As the end of the year approaches, I am once again prepared to put on record my predictions about what the next twelve months hold for the online video business. However, before I share the results of my crystal ball analysis, I wanted to evaluate how my 2010 predictions fared:
1. The largest video properties won't produce any video. Grade: A
Not only did the majority of the top 10 video properties, as measured by ad volume, not produce any video, but it is hard to find many content producers in the top 20. For example, NBC is #21, ESPN is #27 and Disney is #29. The aggregators, syndicators and networks were the dominant growth stories of 2010, and it is hard to see that train slowing down as we enter 2011.
2. Stream fraud becomes online video's click fraud equivalent. Grade: B-
Although there were a handful of cases of video fraudsters getting caught with their hands in the cookie jar, most stream fraud went unnoticed in 2010. It's unclear whether agencies are simply content to look the other way or whether the overreliance on ineffective verification services clouds the problem, but regardless, stream fraud continues to be a profit machine for the bad actors. Without a consistent performance metric across video inventory sources, this problem is not going away any time soon.
3. Video ad networks will compete more with display ad networks for display advertising. Grade: C
All hail the traditional display network? Not exactly. It turns out the massive thorn in the side of display networks in 2010 was the emergence of DSPs. Video networks were a blip on the radar from the perspective of at-scale display networks. Conversely, display networks weren't significant competitors in the other direction, as only one has become a major player in the video ad industry since inception -- and it bought a video ad company in 2006.
4. Facebook becomes the No. 2 video streamer in the world. Grade: B
In August, Facebook reached #3 in the comScore rankings as measured by uniques, not videos streamed. Although this growth from 2009 is impressive, I was definitely off the mark in my prediction that Facebook would make it all the way to #2 by the end of the year. A few factors greatly influenced the outcome of this prediction. First, Hulu and Vevo grew dramatically in 2010 by bringing broadcast content online faster than anyone expected. Second, video ad networks scaled significantly in 2010 and were very successful at inserting video advertising into non-video content placements that outpaced Facebook's growth. Lastly, Facebook simply didn't "pull the trigger" and go aggressively after the video category.
So, here are the new predictions for 2011:
1. Social gaming companies continue their onslaught on daytime television and embrace video advertising as the preferred monetization vehicle outside of virtual goods.
In August, I wrote about the impact social gaming is having on daytime television. As Agent Smith said in "The Matrix," "You hear that Mr. Anderson? That is the sound of inevitability." As more and more women dedicate their leisure time to Facebook, daytime television is in danger of losing its core female audience. Simultaneously, the social gaming companies are getting better at understanding the 5% of their user base that generates 95% of their revenue. So these companies will began to embrace video advertising in and around their games to increase the monetization of the other 95% of their users. If you are a CPG advertiser, this is the holy grail: efficiently priced, audience-targeted and day-parted media that is essentially audience replacement for daytime television.
2. Public companies drive consolidation as they grow out of the recession.
Any consolidation in a new media category gets a lot of hype. 2010 proved to be no different for the online video space, with the mergers of AdConion and Joost, Specific Media and BBE and Undertone and Jambo. However, the smart money knows private-to-private transactions are not particularly meaningful and usually precede the deals that actually change the dynamics of a media category -- and those deals involve public companies. The first deal we saw in 2010 was AOL's acquisition of 5min Media, followed by YouKu's IPO. In 2011, I would expect to see at least two nine-figure acquisitions. My most likely candidates to transact in 2011 are the huge video sites like Hulu and Tudou, and the companies selling "the pick axes" of online video: Brightcove, Freewheel and Conviva.
3. Mobile video advertising becomes the most sought-after new ad format.
Let's face it, mobile video advertising is an incredible branding environment. It's full-screen, interactive, highly scalable and hyper-targetable -- where do I sign up? Unfortunately, although ad networks now control nearly 85% of all ad dollars in the mobile advertising business, the infrastructure to support video advertising at scale (meaning with proper third-party ad serving, measurement, yield optimization, etc) is still not fully built out. I believe 2011 will be the year that mobile video advertising becomes "real" and will start to be a common request from media buyers. Unfortunately, this is bad news for traditional media companies, as the majority of all the mobile impressions are controlled by independent app developers.
4. A second video-specific company reaches the 100 million unique-user mark.
For the past few years, YouTube has sat alone at the top of the video charts, dominating the category in both reach, at 117 million uniques per month, and video streams, at more than 500 million per day. Although I firmly believe that YouTube's dominance is not being challenged in any meaningful way by any player in the business, the category has grown so rapidly that other companies are scaling their audiences regardless of YouTube's market power. By the end of 2011, I expect at least one other company to be in the 100 million unique user pool. However, on a stream basis, nobody will come even close to reaching YouTube's stream volume; it is the world's top video server, bar none.