Commentary
The E-Commerce Video Mirage
- by Ashkan Karbasfrooshan , Op-Ed Contributor, July 2, 2012
Content is an increasingly ad-supported medium, but content creators and publishers all seek to generate a two-pronged revenue stream to make production and publishing profitable. With the democratization of content creation and a barrier-less publishing landscape, the supply of ad inventory has mushroomed, making ad-supported models unsustainable for most (unless you have some kind of comparative advantage rooted in a low-cost, high-quality model).
With users not all that interested in paying for most forms of premium content (consumers have proven to be willing to pay for ultra- and super-premium content, but not for made-for-Web premium content), this leaves licensing and e-commerce as two options.
We’ve previously looked at licensing models and options; today we’ll touch a bit on e-commerce.
Conversion and secondary demand
Zappos has been experimenting with videos as a conversion tool. This form of videos as a means to convert people who are in the virtual store is a no-brainer and bound to become more commonplace.
Building primary demand
But video remains a branding tool -- and by and large, there are few cases demonstrating that video has in fact converted curious surfers (let alone interested would-be shoppers) into actual buyers. That doesn’t mean that publishers and marketers can’t turn to video content to generate e-commerce, however.
Here are some factors to consider:
Scale
The pre-roll ecosystem is a loser’s proposition for most content creators. CPMs keep falling, and with about 50% of videos generating 500 views on average, the reality is, you can’t expect videos to break even. However, 500 targeted views may lead to one to five sales of a product, which means that the revenue generated from e-commerce has the potential to be more lucrative than the revenue from advertising alone. While you need serious scale to drive either e-commerce or advertising revenue, at first glance, it’s possible to develop a profitable e-commerce strategy, while advertising schemes are becoming increasingly difficult if you lack your own-and-operated property.
Timelessness
E-commerce offers tend to be timely in nature, whereas any timeless video can swap out old ads for new ones. As such, an e-commerce strategy needs to take into account how popular your video will be over time. According to some stats, 25% of views come in the first four days, after which point the views trail off; if that’s the case, the e-commerce offer can be timely. If, however, you produce more timely videos that sustain views, it’s important to ensure that your offers don’t get stale.
Tech limitations
Of course, there’s no need to “bake in” the offers (be it via graphics, or verbal mentions). One can technically rely on dynamic overlays to regularly update a video with new, pertinent e-commerce offerings over time. Of course, the limitation here has to do with technical realities.
Distributed model presents unique opportunities
Online, most of a video’s views will come in a distributed model, frequently in a third-party player. This means that any dynamic overlay is an add-on to the content, in the player. Chances are, then, that you, the producer, don’t control that aspect.
There’s no silver bullet
In other words, you have to choose which approach to take, as there are no silver bullets.
If you promote timely offers, those will quickly become irrelevant to viewers over time.
If you pursue a dynamic insertion strategy, then those may not travel around the web with your video, limiting their impact.
Buyer beware…
E-commerce is as old as the Web, but video is a relatively embryonic tool. Through experimentation, video can augment a producer and publisher’s monetization strategy, but any attempt to find a perfect solution may be wishful thinking. You know that saying: If something seems too good to be true, it just might be!
Hysterical
There's a rock-solid, if belated, insight in the acknowledgement that "video as a means to convert...is a no-brainer." There's plenty of data out there - whether our large client base and case studies, or from other sources - proving that.
Beyond that, I'm not sure where the "mirage" controversy is supposed to be. Video converts in the online store. Video, pushed out to multiple endpoints, drives branding and awareness. It's a powerful type of media in that it influences a customer at multiple points in the purchase process. I think Mr. Karbasfrooshan is, rightly or wrongly, intent on discrediting in-video shopping. Fine if that's the POV, but he's undercut his argument by tarring with a very broad brush.
Informative article. I work for McGladrey and there's a white paper on E commerce on the website ( http://bit.ly/HJbEFy ), with information on current trends in online retail and advice from industry experts you may find useful.
As the producer of sales videos of every degree whether specifically for brand building, or for inciting buying behavior, the statement: "there are few cases demonstrating that video has in fact converted curious surfers (let alone interested would-be shoppers) into actual buyers," is a difficult pill to swallow. As Russ quite rightly pointed out, there is plenty of data to contradict this "broad" statement. The 50% of sales videos at the 500 mark is quite right though, and sauntering around video sites where sales video content is freely located, you will find a host of sales video productions (professional and otherwise) that fail to hit that mark - Yes video is in its infancy, but the information provided to customers of video by and large is not - You can buy every "how to think rich and prosper book" out there from accredited authors, but unless you read and apply the learned information, (relating to video this would include utilizing social media effectively and tailoring the content in a search engine optimized fashion etc) the video may stall in its ability to entice 4 digit views. Maybe it is time to look to a new model, and maybe it is not in the provision of video. Video views and ensuring those views are made by qualified targets can be benefited by a more real partnership in the post production phase, that may require new financial modeling in the production sphere however.
Mike Dawson of sollylabs.blogspot.com
Russ, really don't think my objective was discreding in-video shopping or anything for that matter.
In fact, I have been thinking of e-commerce opportunities and strategies for our own videos, and I simply outlined some of the pros and cons of each strategy.
We ARE talking about e-commerce and videos, right? You make it sound like I am some kind of lobbyist for a government agency!
A lobbyist! That made me laugh but no, I don't see you that way, Ashkan. I see you as a passionate industry insider with a strong point of view, which makes for healthy industry discussion. The point of view I'm advocating is this: many companies (including some of the biggest in the world) are driving many millions of dollars (or more) in incremental sales by using video in ecommerce. I know because many of those companies work with us. The e-tailing group has tracked ecommerce video usage among 100 of the largest online retailers on the planet since 2004, and found that about 80% are now using it (don't recall the stat exactly, but it's in a whitepaper we jointly published with them, on our site along with many case studies). If we characterize that level of results-driven industry acceptance as a mirage, perhaps we should think of social commerce as something like Bigfoot and equate mobile commerce with the Loch Ness Monster. Heck, this whole Internet thing may be nothing more substantial than a rash of UFO sightings! Ashkan, thank you for a provocative post and for the opportunity to engage in some healthy industry debate.
Gotcha, the "mirage" in the title. Fair enough. As you know, in publishing sometimes you use words in titles or ask questions but then disprove them in the post or expand to suggest it's more complicated than that... I think all I was doing was showing that there is no silver bullet, slam dunk solution.
And thanks for the kind words.
With all due respect, I have to strongly disagree. Video as a demand gen and conversion tool is quite effective... I dare say, as or more effective than other methods.
The problem? It is not easy. There are a lot of misguided efforts and off-target content programs out there... the kind I would expect to fail.
The productive discussion is about how we improve the industry's overall capabilities, rather than damn an entire segment just because there are a lot mediocre practitioners.
There are many ways to achieve and maintain offer-specific benefit over the long haul with video... I am talking months or years, not days.
Your point about the democratization of content is well taken. Bad content = bad results. When it comes to conversion, bad strategy = bad results. Combine bad content and bad strategy? That's a nightmare, but not one that reflects upon the opportunity... just the executions.
Rob
Robert, I agree 100%. I think my only point in this article was: there's no silver bullet and this isn't something you can hope to attack via technology only.
I don't know what you know, but check out Saks Fifth Avenue website and how they use a few second video to help sell products. Very effective from the consumer view. PS to Russ: A school down south is using the photo, if that is what you want to call it, of the Loss Ness to prove there is no such thing as evolution. Go figure.
Paula, thanks for the suggestion. I will check it out. But for what it's worth, I am referring mainly to the challenges for content creators to generate e-commerce revenues, naturally the Saks Fifth Avenues or Zappos (as per my example) will continue to use video to increase conversion, sales, reduce returns, increase customer service.
e-commerce in video is a natural answer for retailers, but less so for content creators.