• by kyle , Daisy Whitney , May 21, 2008

Web video has yet to hit pay dirt

The numbers don't lie, and they say Web video producers should be raking in the dollars. After all, advertisers are expected to spend $1.4 billion on online video this year, then $2.1 billion the next year, then $3.1 billion the year after, according to eMarketer. But most of that money is going to established players, like ABC.com with its network fare, or Yahoo and its popular music videos. Sure, Michael Eisner's Web studio turned a profit on last summer's Web hit "Prom Queen," which generated more than 15 million views, while the creators of the popular Web series "Ask a Ninja" pull in more than $100,000 a month from ad revenue, merchandising and licensing.

They're the exceptions, though.

To be sure, the rise in viewership has been fast and furious in the Web video world. In fact, nearly 80 percent of Internet users will watch online video each month this year, a number that should hit 85 percent in 2010. But most of those consumers are tuning into either YouTube, which delivered 2.9 billion video streams in February, according to Nielsen, or to MySpace, Disney, Nickelodeon or ESPN, all of which fall into the Top 10 online video brands, as ranked by Nielsen based on total streams.

Most indie producers, however, aren't feeling the financial love. The Web comedy "The Guild," which won a YouTube award, a Yahoo Award and a Greenlight Award in March (along with $10,000 in cash), has been funding production solely with fan donations. "The Guild" creator Felicia Day says even though seven episodes have aired since last summer, garnering more than 4 million views, the show still doesn't shoot an episode until it receives sufficient donations to underwrite production. And the budget covers only essential production costs, not actors' salaries. Day hopes the awards will vault the show to another level so the team can start making money.

The popular Web show "Mahalo Daily" receives between 50,000 and 60,000 views per episode, but isn't making money yet. Show owner Jason Calacanis doesn't plan to sell ads until the show reaches 100,000 views per episode. "We want to focus 100 percent on getting to 100,000 views a day," he says.

Then there's "MobLogic," a six-times-a-week news show backed by CBS Interactive. The show launched in March, with Saturn as the first advertiser. "We are on the path to profitability, but the whole industry is still about a year away from having the ad solution figured out, so for now the remainder of our budget is covered by our parent company," says Lindsay Campbell, the show's host. "If we are able to grow a large audience, we will have no trouble securing sponsors, and the show will stand to be an example of success in the online video space."

Irina Slutsky, who fronts "Geek Entertainment TV," still works as a video consultant since her Web show isn't self-sustaining. Adobe, GoDaddy and Intel have advertised, but Slutsky says she's testing the ad waters carefully to make sure advertiser influence doesn't creep into the show.

As independent Web shows grow their audiences, they'll still have to compete with the heavyweights for ad dollars. Eisner's Vuguru debuted its new Web show, "The All-For-Nots," in March with two big advertisers already on board, Expedia and Chrysler. The show also has turbocharged distribution: It's available online at Hulu, iTunes, blip.tv and other sites, as well as on mobile phones from Verizon and on Mark Cuban's cable channel HDNet. The battle continues.