"Value Communities" drive online video success
Editor's Note: Be sure to check FOV beginning Oct. 1 as we roll out
Fierce 15: Top 15 Movers and Shakers in Online Video
I had a very productive and intriguing conversation this week with Benjamin Wayne, CEO of plug-and-play video solution company Fliqz. We discussed, among other things, road blocks we saw to widespread adoption of online video as a viable ad format.
In discussing the question, Benjamin made a crucial point: A site was only viable in an ad-driven model if they could create a dedicated, involved "value community."
He mentioned military.com (FD: a Fliqz customer) and Flixster as two good examples of value communities. Military.com specializes in all things armed forces, and has developed a branded video-sharing community through Fliqz's white space plug-and-play model. Flixster, a haven for movie buffs, has aggregated several million clips of trailers, interviews and film scenes on its site.
The value community model is evident in the specialized audiences these sites attract, and the definitive value proposition they present to advertisers. Companies offering discounts to veterans or seeking applicants with military background see a clear advantage in advertising on military.com, just as DVD releases and movie premieres can be highly publicized to an engaged audience on Flickster.
Now turn to a site like Dogster. Sure it's great to post pictures of your dog and share them with other canine enthusiasts, but as Benjamin said, "I'm just not sure I see American Express ever advertising over that content." The love of looking at pictures of dogs does not translate as directly to a "value community" as Flickster or military.com. Sure, you could advertise dog food, kennels and veterinary services, but the market is smaller and the audience is less devoted to the site.
Benjamin referenced the number of sites founded in 1999 and 2000 on the premise that they would first drive large amounts of traffic to the site, then monetize through advertising. Obviously, many sites succeeded in drawing huge audiences, but failed as businesses because of the pitfalls of advertising in the ever-changing online environment. Benjamin feels that there is a way to go before Video 2.0 solutions start driving huge ad profits, especially in the user-gen arena, and said that he expects more video companies to fail before we see widespread success. You only need to look to the 2008 Olympic example to see why; huge audiences, tiny ad revenues.
Fliqz's model is driven by subscription to the hosting service, and it sees revenue through a value-added service many SMB's, such as realtors and car dealerships, are adopting to reach new customer bases.
Since there doesn't appear to be any major product announcement looming in this space, look for value communities to drive growth for ad-centric online video sites and subscription-based service models to drive growth in serving online videos, until hardware or applications become headline-worthy.
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Comments
Posted by Alex Nesbitt | September 26, 2008 - 12:27pm
Excellent point. I have been arguing that the future biz models will be based on community economics. The value of the adverting market in that economy will be driven by the value of the audience to advertisers. But I would caution against discounting communities like dog lovers. While they may or may not be as attractive to advertisers, they do spend lots of money and if you enable trade in goods or virtual goods within that type of community there is good money to be made.
Alex
DigitalPodcast.com
Posted by Benjamin Wayne | September 28, 2008 - 8:24pm
Alex,
I definitely agree with you. The point I would underscore is that the majority of ad spending today is generated by the major brands (with specific concentration in CPGs, personal care, pharmaceuticals, financial products, consumer electronics, and the like), and controlled by the major ad agencies who dictate the majority of the media spend.
In this environment, communities like Dogster certainly aggregate a lot of spend, and there's the potential for real money to be made there, but it's not in the sweet spot for where the majority of ad dollars are either spent or controlled. These alternative environments create real niche opportunities to reach enthusiasts spenders, but they're going to require the development of alternate models, which will definitely happen, but is going to take some time.
Benjamin Wayne
CEO, Fliqz
