Thursday, November 09, 2006

YouTube’s Limitations

Can Web Video Make a Buck?

November 8, 2006

User generated video is the loudest buzz in the industry these days, but can real money be made in it? If so, how will this happen?

Such was the issue that a group of experts in the industry addressed in a panel discussion Wednesday at the Dow Jones Consumer Technology Ventures conference, held at the Fairmont Hotel in San Jose, California.

“Consumers are increasingly using the web to get video … and the definition of video is exploding,” said panelist Danielle Levitas, vice president for consumer and broadband markets at market researcher IDC.

Citing a recent IDC survey, she said about a third of PC users are watching videos on their computer screens, and a majority are seeking user-generated content of the type found on YouTube. Such videos outrank movie trailers, music videos, news, and sports videos in terms of popularity at the moment.

Most viewers are young men, a demographic that makes advertisers salivate. However, translating the current craze into a lucrative ad business is another story, and one that even YouTube itself has yet to solve, said panelists.

In fact, many of the most popular videos play to the lowest common denominator, said panelists—such as the experiments with the explosive combination of Mentos and Coke that became a viral video success. Ms. Levitas also pointed out that if it weren’t for online pornography videos, the current revolution in user generated content might never have happened.

Taek Kwon, operating partner at TPG Ventures and the former CEO of Friendster said that while innovative new advertising methods are on the horizon, as yet none has established itself as a workable model. This is a “big area” that remains unsolved, he said.

Steven Starr, CEO of Revver said the focus needs to be on fostering creativity so that content flowers and viewer ship increases. A former Hollywood film agent whose company offers homemade digital video makers the technology they need to get on the web, Mr. Starr said he believes online video is a “new art form.”

He cited examples such as LonelyGirl13, a fictionalized video of a troubled young woman that garnered a massive viewership, and video bloggers like Ze Frank and the guys behind “Ask a Ninja.” A show of hands demonstrated that such names were unfamiliar to many of the businesspeople in the audience. To the average 15-year-old MySpace user, these are heroes, said Mr. Starr.

A path to these young users needs to be created by those who take the time to understand them, he said. Ultimately, said Ms. Levitas, the area that probably needs the most work is what is known in the movie industry as “product placement.” If done in a way that’s not misleading to viewers, it is likely the most acceptable and appropriate platform, she said. Indeed, most panelists agreed that whatever the new advertising model will be, it needs to be as integrated into the videos as possible.