Varied Paths to Video Monetization

The internet is bursting at the seams with video. While sites such as YouTube are jampacked with user-generated video content, other sites are serving up professionally made web series along with brand-based video advertising and other sponsored content. But with consumers' attention spans already stretched to the breaking point, the real question has become how to turn this mismatched mountain of video into concrete revenue and effective advertising.

One model that may be gaining traction is epitomized by Beezag, a site that encourages users to watch branded or sponsored video advertisements and answer questions about their buying habits in exchange for deals and discounts. Its sister company, AdGenesis Digital, also licenses Beezag's platform as a white-label solution to other sites.

The company says its platform boasts an ad click-through rate of more than 25%. And companies are starting to take notice. On Oct. 12, the company inked a deal with Parade to bring its video platform to the magazine's website, and just a few days later on Oct. 15, the company closed a content deal with Dick Clark Productions, producers of So You Think You Can Dance and the Golden Globes.

"The challenge was, what do we do as a brand to reinvent ourselves so that consumers actually want our message?" says Richard Smullen, co-founder of both Beezag and AdGenesis Digital. Smullen says the answer is to target consumers' interests, not just in terms of products but in terms of the actual content used to advertise them.

Andrew Frank, an analyst with research firm Gartner, thinks that incentivized advertising such as Beezag definitely seems to appeal to some consumers, likening it to group deal sites such as Groupon. "They seem to be attracting bargain hunters," says Frank.

According to Chuck Richard, a VP and lead analyst with Outsell, Inc., the most important aspect of a service like Beezag is tying user targeting data to an opt-in arrangement. "Look: When this is done right, it becomes very successful, [similar to the] 50- to 60-year-old trade publishing model. You register, you sign in, you say what you do for a job, and you get fantastic information for free because of it," he says.

Richard hastens to add, however, that a service such as Beezag needs content that is actually entertaining to watch if it is to succeed. "It better be interesting, because people's patience to come back and keep doing this with just your standard, run-of-the-mill 90's TV-style ad is going to be low," he says.

While Beezag is targeting users directly, other companies such as California-based OneScreen are focusing on connecting video producers directly with content publishers and advertisers. The company's Media Exchange lets each party interact with the platform individually: Creators select which videos a publisher can access, advertisers upload and target ads for individual publishers, and publishers configure the look and feel of the platform's skinnable video player. There's also an analytics platform, support for third-party video CMS systems, and upcoming mobile versions.

According to CEO Atul Patel, Media Exchange picks up where video CMSs left off. "Up till now, the video CMS systems on the market ... have been focused purely on the closed environment," says Patel. "It's your website, it's your content, [and] it may even be your ad sale team. In doing that, the tools to really manage the rights and the orders with other parties. ... Those kinds of things aren't built into those systems."

OneScreen's platform is still in beta, although it is seeing commercial use by companies such as AFP, Tremor Media, and ScanScout. The company is also actively brokering the agreements between its users, at least for the time being.

"If we were to open the floodgates and say, ‘Everybody go at it!' It would just become a mess," says Patel.

According to Ken Doctor of Outsell, Inc., video syndication seems to be entering a "third wave," after the initial round of companies in the late 1990s and a second group in the mid-2000s. "What everyone has so far found is it's a really tough business," says Doctor. The key, he adds, is bringing all the individual pieces together: the advertising, the targeting, the technology, and the content.

Meanwhile, Outsell's Richard thinks that companies, particularly in the B2B sphere, are very interested in video advertising. He points to a December Outsell survey that found projected B2B ad spending on video sites growing by 154% between 2009 and 2010. He adds, however, that it's still a relatively small market.

"It's a very hot topic, [but] it's not very widely distributed across the B2B players yet," says Richard.