• by Joe Marchese , December 5, 2006

If you want to watch video online, you certainly have no shortage of choices. There is so much content and so many destinations, one could easily come to the conclusion that there are too many options. How long can the market (or more accurately, venture capital) support them all? Last I checked, Web 2.0 didn't come with an extra eight hours a day for consumers to spend bouncing from site to site searching for videos The absence of a switching cost between methods of online video consumption will allow the people to decide which video sites survive. So, it's going to be a race and you want to place your bets, but where? To handicap the race to online video supremacy, you have to consider the major components of the online video ecosystem; interface, content and monetization.

Interface. The interface is important on a couple of levels. First, the cleanliness of the interface can perform miracles for user adoption (see: Google and Apple). Maybe even more important is the experience the interface can provide. For a long time, we were introduced to a manageable quantity of content on broadcast; we picked the ones we liked and allocated our attention accordingly. Even that has been getting difficult with all the choices we have with cable right now, and online introduces a whole other level. And online video search is not search as we know it. We are still learning what to ask for to get informational relevancy and the search engines are figuring out ways to objectively and scientifically produce results. But do we know what to ask to achieve emotional relevancy? And if we did, does an objective and scientific process exist to produce the most entertaining results? So far, the recommendation, or "social search", is the most powerful tool out there. That said, emotional relevancy is a long way from being solved.

Content. When we talk about video content as a differentiator, we are talking about both quantity and quality. It is easy to understand why quantity is important, given all of the destination choices for consuming videos online; you want your source(s) of online video to be as exhaustive as possible. This then brings us to exclusivity deals. Think NFL Sunday Ticket on DirectTV. If I can get everything from two sources, in this example satellite or cable, but I can only get football from satellite, then I would choose satellite.

There are parts of this example that don't work for online video. For instance, you only need one provider of home connectivity for content, whereas online you can use as many as you want. However you look at it, though, all things equal, exclusive deals to quality content could be the differentiator between online video sites.

But now that we have established the importance of exclusive content, let's poke a giant hole in it.Why would any content producer want to grant exclusivity? Historically, and I don't think anyone is arguing this is going to change, content producers grant exclusivity for funding prior to production, or at least prior to release. So the AdSense approach of "build the content first and we will pay you if and when the people come" is a little more difficult in the video world.

Montetization. The issue of the timing of funding also affects the quality of the content. In order to produce quality video content, there is a much higher outlay of initial capital by the producers. Meaning, it's much harder to make the next great drama with one actor and one cameraman, then it is to write the next great blog with one coder and one journalist. If only there was some system to decide which content got funding, could bring together the talent to make it real and then make deals to distribute the content--that's right, video 2.0 is going Hollywood, but it just doesn't have to happen in California. New Hollywood will be anywhere there is talent and money, and a system for putting the two together, even for the smallest deals. The New Hollywood system will get better (and may even be controlled by old Hollywood), and the online video distribution platform with the best relationship with both new and old Hollywood will be a leg up on the competition.

The question is, should the distribution platforms attempt to play the role of New Hollywood? I think we are more likely to see another layer of mini-studios arise between the small content producers and the YouTubes. This may result in a land grab by distribution platforms to get these studios under contract (see Google's recent efforts with the big guys), very similar to Web 1.0 and the online land grab for ad inventory.

Regardless, what needs to happen is the creation of an online video ecosystem. This ecosystem would account for content consumers (the interface and content choice) and content producers (with distribution and timely funding options) and the money to support it all. Content will be attracted to distribution methods that can earn them the most revenue. Google, or VC backed video sites, can foot the bill for a little while, but the determining factor for long term success will be who can solve the online video monetization issues. The challenge facing Google et al. is that getting money to support their budding online video ecosystem is very different from their experience in extracting budgets for performance-based advertising; they need brand dollars and they need TV dollars.

So, let's handicap the race (this is just for fun, don't get mad if I left your favorite out):

GoogTube: 2:1. Reason: Money, resources and the lead.
Myspace: 5:1. Reason: Why not?
Yahoo: 10:1. Reason: MyYahoo and social search a plus.
Microsoft: 25:1. Reason: Money, money, money--and years of pushing into home entertainment.
Revver: 30:1. Reason: working hard on revenue sharing (I have a lot of respect for David Tenzer who is managing Revver's Hollywood relationships).
Heavy: 30:1. Reason: Better,/cleaner interface than the bunch-but not necessarily a better experience.
The dark horse: 1:1. Reason: Because Google wasn't first, and where are altavista and excite right now? Doing it right is what matters online.