starcom MediaVest Group’s GM Planworks, suggested at a conference last December that the less intrusive** post-roll format could ultimately become a more successful model than pre-rolls.”

**I’m not sure Curt is after something less “intrusive,” or rather a video-ad experience that has more impact because it’s more “integrated.” Integrated marketing works best if the brand fits naturally into the programming, whether that’s an opportunity for product placement (eg, “The official beer of Diggnation”) or a brand that’s open to working with the programmers around messaging (eg, Howard Stern-style “live reads” for Heineken). The collateral benefit of this is that it drives greater relevance – a better fit between the marketer and the audience – naturally; it’s very tough to make it work if the brand doesn’t below in that particular setting. The unsolved challenge, though: How do we make integrated video marketing scalable as viewership fragments across more and more programming choices?

The FT cites a Screen Digest study predicting that user-generated video sites will capture only 15% of online video advertising budgets by 2010, despite attracting 55% of viewers’ attention.

“Peter Chernin, News Corp president said at a recent conference: ‘We do not see big advertisers advertising with YouTube or MySpace. They have concerns about the content … and there is no scarcity value for the content … so there is very little ability to monetise video advertising on user-generated video.’”

Quite a comment from the #2 executive of the company that owns My Space!

From the WSJ:

“But now there’s a growing recognition among some record executives and performers that the people who are downloading illegally are frequently huge music fans and that marketing to them may be more desirable in the long run than suing or otherwise harassing them.Hence the alliance between Jay-Z and Coke. By inserting promotional material into the decoy files, and then planting those files prominently on file-sharing sites, record labels and other marketers can turn what is now an antipiracy tool into an advertising medium. ‘The concept here is making the peer-to-peer networks work for us,’ says Jay-Z’s attorney, Michael Guido. ‘While peer-to-peer users are stealing the intellectual property, they are also the active music audience,’ and ‘this technology allows us to market back to them.’”

It’s a funny logic: We still may sue them, but we admit they are our best customers.

The Center for Media Research cites a Telephia study on the growth of mobile TV watching:

“According to Telephia, researcher to communications and new media markets, the mobile TV audience grew 45 percent to 3.7 million subscribers in Q2 2006. The third screen allows consumers to get news and information while on the go, with news, weather and sports channels topping the list as the most watched mobile TV content. Total quarterly mobile TV revenues increased to $86 million last quarter, an increase of 67 percent since Q1.”

ABC News leads the pack among mobile TV watchers in Q2 2006, with 40 percent of the total mobile TV audience. The other leaders are The Weather Channel, Fox Sports, ESPN, Fox News and NBC Mobile News. Interestingly, Comedy Central — which skews younger than ABC, Fox or NBC among news watchers — placed behind the others, with 16% of the mobile TV audience compared to ABC’s 40%.

First, Kevin Rose lands on the cover of Business Week. Now, the site’s weekly video round-up, Diggnation, has won 2006 People’s Choice Podcast Award For Best Tech Podcast. Rock on, Digg!

Revver has built a cool system for inserting ads at the end of online videos in a manner that allows advertisers to select flight dates and enables content producers to monetize their hits by rotating in new advertisers at the audience for a particular clip grows (see AdAge). Clickable ads run at the end of each video. With the old approach — attaching a single advertiser to a single video clip — an unexpected viral success gave the advertiser a bargain but the content producer ended up underpaid for his or her work. Revver’s technology can even the playing field.
But I worry the model may still underpay the content creators. One, Revver takes 50% of the revenue, even when a viewer finds the video by way of the content producer’s own site; the content producer makes the content AND finds the audience, and only keeps 50% of the money? Two, advertisers are paying only when viewers click on their ads. This works fine today, while the technology is novel and the click-through rates are high. Say an advertiser pays $1 per click and 4% of viewers click through: that’s a $40 effective CPM! But if CTRs on ads in online videos follow the path of ads on websites, in email newsletters, on blogs and in RSS feeds — which all started in the single digits — they may settle somewhere below 1%. At 0.5% click-through, that effective CPM drops to $5, $2.50 to the content creator for every thousand viewers.

According to Hitwise (see Yahoo News), YouTube now serves 100 million daily video streams, but the revenue model is still under contruction:

“YouTube videos account for 60 percent of all videos watched online, the company said. Videos are delivered free on YouTube and the company is still working on developing advertising and other means of generating revenue to support the business.”

By way of marktd, I came across trendspotter No Man’s Blog trying to divine the essense of viral success by crunching YouTube’s most popular video numbers. The top 100 list includes:

“4 commercial ads – amazing achievement for Sony Bravia Balls (#34 with 3,466,011 views), but not least for Crispin Porter + Bogusky as all other three (!) commecials on the Top100 are the brilliant VW Pimp My Auto executions. Apparently we no longer need a TV to watch great TV ads…”

I wonder if YouTube is considering a market research business?