Commentary

Think Like A Viewer To Create A Valuable Video Content Business

Does video content represent a cost unit or a profit center?  Does it matter?  In some ways, no.  But as with everything on the Internet, invariably the question to succeed boils down to a matter of "how to scale."

Content is a means to an end, the canvas around which marketers filter their message.  It doesn't sound very romantic to say so, I know, but it's a fact: were it not for marketers' desire to push their commercial message to sell their products and services, we would have very little content to consume.  Content and ads are the quintessential chicken vs. egg motif.

Is the marginal cost of digital media zero?

Historically, the price consumers paid for content was a reflection of the value-added process involved with the production of the form factor (a book might cost $10 -- but that said more about the publishing process than the work in question).  With digital media, the incremental cost of copying and duplicating media is zero, so this disruptive reality has shifted the perceived value of content.  Sure, content is king and all, but the fact that content can be created for a marginal cost of $0 has led many to devalue it in the process.  It's a bit different when it comes to distribution, no doubt, and that merits a post onto itself.


As a means to an end, video content is fundamentally a cost unit.  That doesn't mean that content producers should solely seek to maximize output while minimizing costs.  Instead, one should seek an equilibrium that offers the right mix of quality and quantity to generate the most value for the entity that subsidizes its creation.  Online, that's not the reader/listener/viewer, but rather, the marketer.

After all, it's helpful to draw the parallel between:

- Technology > Software > Licensing model > Users
- Media > Content > Advertising model > Audience

With the former, companies or users pay a license to use software.  In the latter, marketers underwrite the content directly or indirectly -- and by and large, listeners/viewers/readers don't pay for the content.  As a result, everyone is scrambling to come up with a better advertising mouse trap to better serve marketers.

Same story, different chapter

When search was scrambling to find a business model, some companies began to serve paid text ads (paid listings) into their organic search results.  The first online company I worked at, Mamma, did this in 2000, as did the pioneer in the space: Overture (then GoTo.com) who solely served paid ads.  Of course, Google refused, and instead created a slot alongside the organic search results to serve paid ads.  This became the most successful advertising model since, well -- you get it.

What came first?  The content or the ad?

Video is encountering a similar fork in the road, a dilemma that is actually manifested in many ways and on multiple levels.  One issue is choosing and fully embracing a leading ad model (increasingly looking to become the pre-roll ad).  But another method is the concept of branded entertainment, something that isn't necessarily novel to media in general but still small in the nascent but burgeoning online video medium.

All online video spending in the U.S. represented $1.5 billion in 2010.  All online advertising in the US generated $25 billion, with search garnering 40% of that figure.  Meanwhile, television advertising in the US is a $70 billion market, though the vast majority of that figure comes from the 30-second ad spot, and not branded entertainment.

Nonetheless, a lot of companies and marketers, wrestling with the so-called death of the 30-second spot - and the fact that online is not linear -- are betting on branded entertainment. To be perfectly fair here: some companies generate more in one branded entertainment campaign that my company might generate in a whole year from all operations, but I still think that only pursuing a branded entertainment editorial strategy leaves a lot of value on the table.

In other words, yes, the short-term revenue potential from branded entertainment is very alluring.  But long term, a branded entertainment-centric catalog isn't exactly a catalog; it's a commercial reel, at most.  Viewers don't really care about branded entertainment, and marketers' interests simply aren't aligned to create informational or purely entertaining content that isn't too commercial, mainly because of the lack of the 30-second spot to inject a commercial message in the content.

Ultimately, it's easy to determine what the right editorial or marketing strategy is, but the right business strategy requires a mix of the two: striking a balance between pure and branded content.

2 comments about "Think Like A Viewer To Create A Valuable Video Content Business".
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  1. Alex Vachon from Cartouche Creations, April 4, 2011 at 1:15 p.m.

    Thanks for your article Ashkan. Makes me wonder. What works best for my clients? I'm in the business of creating content, and I'm more and more a digital video producer rather than a broadcast one. Personally, whether I see brands being integrated in reality TV shows such as The biggest Loser, or when Ford pushes their products as music videos on American Idol, I cringe. But when I see a remarkably entertaining pre-roll ad on Youtube (Axe music video for example), or a hilarious Super Bowl ad, I welcome the brand. I don't mind, I'm entertained.

    After all, we buy advertising posters as art, such as Toulouse-Lautrec’s. We watch 90 minutes of the best of TV commercials in film Festivals. Some branded content makes me run to the restroom before the show returns, and some ads will make me forget it.

    So in the end, as branded content producers, we should always give the audience what it wants first, which is a great story well told, and then worry about how much money or time my clients are willing to invest in it to produce and distribute it. A great branded story can be found on a poster, a 15 second ad, or in a movie scene. It’s the best guarantee for success for our clients. The thing is, it always takes some kind of emotional investment into the brand to be able to make a good story. If you know how to do that, your clients and audience will always come back for more.

  2. Grant Crowell from ReelSEO.com, April 5, 2011 at 2:20 p.m.

    Thoughtful stuff, but still it all seems to generate around old marketing ideas with new media. It takes more to just be entertaining, since there's so much about that online. I believe the key is going to be to use video content to actually build real relationships with your customer base. It has to go beyond, "look how I entertain you" to "look I want to really help you, too." What's missing is the emphasis on video content as part of the long-term strategy – customer service, forums, encouraging consumers to become the producers of video and hosting their videos yourself. Entertainment is just the first step of engagement. You have to do more than just get their attention and interest, you have to continually put out helpful content to make the customer base feel listened to and appreciated.

    That is what's called, "social video marketing."

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