Online Video Reaches McDonald's Numbers

If the industry can't figure out ways to monetize online video usage with the numbers shown below, then it may be time to return to the days of a few broadcast nets and 12 cable channels. A global reach and a diversity of communities of interest should find a number of revenue pathways.


Google Sites Exceed 10 Billion Video Views for August
comScore, Inc.'s August 2009 Video Metrix data shows that 161 million U.S. internet users watched online videos during the month of August,. That's the largest online viewing audience ever recorded. Online videos reached 25 billion views during the month with Google sites claiming 10 billion alone. The next most viewed online sites included Microsoft sites at 546,500 views, Viacom Digital at 539,500 and Hulu at just 488,300. •

Valuing Twitter

From Ad Age, a story that will be followed like a Tweet on Twitter. The recent investments in Twitter set a current valuatuon of about $ 1 Billion. While Facebook has recently announced membership that exceeds the US population and positive cash flow, the questions dating back to the last Internet bubble burst persist: how to measure value for new media platforms with significant, and global, users but uncertain monetization. Can advertising work, and if so in what format? Will efforts at contextual and/or community-soical media focused ads find acceptance or rejection? The potential for entities like Twitter and FaceBook is huge and compelling. Yet, not yet proven or by any means guaranteed. The past decade is filled with evidence of great new media hopes lost. The marketplace, technology and new platform ad possibilities have indeed changed, but the means to create, sustain and grow revenue lines remain largely undiscovered territory. But the exploration will, and should continue, because new revenue worlds can and will be discovered.

Here's the story:

Can Twitter Rake in the Ads to Justify $1 Billion Valuation?
With the Money Comes Expectation of Revenue; Microblogging Service Seems in No Rush Turn on Spigot
by Michael Learmonth
Published: September 28, 2009




NEW YORK (AdAge.com) -- The question about Twitter used to be, "Is it a business?" Now, the question becomes "How big can it be?"

And the answer is: It better be big. CEO Evan Williams confirmed last week that the microblogging service had finalized its new funding, reported to be $100 million, giving Twitter -- which now has no monetization program in place -- a whopping $1 billion valuation. Prior investors Spark Capital, Benchmark Capital and Institutional Venture Partners doubled down, and late-stage investors T. Rowe Price and Insight Venture Partners joined up.

With the funding, Silicon Valley and the venture community are once again setting their sites on the marketing budgets of American business to support another free "cloud" web service, in this case 140-word bursts of text. Indeed, they're counting on the exponential growth of advertising revenue in a flat market for a company that -- while certainly useful to marketers -- has yet to earn its first dollar.

"I think they can build some kind of ad business, but the more relevant question is can they build an ad business worth a billion plus dollars," said Warren Lee, VC at Canaan Partners. "That would require tremendous volumes of impressions and reasonable conversions. Lots of execution will be needed. Not impossible but unlikely."

The cash infusion (on top of $55 million already raised and the estimated $25 million Twitter has left in the tank), puts the pressure on Twitter to earn its first $100 million within the next year or two, and sparked cries of "bubble!" from the cheap seats, but that was true of AOL, Netscape, Google and Facebook.

'No precedent'
Yet Twitter is quite different. "It's the first one that's not a destination -- it's a distributed service," said Seth Goldstein, CEO of SocialMedia and investor in early Twitter backer Union Square Ventures. "There is no precedent for how to monetize it. "

Like Facebook, businesses already use Twitter to communicate with their fans and don't need to pay Twitter a thing to build followers or communicate with them. "What we see is a move away from brands using broadcast media to more engagement media," said Zephrin Lasker, CEO of sales-lead exchange Pontiflex. "If you have engagement on a one-to-one basis, extremely scalable, that's valuable."

Valuable to marketers, but is it valuable to Twitter? With the money comes an expectation of corresponding revenue, and while verified accounts, corporate services and analytics are interesting, advertising is the business that scales. While co-founder Biz Stone said there are no plans to start an ad business this year, it seems inevitable Twitter will be going toe-to-toe with Facebook in the ad market.

"What is interesting from an advertising perspective is the same thing that is interesting about Facebook: It is one of the only platforms of scale that has two-way messaging potential," said Michael Lazerow, CEO of Buddy Media, which sells ads on Facebook widgets. "But are they a $50 mil or a $1 bil business?"

Twitter could turn on revenue immediately, but appears to be in no rush to do so. Observers have, for example, long wondered why Twitter didn't start running contextual or keyword ads next to tweets, like Google. Twitter could run the ads based on the content of tweets combined with what Twitter knows about the user from their profile and registration details.

Outside factors
The problem with that is that more and more users access Twitter from third-party apps like TweetDeck or Tweetie not owned by Twitter, and those services, too, need a business model and may also incorporate advertising.

Mr. Stone said that ads won't come before 2010 and Twitter's early-stage venture backers have told Ad Age the ad business, narrowly defined, isn't that interesting to them. On its site, Twitter touts marketing success stories from Pepsi, Jetblue and Dell, which consist of the brands using the service to connect with fans.

The cash could allow Twitter to make some acquisitions; perhaps one of the URL shorteners like Bit.ly, one or more of the Twitter applications, or one of the many, many firms now making dashboards to manage Twitter for corporate clients.

With a valuation of $1 billion, Twitter's investors believe one or more of the following outcomes are likely: an IPO or an acquisition at a healthy price. Already Twitter has reportedly turned down bids from Facebook, Google and Microsoft.

The Mobile Market and ClickThroughs

The following story from the always excellent Center For Media Research and Mediapost.com speaks to the ongoing challenges of mobile media as an ad platform--at least as measured by click-throughs.

The evolution and integration of advertising with the mobile platform will continue, and the pathways to success may be unforseen today. However even as that model develops, the value of mobile as a way to maintain and expand brand connectivity will remain and grow. Mobile will become a part of the multi-platform revenue puzzle, but in a market with multiplying content choices using mobile as part of the branding and promotional puzzle is a key part of any plan today and tomorrow.

Here's the story...


"Mobile Internet Engagement and Ad Clickthroughs Out of Sync"


According to the results of research exploring mobile Internet engagement levels among smartphone owners, as compared to owners of other devices, InsightExpress found that 68% of smartphone users reported feeling positively engaged (enjoyment in activity) while using the mobile Internet, second only to the 70% of users who were positively engaged while on a computer. Alternately, only 47% of feature phone users reported positive mobile site engagement.
When mobile Internet users were asked to identify the top three elements that most influence their decision to return to a mobile Internet site, they reported:

•The speed at which the site loads
•The ease of navigation on the site
•The quality of the content on the site itself
Among mobile Internet users, several small but telling differences were revealed when comparing smartphone owners to feature phone owners, says the report:

•Both groups prioritized the speed at which a mobile site loads,
•Smartphone users looked next at the quality of the content, ranking ease of navigation as less important
•Feature phone users found ease of navigation almost as essential as their number one concern, how fast the mobile site loads.
Mobile Web site features that had the least impact on a users decision to make a return visit were the absence of advertising, the ability to personalize, and the number of links, videos or images on the site. Publishers will likely welcome the news that the presence of advertising on a site does not lessen its appeal, concludes the study.

Joy Liuzzo, Director of Marketing and Mobile Research. "Mobile advertising presents a unique opportunity to take advantage of high engagement levels and less clutter on the pages... advertisers enjoy a large share of voice per page since there is often only one advertisement on the page and it takes up more screen space... "

And, an almost concurrent study by Chitika of mobile vs. non-mobile Internet usage, based on a sample of 93 million impressions, mobile users are approximately half as likely to click on an advertisement as non-mobile users. Non-mobile held an 0.83% clickthrough rate, while mobile as a whole pulled a mere 0.48% - just over half of the average.

It appears, given the numbers, that mobile users are not receptive to advertising. This phenomenon that is not surprising, concludes the report, given the mobile users' propensity to be searching for quick answers or directions.

Of the five major smartphone operating systems, iPhone ranked the worst for clickthrough rate at 0.30%. iPhone also accounted for the bulk of mobile hits, at 66%. The group which clicked on ads the most is the "Other" group, comprised mainly of BlackBerry users and a small handful of other phone operating systems (including Symbian, Nokia, and HTC).

Mobile Internet Browsing & Clickthroughs

Smartphone Systems
% Hits
Clickthrough Rate (% of browsing, rounded)

iPhone
66%
0.30%

Other
24
0.92

Windows CE
2
0.61

Palm
2
0.89

Android
6
0.45

Total Mobile

0.48

Source: Chatika, September 2009


The clickthrough rates, says the report, are certainly lower than expected, given the industry's general consensus that mobile users are more likely to click ads. Possibly, concludes the study, because the ads displayed on mobile devices are the same as the ones displayed to non-mobile, rather than comparing standard online advertising with mobile-oriented ads.

However, concludes the report, though "... (though) mobile accidental clicks are more relevant than in non-mobile ad serving, it appears that mobile Internet users are disinterested in advertising at an extremely high rate... "

To review the Chitika report, please visit here, and to read the InsightExpress release in its entirety, please go here.

Start-Up Lessons

Start-Up Marketing Surprises: Lessons Learned From An Economic Storm

Over the past several years, I have written about my experiences consulting with start-up companies in the linear and new media/digital markets. Most recently, I have learned surprising lessons which changed and challenged assumptions about the power of brand and power of a global online community.

Over the past year I have worked with a start up linear channel with a Las Vegas theme and a new broadband site focusing on music, musicians and fans of how music is created.

Working from a belief that the current economic crisis, which effected Las Vegas especially hard, would provide a counterintuitive opportunity for a new linear Vegas channel, my colleagues began meeting with key Vegas business and marketing entities. The value and power of creating such a content and marketing platform was acknowledged. While Las Vegas could still point to annual visitor number s of over 38 million, and 22,000 conventions hosting over 5 million attendees annually, there was recognition that even a global and iconic brand like Vegas could be severely stressed. As the growing mobile/digital/online distribution and advertising platforms captures more viewers, and especially so in the global market from which Las Vegas increasingly draws its visitors, the opportunity to use the marketing power of a new immediately branded linear channel as a means to also populate the multimedia space with content seemed timely in a time of extended economic uncertainty.

Even the downward pressures on ad spending and CPMs were not seen as a deterrent. Discussions with Vegas based businesses supported the projections of ad and marketing dollars for a channel dedicated to showcasing the full breadth of Vegas entertainment, events and lifestyle. In addition, independent analyses from ad sales executives cited the power and appeal of the Vegas brand association for travel, leisure and entertainment related categories attracting a younger and more affluent demographic. Of particular interest is the potential of “product placement” type sponsored programming featuring the major name properties showcasing their venues and attractions. As a multi-platform plus, relationships with premier Vegas marketing entities would add a major online reach and allow advertisers to take advantage of the Vegas brand in traditional linear and new media audiences.

In addition, with existing Vegas investment in Macau and the historical interest in Vegas from Asian, and particularly Chinese, markets there were reasons to project significant international interest and carriage for the channel. Coupling all of this with strong relationships and understandings in place for domestic distribution of the channel there was justified belief that the plan would be sufficiently well received by investors.

To the surprise of the team, the indications of ready investor interest were tempered by caution and uncertainty once the full plan was presented. The many stories about how Las Vegas has been hit by the current economy coupled with ongoing uncertainties about the ad market resulted in more and stronger resistance than expected. The discussion (I hesitate to say argument) centered on a focus on the immediate past, present and future versus a longer view of how a branded Vegas channel could and would weather this economic storm and find advertisers, as well as exploit the brand’s global and online reach. For example, last year’s approximately $6.5 billion in gambling revenues in 2008 “fell” to the 2005 levels of approximately $6.5 billion and continuing reports of foreclosures, unemployment and financial pressures on the major hotel/casino companies result in a risk averse reaction from the investment community. The assumed power of the brand could not, as readily as believed, counter current economic and advertising uncertainty. While the potential of the brand and channel are recognized, the issue becomes timing and a steadier advertising market.

Conversely, is the more immediate likelihood of successful funding for a broadband venture, The Musician Network (TMN). The focus and theme of TMN is on musicians (both amateur and professional), the creation of music and the consumers of music and music equipment around the world.

To date, while the business plan and funding process are being finalized, there has been a TMN-YouTube site with a very basic and stripped down version of what the “live launch” full site will look like. With no marketing budget or active efforts and relying only on online/social media sharing, the site has registered over 500,000 viewers. Though the current users skew heavily male, there is an almost even split among age groups from 13-64. These nascent statistics have indicated what a marketing campaign with sufficient resources and using a mix of online, viral, search and traditional industry media might achieve.

Working with executives with experience both in start-ups and the provision of back-end online e-commerce and video infrastructure and integrated marketing solutions employing and connecting online, SMS and mobile strategies, the response from the investment community has been strong.

Although the marketplace for broadband music sites is crowded, the perception is that by focusing on the creation of music and those who create it, TMN has a viable opportunity to fill a niche that remains open and sufficiently distinctive. Of particular interest is the marketing and advertising reach to a passionate and dedicated consumer base that has a demonstrated history of spending in the music category and remain willing to spend on their passions, and to reach these consumers in and through the media where they find music. This belief is supported by recent statistics compiled by the national Association of Music Merchants (NAMM).

In the music making space, industry estimates are that 52% of US households have at least one person who plays a musical instrument and the musical instrument and equipment market alone generates about $7.5 billion annually. The recording industry (CDs, portable players, etc.) adds approximately $19 billion. This sector also contains numbers of publications with a focus on particular instruments or production interests. While there are many online destinations for music videos, there is an opportunity for a focus on an audience that plays music and cares about how music is made and the life of music makers inclusive of musical styles, instruments and levels of musicianship. Investors look at these numbers and see a new media means to tap into its present reality and future potential.

From these very different investor community reactions, I have learned (again) that any assumption can be proven shaky and that brand name alone is no guarantee of success—at least immediate success. While there seems little question that the Vegas brand is and will remain instantly recognizable and attractive on a national and global scale, the kind of economic stress we have experienced can and will create deeper questions and caution than imagined. The means and opportunity to introduce and market a new media or content brand will be tied to timing, perception of a market opening and the right plan to exploit that opening.

A few months ago, my money would have placed a bigger bet on Vegas. Luckily, the smart colleagues I work with aren’t going after my money.







Glenn Moss provides legal and business consulting to media and communications companies. With over 20 years of experience with cable, broadband and broadcasting companies, Mr. Moss provides a combination of legal, business affairs and management services to Internet, VOD and cable networks. He can be reached at gmoss22@gmail.com or 917-543-4888.