Commentary
There Is No Money In Online Video -- None. (Unless You Have The Scale Marketers Need)
- by Adam Singolda , January 3, 2011
The Paradox: Video traffic on the Web consistently generates the highest CPM from advertisers. But if you're a publisher, even a known premium brand, and you produce your own videos and are not generating at least 10 million video views per month, you are almost certainly losing money every month on your video business.
Background: Premium video generates the highest CPM. For financial and business verticals, $30 and above; for news, $20 and above; brand lifestyle, I hear from our customers, an average CPM of $23 and above. Video ad networks can generate a CPM of around $7 when you are not able to sell your own video traffic - still a decent amount of money. Compare this to display advertising or sponsored listings, where the same verticals get a few dollars per thousand impressions. Seems like video should be a significant factor in increasing your revenue.
But if you're a publisher averaging only 2 million to 3 million monthly video views, you are losing money month after month. How can this be? Many of the top publishers have internal production capabilities, and they produce their own video content. Some license it on their site, or outsource production to third-party production companies like Watch Mojo, Howcast etc. Either way, there are some acquisition costs involved.
Can you recover those costs and resolve internal sales conflicts that limit your revenue potential? Brand publishers prefer to give their advertising sales team a fair shot at selling their video traffic first in the market. These publishers can probably get the highest CPMs if they leverage their brands (more on that later). But to be honest, with only 2 million to 3 million views to sell, you are well under the traffic most brands require for most campaigns.
Assuming the sales team has good sell-through, say, 70% and above, many publishers will agree to give the rest of the remnant inventory to video ad networks to sell for pre-defined guarantee deals, or sometimes for whatever they can get. Most brand publishers will not give 100% of their traffic to ad networks since they think it will dilute their brands and their existing relationships with advertisers. (Some publishers never give any of their traffic to ad networks, even if it means losing money on it.) Either way, when that inventory moves from direct sales to the ad networks, the CPM drops significantly -- but can still be meaningful.
The Solution: GET SCALE advertisers need, and get it fast !
When advertisers buy video traffic from one source, they need scale. From what we hear, to be a reasonable player in the market, you need to have a minimum of 10 million video views per month and preferably substantially more. Here is a list of things you can go to get your video views up to a level acceptable for most brands:
(1) Promote videos all across your entire site. That means Homepage, Category pages, Article Pages, About Pages, Search Pages, etc. Even better if you can do it in an intelligent and personalized way, that can double/triple your video views over generic efforts to promote videos, such as using "popular videos from the same category,",etc.
(2) Syndicate or distribute your content to leading networks such as 5min (AOL), YouTube, CineSports, etc.
(3) Improve SEO -- even though I don't see this as a meaningful video traffic generator since most people don't know what they want to watch next, and for sure can't type it. But if you're already have people working this strategy, it is worth trying.
I also recommend reading my previous columns: "Are You Doing The Right Things To Increase Video Views ," and "Online Video Finally Works: Now It's Time To Make It Better."
Don't bury your video business and deprioritize it over other things because you're not making money from it today. Your goal should be to scale your video traffic any way you can, and fast, to a point where you can be a serious player. Then you will turn video into a meaningful profit center for your business. Otherwise, if you're not personalizing your video discovery experience, and not distributing and syndicating your video, you are likely to lose money -- because without scale, there is no money in video. None.
The Vidsense Video Snack Network is the ONLY video network that can deliver scalable, effective big brand reach for big brand advertisers. Forget 10MM video views per month. Vidsense can deliver up to 10MM video views and self-qualified viewers PER DAY to a single advertiser destination page, something not even the largest online ad networks -- not Google, not Yahoo, not AOL and not MSN -- can replicate.
For publishers running their own or licensed video with a pre-roll advertising model, almost no amount of video traffic will make you money. The costs of sustaining the pre-roll model, like just about all other forms of the advertising-as-intermediary model online, will eventually drive you right out of business.
This used to be true, but we have a number of customers in the "sub-10M streams/month" range who sell most of their inventory direct, at very high margin CPM's. This is true for both the customers who use our platform to serve their own video content, as well as those who source both content and video platform services from RealGravity. What they can not sell themselves, we sell for them through the ad nets and Adapt.tv: The $6-$10 that they get from the ad nets and exchanges is about triple what we charge them for all video management, bandwidth, hosting, ad-serving, ad ops, etc...and it is about double what they pay when they access both video services and content from RealGravity. 50% gross margins, net of all costs including content license, on ad net sales, is not a bad business, and it is still better in absolute dollar terms than what they get from display.
Small Screen Network is making money. We are doing it with a quality over quantity mantra: quality content, quality audience. Our niche focused web video micro-hits generate tens of thousands of views per month rather than millions. Those views come from an audience deeply interested in what we produce. Therefore, we can charge a premium for sponsorship, brand integration and advertising. We believe CPMs will quickly become a thing of the past. What do you all think?
No wonder I'm broke. Damn.
Super tight focus like Luke and Colin are illustrating is currently profitable and will continue to grow in value. We have super tight focus on our network platforms at Sequence Media Group and Legal Broadcast Network and our sub 10,000 view groups show the greatest growth. Yes scale is vitally important to the big players, but quality, focused audience is where most of us seem to be headed.