Twitter is hugely popular, growing quickly, and has attracted lots of funding and worldwide buzz and all the other things a wildfire-on-the-way-to-greatness web start-up could ever hope for.
But how’s it ever going to make money?
That’s something that people have been discussing for a long time now. Aidan Henry, who I know from MappingTheWeb but is also now writing over at ReadWriteWeb these days (CongratsAidan!), posits a few interesting theorems today. In short, Aidan suggests doing contextual ads that run in Twitter feeds, an adwords-like system that auctions off ad space, or a tiered model with a free level of access and a subscription-level that allows people to get the site ad-free.
Personally, I like doing things simple and easy whenever possible. Although many people access Twitter through a mobile device or through applications like twhirl and twitterrific, there are large numbers who access it on the web, through twitter.com. Why not just put a leaderboard banner ad across the top of the page and perhaps a skyscraper ad underneath each person’s friends in the right column?
That way, each time anyone refreshes their page to receive new messages, and each time someone clicks around the site to browse, a new ad impression is created. Geotargeting or some other means of sending contextually relevant ads could further increase CPMs.
I think introducing ads into Twitter feeds could be a dangerous move. Even clearly labeling tweets as “sponsor messages” will annoy many people. It will also open the floodgates for more spam to be introduced. For example, if Twitter is sending sponsor messages, why can’t I send sponsor messages of my own? This could have an overall negative effect on what is currently a great and thriving and growing community.
Clearly these are all things that the people at Twitter are pondering. It’s a tough problem, adding a revenue model into the mix of an existing free service. I hope that Twitter can eventually figure out a system that works and does minimal harm to what is now a pretty special community.
As online video producers experiment, fumble, and tinker their way toward a model for making money on scripted online video content, an old school premise emerges on the new media scene: product placement.
It makes sense. Because online video needs to be able to be seen where there’s audience (see: YouTube), advertising that is already “baked in” to the video content itself can help producers to monetize their product.
Fred Seibert, creative director of NextNewNetworks, talks about creating programming around “community need” and then finding a way for video content and sponsorship to crossover to meet that need. Interesting stuff.
Online video advertising is still, relatively speaking, a brand new industry. People only started watching videos on a massive scale over the last three or four years, as broadband penetration peaked and video platforms like YouTube emerged for non-technical people to easily upload and publish video to the Internet. And it’s only in the last year or two that online video advertising has emerged.
Much like for the Internet itself, the idea of advertising for online video was strange at first. But over time, people are getting used to the idea, and depending on the quality of the content, will put up with it in certain forms. Further, if the advertising is contextually relevant and/or blended effectively with the content itself, audiences might actually enjoy it.
Here’s what we know: people are online, they watch video online, they spend money online. Therefore, video producers and advertisers are going into overdrive to figure out a model that works. And as this marketplace matures, we’re going to see higher quality video content online and advertising models emerge that make money for producers.
There are probably many people who will disagree with that last statement, by the way. It’s conventional wisdom in some circles that you can’t make money online from scripted video content. I disagree. It’s simply a matter of time and experimentation.
Mark Cuban wrote a piece last night about “the failings of Internet video and the expectation of free content,” which references a Bernstein Research report called And Now for the News…The Emperor Has No Clothes.” Cuban’s premise is that “the a la carting of video on the net” will force video production budgets to be slashed and video content quality dumbed down, which will only benefit “Google and Youtube and black and white hat SEOs.”
This is an interesting and complex topic, and no one really has all (or even many) of the answers right now, but I find some flaws in Cuban’s thinking.
Let’s walk through this. Cuban’s initial premise is:
* Consumers won’t pay for content on the web, so it will have to be ad supported. - Is this true though? Over the last month, I’ve paid for music and video on the Internet, purchasing both through the iTunes store. The content was high quality (a great 2007 album by The Hives, and episodes of Lost that I had missed) and the price was right.
Consumers will of course be savvy in setting the barometer on what they will and won’t pay for. Most people though will be willing to be subjected to some form of video advertising.
Then we have:
* [Video content] will have to be ad supported, and it won’t be ad supported - Cuban is arguing that video content producers won’t be able to make money back on video advertising that it will take to create video content. This is a tough one, but it makes a number of assumptions. It assumes that video is being produced for web distribution (only?), and that the revenue model is based on some form of video advertising.
There are a number of ways, however, that things may work differently, in whole or in part. Video could be a branding vehicle to drive eyeballs back to television or elsewhere, or it could be a “loss leader” in an effort to get people to purchase video.
Cuban is right in stating that “a la carte” consumption on the Internet is exploding traditional methods of media consumption. In other words, people would only pay for the cable television channels that they wanted if they could, but they’re forced into paying for expensive packages at present. The print newspaper and music industries are flailing because people can purchase “a la carte” or get the content for free online.
So Cuban is looking ahead to see how the television and movie industries are going to deal with these same issues when it comes to video.
The short answer that anyone can say for sure is that it’s both an exciting and chaotic time for media creation, distribution, and consumption. I would argue though that in the end it’s a great thing because people are able to get more of what they want and how they want it than ever before.
Here are a number of other factors that I see playing out in the years ahead:
* Television will compete with the Internet for a long time - The opposite is of course true. However, if seven or eight million people watch a show on broadcast TV or one or two million watch on basic cable, no one blinks an eye. These numbers are astronomical when compared to numbers of people watching any one show online. That means that television – and that includes premium channels like HBO and Showtime – will be producing high quality content for the foreseeable future.
And really: the last decade has perhaps been the best in the history of television. The Sopranos. The Wire. Buffy the Vampire Slayer. Dexter. Lost. The Shield. Great shows are managing to be produced. One could argue that the proliferation of cable TV helped to drive this “golden age.” So as a devotee of great TV, I’m confident that that won’t change anytime soon.
* Producing and distributing “high quality” video content on the Internet is still very new - New web enterprises like Funny or Die and web-only shows such as Prom Queen are voyagers on a brand new ocean. Television has been around for decades, so of course many of these newer efforts are going to look and feel awkward, as production budgets and episode lengths are tinkered with to meet brand new economics.
This will get figured out though. Here’s the thing to remember:
* People love to watch video on the Internet - So people will figure out a way to make money on it. Sure, there will be some of the “dumbing down” and SEO plays that Cuban fears, but there can and will be a way for high quality shows to find an audience, and for that audience to help drive revenue for the content producers.
* The video advertising industry is still brand new - Pre-roll, mid-roll, post-roll, sponsorship, banner ads, companion ads, takeover ads, ad overlays, hypersyndication. These are all brand new tools for video publishers to play around with to find the model that will be acceptable to viewers and will make the most money. If it sounds confusing, it is. But there are hordes of hyper smart folk working on the equation even now. There’s gold in them thar hills, if you follow.
Production budgets, content type, and content length will all be experimented with wildly for many years to come. And over time, expectations and norms for advertising and monetizing online video content will evolve and mature. Let’s remember that a decade ago, online advertising wasn’t respected as a way to make money!
* Creative destruction - If nothing else, the Internet is a powerful force that is still only beginning to shape our daily lives. We’re only a few short years into widespread broadband cable distribution, which is driving the mad wild rush of video consumption.
So, finally, Mark Cuban asks: will it lead to destruction?
Yes. And that destruction will clear the way for what’s next.
I normally read Mashable, the uber-comprehensible news service of the social media world, through an RSS reader, so I was a little bit surprised when I browsed around the site last night.
Is it just me, or does it have a lot of ads?
The center column is ad-free for the most part, thankfully. But there’s a lot of color and blinking lights and ads that run on and on down both the right and left column of the page.
Far be it from me to criticize a website for trying to make money, I’m all for it! But there’s a balance between content and advertising that’s part art and part science.
I don’t think that Mashable’s use of ads is terrible, but it was enough to be distracting. Which I suppose is good from the advertiser’s perspective!
Taking a look at TechCrunch, arguably the site which Mashable most hopes to emulate in terms of popular and financial success, it’s pretty clear that there are a lot fewer ads and the layout and balance between content and ads is cleaner. There’s a wide body of content on left, with a sizeable column on the right set aside for ads and other stuff.
The appearance of the ads is less distracting on TechCrunch as well. Less bright flashy things going on, lack of Google text ads.
Hey, we all have to use Google text ads from time to time (ahem), but lets face it, they’re not the greatest thing that you can do for the overall appearance of your site.
The first sentence of the third paragraph of a New York Times story covering Google’s launch of video ad units to its Adsense members that include YouTube videos says it all: “The service, which represents the first major combination of a Google product with YouTube, will give video creators wide distribution beyond YouTube via Google’s network, known as AdSense.”
We also know that Google will share revenue from the ads with web publishers and video content creators. So beyond that, what does it all mean?
Mathew Ingram frames the big picture question: “Whether this is a breakthrough use of YouTube as an advertising platform, or a lame scramble by Google to justify the billions it spent for the video-sharing site, depends on who you believe.”
Andy Beal provides some detail on video content providers that will be launched with the program, such as TV Guide Broadband and lonelygirl15.
A significant question will surely be whether or not Google/YouTube can provide compelling video content that a) web publishers will be willing to run on their sites and b) whether said content will be interesting enough for audiences to sit through to make money for three parties: web publishers, video content creators, and Google/YouTube.
A bunch of websites, including Lost Remote, are quoting Brightcove’s CEO as saying that getting high traffic sites to run “arbitrary content” is a difficult proposition. Which may well be true, but something tells me that Google will have more success at this than Brightcove.
Overall, I see this as an interesting experiment and strategy, but whether or not it will be successful remains to be seen. It’s certainly a side-run around the big question stemming from Google’s purchase of YouTube: how will they make money on a massively popular video site fueled by user contributed video content? We’re starting to see the answer: carefully selected commercial and “amateur” video will have some form of advertising, some of which will run on YouTube, and now we see that some will run on websites that already are part of the Google Adsense program.
Which is one of the places where Google makes real money.
In what may be coincidental but is nonetheless interesting timing, stories involving both ABC and NBC making broadcast shows available online (at least for an increment of time after the show premieres on television) have caught the buzz over the last 24 hours.
ABC’s deal with AOL locks in distribution via AOL and features advertising embedded during shows, with no cost to viewers. The NBC deal allows people to stream shows for free for one week after shows premiere on the broadcast network. Advertising runs on shows and can’t be fast-forwarded through.
So, what have we learned here?
* Television isn’t just rushing to get online. It’s scrambling.
The days of massive traditional audiences watching TV distributed by networks on a television set are in their last throes. The networks now get this and are hell bent on finding new ways to get eyeballs in front of their shows.
* The future of television is online, free, and ad-supported.
Some people might pay $1.99 to download shows on iTunes (guilty here, when I went away for several weeks and my DVR forgot to record Lost!) but for most, they’ll sit through short, sweet, and relevant advertising.
* People are online and want entertaining content.
This is the most powerful force of all. The audience is there, and there’s a marketplace for quality entertainment content. That race is on at warp speed to fill it.
* Return of the TV?
Just for kicks, think about this: wouldn’t it be wild if the traditional TV, powered by the DVRs (digital video recorders) that networks despise, actually made a bid for people to return to their sets because it allowed people to fast-forward through commercials?
* Check the trends.
Here’s what we’re looking at: traditional TV will figure out more ways to advertise in-show (thanks, TiVo!), online TV will figure out the revenue model (think short pre-rolls, mid-roll, post-roll that allow interactivity if the user desires), and much much more content available online than ever, including original offerings such as Quarterlife.
Yet more confirmation is rolling in that the Internet revolution will not be televised… Okay that’s a terrible pun but it’s fascinating to look at the dramatic shift in how ad spending is being allocated across different forms of media.
According to TNS Media Intelligence, online ad spending is way up while television, newspaper, and radio are all down in terms of year-over-year spending. And the difference is not just small, it’s dramatic.
With the exception of outdoor media buying (billboards, buses, and so forth) and magazines, online is where it’s at. And the most striking thing of all is that online ad spending still only forms a small percentage of overall advertising expenditures.
Which means that this whole Internet thing is still at the beginning.
⊆ September 13th, 2007 by Eric Berlin | ˜ Tags: advertising
Advertisers are getting interested in web video shows, and the media is getting interested in advertisers getting interested in web video shows… it’s getting heated up in the online video space.
People are getting jittery that the US economy is heading into or is currently in recession. If that’s true (and of course I hope that it’s not, but the signs are there) I wonder if that will allow for a radical realignment of how advertisers spend their money.
In other words, right now ad dollars are disproportionately spent on television and print and outdoor media as compared to online in terms of how people spend their time. I think it’s possible that a down economy will give advertisers the latitude to “experiment” and shove a rightful percentage of ad dollars where they should go: to ad banners, online video ads, and other kinds of contextually relevant online advertising.
Part of this process will be fueled by maturation in online video shows, from Prom Queen to Geek Entertainment TV to Digg Nation to other well produced shows that are distributed solely or mostly online. And it will be fueled by an increase in the number of video ads produced. Right now, interestingly enough, there’s more demand for online video ads than inventory available to be served.
YouTube’s announcement that it is finally going to start running video ads along with some “media partner” videos is causing all kinds of reactions across the blogospheric Milky Way.
In my view, the biggest takeaway is that we’re finally seeing how Google – which purchased YouTube for about $1.6 billion – thinks it can make money from online video, which will surely be massively influential on how the rest of the industry attempts to do the same for some time to come. The basics are: run an overlay ad that pops up on part of the video a short time after the video starts playing, and allow users to either click an “x” to “opt out” of the ad or click a play button to pause the original video and play the video ad. The key in the case of YouTube is to only run the ads on “approved” videos, which avoids the sticky issue of placing advertising on top of content that may not be copyright protected or may include content of questionable standards.
Personally, I’m surprised to see a major shift away from a 15-second or so pre-roll and post-roll method of video advertising, which seemed poised to become something of a standard. Doing it this way does a few things: guarantees that eyeballs will view the ad, which satisfies advertisers who are paying to get their wares seen. The big question is which form of advertising is less obtrusive: pre-roll or overlay during the video? Again, personally, I’m happy to get the short pre-roll ad out of the way straight off so that I can then simply enjoy the video without worrying about taking action to opt-out of advertising. But this form of advertising is so new that Google/YouTube likely has the power to create an industry standard.
Meanwhile, the conversation in the blogosphere is focused on who invented the video ad overlay concept first. VideoEgg seemed poised to claim the title, though this morning Mike Arrington at TechCrunch seems overwhelmed in explaining that “everyone” invented video ads “first” (YouTube, VideoEgg, Brightcove, and Adbrite all argue that they either were “thinking about it” or doing it first!).
Jim Kukral closes off the debate nicely by writing: “The fact is, it doesn’t matter who did it first. YouTube is the biggest shark in the pond, and they did it before everyone else.” I’ll just extrapolate that to mean “they did it in a big way before everyone else.”
Around my office, we like to say that when you come up with a good idea, don’t worry, you’re not alone. Someone else has already come up with it, or is thinking about it at the same time!
Great snapshot statistics of where advertising dollars were, and more importantly where they’re headed, over at Internet Outsider.
The upshot:
US advertising revenue at 4 big online media companies–Google (GOOG), Yahoo (YHOO), AOL (TWX), and MSN (MSFT)–grew by $1.3 billion in Q2, or 42%.
US advertising revenue at 15 big television, newspaper, magazine, radio, and outdoor companies (Time Warner, Viacom, CBS, etc.) shrank by $280 million in Q2, or 3%.
I’m curious to see what the numbers are when looking at media/online media company advertising statistics as a whole (beyond just the largest companies), but nonetheless these are pretty startling numbers.
I’d really like to blockquote the entire (relatively short) article, but instead I’ll highly recommend that you check it out for yourself. The present and future of media is online, and ad spending is beginning to reflect that.
If the US economy does slow down – as it looks like it might due in part to the deflation of the housing market and a surplus of bad debt – I wonder what that will do to ad spending. It’s possible that the rate at which advertisers switch over from traditional media to online buys will only increase, in the hope of getting value in hitting more eyeballs in a targeted way.
Which is where the real value is in any economy. The big shift has already begun.
