BloGiza

The online year that was

As today is the last day of 2007, it’s a little hard to resist looking back at the past year and trying to sum it up. So, I won’t resist. Unlike last year, 2007 is hard to summarize with one handy tag such as “the year of online video” or “the year of social networks”. There was a lot of activity in a number of different areas, the rise of a major player in the social networking space, and the rise of a new form of communication.

So, herewith a few highlights IMHO of the online industry in 2007

Story of the year: The consolidation of the advertising industry
Y’all thought I was going to say Facebook, right? Now, while the rise of Facebook is certainly the most hyped story of the year, my vote for the most significant development  (not to mention the biggest source of M&A activity) is the rapid consolidation of the online advertising space.

During the last 12 months, Google bought out Doubleclick for $3B. Shortly thereafter, Microsoft acquired aQuantive for a staggering $6B. AOL bought out targeted ad firm Tacoda, as well as Quigo which. Yahoo acquired Blue Lithium, as well as a majority stake in Right Media. WPP bought 24/7 Real Media. And the list actually goes on.

The M&A hyperactivity in this sector is an indication of the fact that online advertising has reached a certain stage of maturity. Beyond that, the consolidation is likely to have long-term ramifications, especially in regards to the rise of Google as the behemoth of the information age as well as the development of new business models online. And that’s what makes this, at least for me, the biggest development of the year.

Phenomenon of the year: Facebook
Obviously, I couldn’t not mention Facebook which gained momentum extremely rapidly this year and became the go-to social network for those of us who aren’t musicians, 14-year-olds, or skeevy perverts. Facebook only opened itself up to the world outside the university sphere towards the end of 2006. I joined up early this year. Before long, almost every high tech-ist I knew (and many I didn’t) was on it. Lately, the sphere has expanded further and everyone, their parents, and their parents’ friends are connected. Clearly we’re on to something.

Of course, it will be interesting to see whether Facebook will be an ongoing concern for most people or just a passing fad. I like it for business purposes, as a tool for microblogging, and as the communications platform of choice for a number of my friends. On the other hand, I have a hard time answering those who complain that there’s nothing to do there. We shall see.

New technology: Microblogging
The rise of Twitter and its clones provided us with probably the only real new media form we’ve had in a few years, viz. microblogging. At first, the concept seemed a bit stupid. After all, why would I want to blog in tiny, one- or two-sentence bursts? But then you start getting into it and discover that Twittering (or updating your Facebook status, which I tend to do more) is a nice complement to blogging for those times when you have something small and/or clever to say but which doesn’t warrant an entire post. Plus, it’s the first Internet app that makes perfect sense for the mobile. It’ll be interesting to see who snaps up Twitter and for how much.

Interesting development in local tech: The renaissance of the Israeli internet scene
Three or four years ago, it seemed that the Internet industry in Israel was close to dead. During the days of the ’99-’00 bubble, the high tech scene was awash in Internet startups looking to be the next ICQ. Then the bubble burst and most of the companies went under. Worse, the VC industry was burned on the subject and it subsequently became almost impossible to get a new Internet startup funded.

As recently as two years ago I regularly had colleagues in the VC world lecturing me that Israel was incapable of producing Internet companies and, besides, these types of investments weren’t suited for VC anyway. What a difference a few years and a YouTube (and a Facebook) later make.

Once again, we are seeing dozens of new Internet companies each month. What’s more, there is a real feeling of an Internet scene here, helped along in no small part by Facebook, the work of groups like the Co.ils and the Geek Garage, and of course Jeff Pulver’s social activities. Let’s hope this continues to develop and mature.

Case of possible overhype: Online video
I’ll catch some crap from friends about this, but the online video space has become somewhat overhyped in the last year. Actually, that’s kind of unfair. What has happened is that in the post-YouTube age, online video has become ubiquitous. This has led to a lot of noise and a sense of, “Ok, what do we do now?”

Towards the end of last year, it looked like the field of mid-tail, independently produced video content (e.g. Ask a Ninja, Rocketboom, Ze Frank) would be the next big thing. As of now, that has failed to happen. There haven’t been any real breakthroughs this year. Even projects as big and as hyped as Joost have yet to take off as a mass-market application.

I still have big hopes for this sector, but it may have to wait until sometime in mid-2008.

Predictions for 2008
You’ve got to be kidding me. Only fools make predictions in this online age where what you write will forever haunt you. Still, I’ll make some safe and predictable ones for the upcoming 12 months:

• There will be a number of huge-size Internet exits that will have people scratching their heads
• The whole notion of privacy will continue to erode as Google finds out more and more about you
• Mobile internet will remain where it has for the last three or four years, i.e. tantalizingly around the corner as the Next Big Thing
• Some technology or company that you’re not thinking about will be the big story of 2008

So, for all my celebrating friends and colleagues out there, I want to extend best wishes for the new year and hope that 2008 brings health, happiness and success to us all.

Viacom vs. YouTube, Round 3

First they tried to come to some kind of agreement. Then Viacom sent out a pile of cease-and-desist letters to YouTube warning them to remove Viacom's copyrighted content from YouTube's servers. YouTube complied, but apparently not to Viacom's liking. Now, Viacom has decided to sue YouTube for a whopping $1 billion over what it claims are 160,000 copyrighted clips that were uploaded to the video sharing service.

This lawsuit may have something to do with the deal Viacom recently cut to distribute its content via Joost. Either that or somebody peed in Sumner Redstone's Geritol the other morning. At any rate, it's a doozy.

First of all, join me in saying that sum out loud in a Dr. Evil voice: one billion dollars.

Next, let us bask in the ridiculousness of these numbers. (Or, better, read this analysis from the NewTeeVee site). Viacom is looking to get $6,250 per clip, which is actually pretty cheap considering that the maximum penalty for copyright violation according to US law is $150,000. I guess Viacom didn't want to look greedy or anything.

All this fighting, by the way, over a company that may have had something like $15M in revenues last year.

Presumably, this will eventually be settled out of court, a number of lawyers will get richer, and the online video landscape will be no better off.

Viacom vs. Goobe

Now we're in for a fight. Last week, Viacom -- the media conglomerate that owns, among other things, MTV, Nickelodeon, and Comedy Central -- demanded that YouTube pull more than 100,000 clips which Viacom says infringe their copyrights.

This is an interesting development, since Viacom had previously been in negotiation with Google to come up with an agreement to kosherize the material in question. This latest move might mean that Viacom is fed up with perceived foot-dragging on Google's part, or it could be a negotiating tactic.

At any rate, according to the DMCA Safe Harbor regulations, YouTube now has less than 10 days to take the clips down. Which means I don't have much time left to enjoy those Stephen Colbert clips and Steely Dan videos that I like. Sigh.

In the broader scheme of things, this points to the complication of bringing the world of video to the Internet in a clear and legal way. In theory, it seems like it would be easy for Google to sign deals with the media companies. But it's also clear that Viacom et al are still trying to preserve what they can from their old business models, so the theory only holds so far.

I'll be interested to see how this flap plays out and what implications it has for Joost and other companies trying to merge TV and the Web

(BTW, an interesting debate on the subject can be found in the comments section here)

2006 - The Year of Online Video pt. 2

The Establishment Goes Online

The online video revolution goes a lot further than the YouTube phenomenon. If anything, 2006 may be remembered as the year that the Internet became an official outlet for mainstream, big-studio product. This has come in a variety of different forms:

• Full episodes available online - Over the past 12 months, the major US television networks had a revelation. Rather than fighting all the file-swapping of TV shows they could embrace the new medium. In quick succession, NBC, ABC, and CBS started offering full episodes of their shows on demand. On their official websites no less.
  
  If you think about it, this is a complete revolution in thinking. And yet it makes a lot of sense: instead of the show being broadcast once, you can broadcast it hundreds of thousands of times. You can build your show's brand and add your network's own advertising. In the future, you can also greatly increase the amount of advertising you broadcast by monetizing each of those shows on demand. A win-win all around
  
• Added features - In addition to broadcasting full episodes of the shows, the networks have also started utilizing the Net to provide bonus material for fans. Reality shows like Survivor now feature behind the scenes footage, deleted scenes, and interviews with participants. Even more interesting is the creation of "webisodes" short (2-3 minute) Internet-only video clips like those recently created for the shows The Office and Battlestar Galactica.
  
  These webisodes, which focus on secondary characters, not only help enrich the viewer experience but they also give the viewers something to look at while the shows are on hiatus. I am betting that we will see a lot more activity like this in 2007
  
• YouTube as a marketing channel - I touched on this before, but the networks have realized that it's better to use YouTube than fight it. If you need any more proof of this point, compare NBC a year ago -- when it forced YouTube to take down all clips of "Lazy Sunday" -- with this year when the network utilized YouTube for an uncensored version of the Christmas Present Song.

I think we will see more of all this in the new year.

2006 - The Year of Online Video pt.1

The Year of the YouTube

Show of hands everybody: One year ago, on Dec. 26 2005, how many of you out there had heard of YouTube? How many had actually used it? Considering how ubiquitous the video-sharing site has become it’s amazing to think that 12 months ago the site was only getting a couple of thousand hits a day is now the number 6 destination on the Web.

Not to mention the fact that 24 months ago the company didn’t even exist.

 YouTube is one of the most popular time-wasters on the Web. It is the go-to site when you want to post videos of your cat. It has created a number of home-grown mid-tail celebrities like the Numa Numa guy, Judson "Evolution of Dance" Laipply, Lonelygirl15,  (and of course our own Papadizi). It has become a marketing channel for professional media outlets.

Even before Google bought out YouTube in December, I was ready to proclaim 2006 to be the year of online video. You could feel something building up throughout the year as a medium which had previously been an early adopter technology.

Setting aside the hype surrounding YouTube’s massive exit, online video – and specifically short-form video nuggets – is looking like the 21^st century’s first new media form and one of the most exciting things to happen to the online world since the creation of the online world.

From the standpoint of the tech investor, the rise of YouTube and short-form video opens up a number of interesting possibilities. Just a few off the top of my head:

• Better-quality, faster video delivery
• Video on Mobile
• The combination of video and advertising
• New types of video-based Web communities
• New advertising platforms based on Web video
• Perhaps even a high-quality content production studio (who knows?)

More thoughts tomorrow.

NBC Does Video Convergence

Today's New York Times has an article about this week's latest YouTube phenomenon. This one comes courtesy of "Saturday Night Live". Last week's SNL aired a parody music video called "A Special Christmas Box".

The clip features Justin Timberlake and Andy Samberg singing a smooth R&B number about making a special Christmas present for their girlfriends.

The premise behind the joke (and the gift in the video) just barely passed NBC's censors, who insisted on that a  certain word -- that appears 16 times in the film -- be bleeped out. In an unprecedented move, the creators of the film asked NBC if they could post the un-censored version of the clip on YouTube. And NBC agreed.

(The uncensored clip can be seen here; I'd put it up directly but we are trying to run a family-friendly blog).

Okay, It's incredibly amusing. But why am I writing about it?

Because it is the latest example of one of the year's most interesting trends: the migration of mainstream content to the Web. The migration pattern is one particular facet of what I call the YouTube effect. Increasingly, major production studios and television networks are harnessing the Web both to provide another broadcasting channel for existing material as well as a way to provide new material that complements shows on the air.

NBC blundered onto this phenomenon last year when another SNL music video, Lazy Sunday, became a sensation after users posted it to YouTube. Originally, NBC had YouTube take the video down. But they soon realized YouTube's potential and have gone so far as to open up their own channel on YouTube where they broadcast clips from NBC shows.

I suspect that we will see a whole lot more of this in the coming year and by the end of 2007 there will be a hell of a lot of overlap between broadcast TV and the Web.

Frosty the VC

So true, so true...

Web entertainment talent gets a vote of confidence

Here's another interesting item on the Web video frontier: United Talent Agency, one of the biggest talent firms in Hollywood, has opened up an online arm in order to scout out potential talent from the Internet world.

The goal this time around, executives say, is not only to recruit the next generation of television and film writers and directors from the relative obscurity of sites like YouTube and Revver. It is also to help the major Web portals that are hungry for original content to find the creative people they need — just as movie studios have long turned to talent agencies when looking for new directors, screenwriters and actors.

“It starts with just helping identify people on both sides of the aisle,” said Brent Weinstein, head of the new division, UTA Online. “The barrier to entry is so low, everybody is now a potential artist. So there’s this great unwashed of talent out there, 99.999 percent of which is probably not good enough to have a traditional film and television career. But on the Internet, a lot of different types of things go. And yet for buyers, this is a wall of people, so how does a brand know which one of them can help it execute?”

This is yet another indication that we are seeing the rise of a new type of entertainment medium. Short-form video or semi-pro video or whatever you want to call it has gotten a real boost in recent months, certainly since the Google-YouTube deal.

It looks like the future of entertainment (or at least some of it) will reside in all the semi-professional stuff that makes buzz on the Web. Now it seems that Hollywood has started to take notice as well.

GooTube

Or should it be "YouGle"?

Well, it's now official: Google is buying YouTube for $1.65B in a stock transaction. The deal ends several weeks' worth of speculation about who would buy out the video-sharing site and how much they would pay for it. I had heard speculation that the deal would top a billion, but I think the final price tag will surprise a lot of people.

After all, although YouTube is probably this year's Internet success story and one of the best pure-Web brands (along with MySpace, Facebook, Flickr and several others) from the second wave of the internet it still doesn't have that much by way of revenues. Certainly not to justify its boffo price tag from a conventional standpoint.

All of which has some people mumbling about Bubble 2.0.

Anyway, some thoughts:

1. The deal confirms the belief that short-form video has emerged as the first new significant media form of the 21st century. YouTube has been evolving quickly and now provides not only a platform allowing people to express themselves but also a cutting edge distribution channel for semi-professional and industry content.
   
2. It will be interesting to see what kind of effect this will have on other video sites.  Specifically, I'm curious to see what will happen with Metacafe, Israel's main entrant in this space.
   
3. This was a surprisingly strong move by GOOG and breaks the conventional wisdom that Google doesn't make big strategic purchases.
4. I tend to agree with Om that the big loser in all this is Yahoo, which lost out on the deal. Yahoo will now be forced to scramble to close some other large deal (Facebook maybe?), which will likely be regarded as a "me too" play.
5. Google will now have to defuse the ticking legal bomb that YouTube represents. The only major threat to YouTube comes from the kind of concerted attack (by the MPAA, RIAA, and other large bodies) that brought down Napster. The success of YouTube is widely seen as coming from illegally distributing copyrighted materials. This includes not only last night's episode of "The Colbert Report" but also home videos of people dancing to Britney Spears.  YouTube will have to cut industry-wide deals in order to rectify the situation; if the industry is smart, they will embrace the new medium.
6. A grudging mazel tov to Sequoia, YouTube's sole backer, who will be walking away after two years with a 43x exit.
   

Short Vids are Here to Stay

Despite all the hoo-ha about Web 2.0, it's becoming increasingly clear that short-form video is the real Internet story of 2006. In the last week we've heard rumors that YouTube is looking for a $1.5B valuation. Not to mention the fact that this year's Web 2.0 conference will feature a showcase of short videos hosted by John Battelle.

We've grown accustomed to thinking about sites like YouTube as the distribution channels of the future, but I (at least) envisioned it as a channel for distributing traditional long-form content such as movies or TV shows. However, it seems that video nuggets have developed into a media form in their own right.

One of the more interesting developments surrounding short-form video content is the recently announced NBBC. NBBC is a joint endeavor between NBC Universal and NBC's affiliates. In brief, the service acts as a marketplace for quality video content. Content creators use the NBBC platform in order to place their content on publisher web sites.

Content creators can use the site to increase the exposure of their videos and to receive ad revenues (the service works on a rev share business model). Publishers have access to new content. And NBC can use the platform both as a new avenue for monetizing its existinc content as well as get a cut of a brand-new revenue stream.

Significantly, the service is open to anybody with video content. NBC does not seek exclusivity nor does it seek to own the content.

Interestingly, this seems like the first example of a major content provider extending its brand to user-generated material. If NBBC manages to take off, you can be sure that other media entities will follow.