Check Out the Video: Monetizing the Video Long Tail

Today, Internet video providers aggregate audiences in small groups and advertisers are often staying clear. But the money is coming – somewhere between $350 million and $1 billion today and growing to several billion in the next few years. At least that's the case if you believe executives who spoke Tuesday morning at a high-powered media gathering on "Monetizing the Video Long Tail." In a "Breakfast at Michael's" discussion hosted by JackMyers.com, they agree business models are not yet solidified, that up to 90 percent of revenues will come from advertising, and that it's crucial to give the users what they want, when, where and how they want it.

"Instead of trying to ferret our users to one place, let's follow our users and bring our content to them," said Patrick Keane, EVP and chief marketing officer of CBS Interactive. Under Keane, a former Google executive, CBS has been very aggressive at putting its content on multiple platforms and portals. The tendency of users to watch Web video on a preferred provider like YouTube or Veoh, rather than gravitate to the sites of individual TV networks, may also explain ABC's moves this month to allow at least some of its video on sites that parent Disney doesn’t control.

People in the broadcast TV business already know how to make money off what Veoh founder Dmitry Shapiro, from the audience, jokingly called the "fat head" of the market: hit TV shows and Hollywood movies. But everyone from the big TV networks to startup ventures are wrestling to find a model that works at the tail. At least 13 percent of Web content today is user generated content (UGC), according to panelist Spencer Wang, a research analyst at Bear Stearns, and that percentage will grow and eventually be ad-supported.

"I guarantee there's a ton of advertisers who want to find me, no matter what I'm watching. I think we'll see a relaxation of attitudes," concurred Veoh Video Networks CEO Steve Mitgang, who recently joined the company from Yahoo!. (Veoh last week announced funding from former Viacom executives Tom Freston and Jon Dolgen, along with Spark Capital.) If not, Mitgang said people like 17-year-old son "may never see any of their ads, because he never watches TV. He watches on the PC." He, Keane and Wang were joined by Andy Nobbs, president of video tracking service Teletrax, a sponsor of the event.

CBS is using the data it gathers from video distribution to learn what works, even to help inform programmers about what they should do more of. "The Web is the world's best laboratory," Keane said, adding that he plans to spend the next 18 months working with advertisers to show them the power of Web-based content. CBS programming on the Web competes not only with user generated video, but also video from semi-professionals who may not have the means for high-end production, or perhaps media outlets like radio, TV and magazines that now have a way of distributing to the masses. Even advertisers can compete with the very TV networks they support. Keane noted that a Nike-produced ad featuring soccer sensation Ronaldinho had been viewed something like 10 million times. "I don't think I compete with NBC or ABC or Fox all day. You're literally competing for a users' mindshare," Keane said. "My competitors increasingly are anyone who'll create compelling content."

For Web video, the long tail (Wired editor Chris Anderson's idea that audiences are increasingly fragmented and going for ever more niche content) mirrors what was done to a smaller degree by cable TV. While the broadcast networks no longer have the audiences they did before the cable era, total TV viewing has ballooned. A report Wang co-authored points out that CNN and ESPN were initially derided as amateurish. Sales of any individual TV show on DVD may be small by network standards, but in aggregate they represent a billion dollar business. Cable niche channels and those DVDs already represent a kind of long tail.

The toughest lesson for TV networks may come from the "blogification" of broadband. Sure, great content will out. But no one, as Wang noted, can make great content all the time. One viewer's "great" will be another person's "bore." Anyone who knows how to point a video camera can make video – just as anyone who can type can make a blog. Sites like YouTube that provide a platform for people to upload video free, and technologies from companies like DigitalSmiths (Jack Myers Media Business Report, July 9) and ScanScout will hasten a day when video content is as searchable and matched ads as servable in very micro-slices that when aggregated make a much larger whole.

Teletrax president Andy Nobbs pointed out there is a "tech arms race between teens in garages and companies like Microsoft. It is about providing intelligence rather than interfering. Where professional content bleeds into peer to peer networks and is replicated, then it's an issue but old principles no longer apply. The specter of the music business problems affecting the video business looms less today and is receding as a bad dream. The video industry is trying to do different things. Publishers and content producers need to come together with distributors to focus on consumers. There has to come a point," he suggested, "when two sides of the divide come together in some kind of rapprochement. You need to reinvent yourself and stay involved on a daily basis. If you don't help consumers, you don't help yourselves."

Eventually, there will be personalized aggregation and tagging, as with DIGG and del.icio.us, and as MySpace announced this week, along with video feed readers that show people the programming they want on a screen they've personalized. As alluded to by the panelists: whoever figures out how to be that provider, that sorter and sifter, is in a position to make many more billions than any DVD sales or cable channel can match today.

This special report is underwritten by Teletrax, "the leader in digital watermarking for video media tracking, measurement and intelligence." For more information, contact: Peter Winkler at pwinkler@teletrax.tv. The editorial content has been prepared by JackMyers.com with no involvement or approval of sponsors.