Google represents the first technology company to be fully ad-supported. It’s since evolved to being a media company, but “Google-envy” has led many tech firms to dream up the next great ad-supported business, while media companies struggle to maintain a grip on their ad dollars in the first place.
In video, while pre-rolls are disruptive (that’s good for marketers), they’re not adding value to the overall user experience like paid search ads do (which is bad for marketers). Meanwhile, Google’s YouTube has so much inventory that it allows users to skip on ads, with advertisers only paying when a user watched the ad to the end. It’s looking increasingly likely that there’s simply not enough ad revenue to go around.
With aggregators owning the audience and thus controlling the advertiser relationship, it’s particularly hard for content creators to survive on ad revenue alone. Traditional media content creators have offline revenue streams and can view online video as a promotional/marketing tool (with any revenue from online being a welcome bonus). But for new-media producers who count on Internet revenue to survive, they have to make online video commercial a revenue-generator. While advertising is always going to be biggest possible revenue source, ultimately supporting the ecosystem. creators need to look at other sources of revenue.
The obvious first group includes aggregators and redistributors. The problem for content creators is that the standard revenue share deal usually doesn’t generate enough money to buy a happy meal.
With that in mind, here are ten groups that content creators can turn to for revenue (provided, of course, you’re producing the right balance of content to provide these groups with value).
1) Portals. Portals have been producing video for years -- but often it’s branded entertainment for their advertisers, which tends to be high-end programming that isn’t necessarily what users are looking for. As such, chances are that their in-house team is only servicing 1% of their needed videos. With portals fighting for mindshare and time spent on their site, they’re always looking for more video content.
2) Television companies. Until Revision3’s acquisition by Discovery Communications, TV-centric media companies’ need for low-cost production capabilities was outweighed by the reality that they had more than enough of their own content to monetize. But that acquisition suggests that some media companies will continue to shelter their super-premium content and look out for premium content to feature and monetize online.
3) Print companies. Print-centric media companies have been losing revenue forever, and some see online video as a truly incremental source of revenues. While some are adopting a low-hanging-fruit option (ex: newspapers arming journalists with cameras, magazines publishing videos of photo shoots), eventually they’ll seek to license or hire producers to make up for print revenue loss.
4) Other new-media producers. We’re not there yet, but eventually we’ll see a tipping point where video content producers are totally sold out and adding more videos will create more ad inventory and thus, ad revenue (right now the former is true, but it’s unclear if the latter is also true). Because a low proportion of producers have a large own-and-operated destination, licensing additional content is not necessarily financially feasible (due to margins). But once there’s enough advertising in the ecosystem, then some will see merit in investing in their own property. That investment will come from marketing, providing (you guessed it) more content.
5) Ad networks. Naturally video ad networks will seek to monetize any and all ad volume a producer can run ads against -- but with a distribution model across hundreds of sites, the margins simply don’t always work out. However, display ad networks are always looking for video content as a hedge from both the emerging video ad networks and the shift of display to video advertising.
6) Ad agencies. Ad agencies are facing shrinking margins and an existential threat. With content and marketing blurring rapidly, even the largest of ad agencies are looking for content creation and catalogs to offer more to their clients.
7) Online publishers. Publishers command audiences, own brands with the kind of halo that advertisers seek out, produce massive amount of text content, have relationships with advertisers -- but lack video content and production expertise (or don’t have as much as they need). Striking up deals with publishers is always an option for video producers.
8) Consumer product companies. Consumer product companies are looking at extending brands into content without wanting to do it from scratch internally. While some companies like Red Bull are massive producers now, most are content to license or outsource.
9) Stock video and image companies. Stock video and image companies have been toying with moving into video to unlock the value of their raw footage while obtaining distribution on emerging platforms. While this may be a tad too revolutionary for some, it’s a matter of time before some of the players go all in.
10) Academic publishers and educational providers. Academic publishers and educational providers are looking at adding video to their tools and resources, as video and remote learning become commonplace.
Ultimately, a producer needs a diversified revenue strategy to survive -- let alone thrive. It’s unlikely that these 10 groups prove to be a salvation. But before everyone bets the house on advertising alone, it’s worth it to explore these options.
I often come across articles like this and for once I would like to say – I totally disagree.
Our content owners have been seeing a very nice cash flow in the higher six figures range. Yes, we put great tech work into practice in order to help these customers get there (mainly to solve optimization and latency issues). Yet this doesn't mean that the model doesn't work, but quite the opposite. Content owners CAN make a lot of $ from online video (and sorry if this sounds like a self promotion, just had to barge in and weigh in on this subject).
The idea of this series is to present a 360-degree view of all of the issues that content creators face. If every article was overly positive or negative it wouldn't work. Sometimes the articles present a more optimistic outlook, sometimes a more cautious one. All this article does is present options for content creators to generate incremental revenue streams. No one said advertising doesn't work.
Just a clarification point for YouTube TruView in-stream ads:
"You pay if they watch for at least 30 seconds or to the end of the video (whichever is less)."
Thanks for clarification Jeff.