Posts from September 2006

We spent the afternoon at ACL and had a good time.

The highlight of the shows we saw yesterday was Okkervil River. This is a local band made good and they were back to play their old stuff and some new stuff.

We went backstage with some friends and had a bird’s eye view and particularly dug the drummer who was great.

The lead singer brings a ton of energy and they’ve got some great songs.

My favorite is For Real.

For Real – Okkervil River

I must say that other than the desire to see some balance in the market for digital music, there really isn’t anything I read or saw yesterday that makes me want to run out and buy a Zune.

I’ll probably do it anyway because I care a lot about this stuff and want to get a sense of what this new device can do.

Wifi is great. That’s been available in Music Gremlin already. Will buying music over the air be the killer app? Listening to music over the air most certainly is.  The inclusion of an FM radio is acknowledgement of that fact. Too bad it isn’t an HD radio. I am sure it will be in a couple years when HD gets low power and lower price points.

The ability for anyone to send me a song over wifi to my device is pretty cool. That happens already computer to computer so it’s pretty clear that music sharing is a big part of the appeal of digital music.

The “three free listens limitation” is interesting. If I can simply click on a button and it unlocks the file over the air and charges my account $0.99, then that’s pretty nifty. But the problem is the file will surely be drm’d in Microsoft’s format and I won’t be able to play it on my iPod.

So in the end the best I can hope is Microsoft takes some share of the market and then the device interoperability becomes an even bigger issue, leading of course to a standard, which we all know is mp3.

So that’s why I am rooting for Zune.

We are off to austin for the austin city limits festival this weekend

We’re looking forward to great music, great food, and a great town.

Update – sorry about the triple posting of this earlier today. Something’s awry with the mobile browser posting service in typepad

I’ve been looking to seeing him live for a couple years now.

And it’s going to happen tonight.

Eyes On The Prize – M Ward

UPDATE – M Ward was fantastic. I particularly liked the end of the regular set when it was just him and his acoustic guitar. He sang Paul’s Song and One Life Away. Then he left and came back for the encore with his band and did an excellent version of Vincent O’Brien.

It was a great show and I’ll certainly try to see him again. He’s an amazing musician.

I posted my YouTube’s Potential Revenue piece to stimulate conversation about the best way to monetize the super popular web video phenomenon. I surmised that 100 million videos served per day could someday be worth north of $400 million in annual revenue and net YouTube something like $150 million in annual revenue.

It was a well-read post and I got a ton of great feedback on the post via comments and posts that linked back to mine. Most people got the fact that I was trying to stimulate a conversation more than project revenues for a specific company.

Here are my big takeaways from all that feedback:

1)    Many people think that sticking a pre-roll ad in front of web video will severely reduce their popularity. I agree but it also depends on the content. It could work for SNL clips, it probably won’t work for kids falling off skateboards.

2)    Many people think a $15cpm will never happen for web video on a service like YouTube. I think they are wrong and that it will happen.

3)    Several people (including Umair, who I always pay attention to) think the whole purpose of a service like YouTube is to blur the lines between content and advertising. They should be one and the same. I totally agree with them.

I’ve been letting all of the feedback rattle around in my brain for the past week and I’ve been using YouTube a lot as well. And I’ve come to the conclusion that post-rolls ads may turn out to be more valuable than pre-rolls. Here’s why:

Watching videos on YouTube is like surfing the web. You watch one, find another, watch it, and do that until you get bored. The end of every YouTube video is a frame that features two suggested videos. I rarely click on those suggested links right now, but I think they are extremely valuable because over time they will become the natural place to find the next video to watch. I think the ending frame is the killer post-roll advertisement. I don’t think they should run a video post-roll, they should just monetize those links.

I think YouTube ought to take a page out of Google’s playbook (if they haven’t already) and make one of the links paid and one organic. I’d suggest the top link be organic and the bottom be paid.

The organic link should be served up by an algorithm that surfaces relevancy and quality, the way Google’s pagerank does for a search query. That algorithm should take into account the creator of the video you just watched, user generated tags on that video, popularity, number of comments, etc, I don’t have any brilliant insights into what that algorithm should be, but I know it should take cues from Google’s page rank, Delicious popular, Digg, Flickr’s Interestingness, Amazon’s front page recommendations, and any other web discovery algorithms that have become popular.

Over time this algorithm will get optimized by marketers like the search engine optmization business has optimized Google’s search algorithm. And what they will be optimizing is the organic link to another video. It could be an advertisement or it could be a videoblog, or some other form of video content. The lines between content and advertisement will blur. I agree with Umair completely on that.

The second link in the post-roll frame should be a bidded marketplace like the right column on the search engines, but it should be only for videos on YouTube.

Say you are a marketer, like Nike. You make a video, doesn’t matter how long or short it is, about your new Nike sneaker that works with the your toaster so breakfast is ready when your run is over. You post that video to YouTube in your brand channel (which already exists on YouTube) and you buy a bunch of tags (user generated keywords) that you want that ad to be linked to from the back frame. You pay on a CPC basis, only for the clicks that come from that link and lead to plays of your video.

If your video is great and the audience loves it, passes it around, etc, you can probably stop buying traffic to it and rely on the organic linking and viral nature of the service to keep the video playing.

Maybe there should be a third link in the post-roll frame that is controlled by the creator of the video. It can be given back to YouTube and monetized and the content creator gets the lion share of the revenue coming from that link. Or if the video is an advertisement, that third link is to purchase the product that was advertised in the video.

My gut tells me that when YouTube does this (and I suspect they are already putting the pieces in place to do it), the post roll frame is going to become very valuable real estate, potentially more valuable than the pre-roll.

But YouTube and the other web video services need to do one other thing. They need to embrace services like NBBC that offer a model for “licensed content” to run on their services. If NBC wants to run pre-roll ads in front of Saturday Night Live clips, that should be their perogative. Over time, content owners may find that other means of monetizing web video (like the post roll scheme I just suggested) work better. But until YouTube and others “clean up” their services by working with the licensed content creators, it’s going to be tough for them to monetize any of the video because of the risk of monetizing someone else’s content without their approval.

This post, plus the YouTube’s potential revenue post, and the NBBC post sort of summarize my current thinking on web video. It’s a huge phenomenon already. And it’s only going to get bigger in the coming years. It will be monetized. And I think we are beginning to see the path for how this all plays out.

Ross Mayfield said at the Web 2.0 conference last year that "web 2.0 is about people".

He’s right. What’s really happening, to steal a phrase from my partner Brad Burnham, is that the Internet is being reconstructed around people instead of pages/content.

In the web 1.0 world, AOL tried to build a walled garden around it’s content. Yahoo!, Google, and others went the open web way. We saw who won that war.

I’ve said several times in this blog that MySpace is the "AOL of blogging". I see blogging as the most open form of social media so that’s why I used that term. MySpace made it simple and necessary for people to have a place on the web that represents them, the people they like, the things they like, etc. And MySpace took off for several reasons, but one of them certainly was the flexibility that people had in changing their pages and putting whatever they wanted on them. The people who use MySpace for their social media platform will be able to leave it for a blog or some other form of social media, if not today, then certainly tomorrow.

Now that they have attained the status as the leading social media platform, News Corp/MySpace is talking about changing the deal. Peter Chernin said:

“If you look at virtually any Web 2.0 application, whether its YouTube,
whether it’s Flickr, whether it’s Photobucket or any of the
next-generation Web applications, almost all of them are really driven
off the back of MySpace.”

and regarding YouTube in particular:

“Given that most of their traffic comes from us,” he said, “if we build
adequate if not superior competitors, I think we ought to be able to
match them if not exceed them.”

The big question is whether MySpace will simply try to build better social media applications (like YouTube) or if they will also impair other social media applications ability to operate in MySpace. If they take the former approach and keep MySpace open to all, then that’s terrific.

But if they take the latter approach and start limiting the ability of others to "drive off the back of MySpace" then they will be sowing the seeds of MySpace’s decline. The web values openness over everything else. It always has and always will.

I am not the only one talking about this issue. Here are some other links worth reading on this topic.

Lost in all the craziness about iTunes 7, iPod, iTV, and the other Apple announcements yesterday was a pretty signficant announcement out of NBC that may just be a bigger deal in the long run.

I don’t think iTunes is going to be my video interface of the future. I think the web is going to be a much more compelling video experience.

And if you look at the number of videos watched per day in iTunes/iPod versus the number served on YouTube, I’d bet YouTube wins hands down. I’d love some feedback on that asssertion. But my point is video is being watched on the web and that’s going to move to the living room with or without Apple’s help.

Anway, back to NBC (or NBBC as they are calling it). Randy Falco, NBC Universal Television Group president and chief operating officer, said:

"We’re going back into the broadcasting business – on the Internet"

Indeed they are.

NBBC will syndicate video clips–produced by
NBC as well as other companies–to a variety of Web sites, including
those owned by NBC competitors.

NBBC is selling pre-roll ads to accompany the clips, and will share
revenue with the sites that distribute the video clips and the
companies or individuals who license them. If individual Web sites wish
to run their own ads instead of ones sold by NBC, they can do so, but
must agree to pay NBC a flat fee that will be shared with the clips’
owners.

I am going to go back to the four rules I outlined in my Future of Media post:

Here is the future of media:

1 – Microchunk it – Reduce the content to its simplest form.
2 – Free it – Put it out there without walls around it or strings on it.
3 – Syndicate it – Let anyone take it and run with it.
4 – Monetize it – Put the monetization and tracking systems into the microchunk.

NBBC follows each and every rule. And so I am going to get a NBBC player and start running The Office or SNL on my blog and getting paid by NBBC to do that.

Finally a big media company that gets it. I suspect we’ll see others follow their lead.

And to everyone who commented on my YouTube’s Potential Revenue post, with the "it’s just pirated content" or "people won’t watch a ten second pre-roll", I’ll just say this. When YouTube starts syndicating NBBC videos, we’ll see what happens.

UPDATE: Saul Hansell has a story in the NY Times this morning about NBBC. Here’s a great quote from it:

“If we really want to compete with big aggregators like  Yahoo and  Google, we need our video in as many places as possible,” Mr. Falco said.

Exactly

This post goes out to all the people who have sent me email in the past month and have not gotten a reply.

Please don’t take offense.

I am starting to rely on other mediums for communicating (following my kid’s lead) and while it allows me to be more productive, it also leaves less time for email.

I’ll say what I’ve said before on this blog. If you don’t get a reply and you really want one, send the email again.

If you don’t get a reply the second time, send it again. If you don’t get a reply after the third time, it probably means you aren’t going to get one.

I’ve got over 2000 emails in my inbox right now, most of them skimmed but not read, some unread, and some waiting for a reply. It’s not going to get better. Ever.

I am a big fan of try before you buy. The Gotham Gal and I lived together for almost five years before we got married. And that worked out pretty well for both of us.

I also love to try out music before I buy it and I do that a lot on Rhapsody and The Hype Machine.

Try before you buy is a good tool in business as well. We prefer to work with a company and use their service for a while before we invest. That’s not always possible and when it isn’t we often will pass just because we can’t take the time to get comfortable with the opportunity. I think its also generally a good thing for the entrepreneur because they get to know their investors well before they get stuck with them.

There are times when it’s a useful hiring strategy. I know of many cases where someone was a consultant or even advisor or board member before joining the company full time. In most cases, those hires have worked out very well.

I also think it’s a good strategy for large corporations looking to make strategic acquisitions. If they can engage with a company as a customer, supplier, business partner, and even minority investor before they purchase the company, it is likely that the acquisition will work out better for them. The trick for small companies is how to engage with a large potential buyer in a meaningful way without getting suffocated by them. I generally advise our companies to engage with multiple large companies at the same time if possible.

Of course try before you buy has its risks. You’ll never get the same level of committment from a partner who is in "try mode" that you’ll get from one that has made the decision to "buy". And what if the trial works out badly? Then you are back to square one. But, of course, that is often the same place you end up when the "buy decison" ends up badly. Except in "try mode" the split is often much easier to manage.

So I recommend everyone think about how to try before you buy. I think in most cases, it’s a strategy that works out well for everyone involved.