Video Sites Still Looking for Ad Models

There are an estimated 1,500 video-sharing sites on the Web. Yet the Internet content rush still has yet to result in established advertising models to generate revenue, and eventually profit.

The ranks of Web video contenders goes miles beyond household names such as YouTube and MySpace to include countless startups as well as sites created by broadcaster/content owners seeking to stake out Web space as viewing habits evolve. And while there are multiple ways to generate revenue from video on a Web site, pure advertising is not yet a true part of the equation for non-household names.

“There’s not yet big pressure on CPMs because spending from companies is coming from R&D,” says Gilles BianRosa, CEO of Vuze, which makes a file-sharing application that enables user to download HD versions of movies, TV shows and videos from top content providers.

In the meantime, many video-sharing sites rely heavily on revenue coming from syndication deals whereby they sell their typically focused content to sites like YouTube and Facebook, which already possess huge audiences and have successful advertising operations.

“We’ve syndicated our video product reviews to sites such as Buy.com,” says Daphne Kwon, CEO of Expo TV. “Advertisers are so scared of anything different or new. And they don’t want to be next to ‘bad TV’, anything that could be bad for their brands.” She adds that the company is trying to get data on how the syndicated video is doing on other sites.

“There’s a lot of talk about video advertising of late, but it’s got a long way to go,” says Chase Norlin, CEO of Pixsys Corp., which helps companies design, and also hosts, Web-sites. “Display ads are still larger and paid-search is huge.”

Zach Posner, senior vice president of interactive at National Lampoon, which has an established Web video site, still counts YouTube as its largest customer, though it syndicates to other destinations. “People think of us as just movies, but we have a magazine and 6 million unique monthly visits to our Web site,” he says.

However, limiting the amount of money available to upstart video-sharing sites is the penchant of large content owners such as NBC, CBS and Turner to create their own sites or add video sharing to their current portals. Comcast joined the growing list in January when its CEO Brian Roberts announced the launch of Fancast.com — a video-rich entertainment destination. Of course, large owners and aggregators have deeper pockets for spending and can afford to sustain sites that may not be profitable, whereas smaller ones without this luxury may fold.

Some sharing sites are being subsidized, claims Jan Steenkamp, chairman of MediaZone, an Internet TV site with sports, international and entertainment content. “Once we get beyond that, people will get more creative with ads. The Internet will provide a much larger CPM for advertisers over the next several years,” she says.

Large sites also are embracing means to let others help build their traffic by employing a type of syndication themselves.

NBC has partnered with Hulu LLC, an upstart site that lets users easily share favorite videos via e-mail or embed them on their own Web sites. Hulu is actually a joint venture of NBC Universal and News Corp. It expects to launch video-sharing capabilities to aug-ment its initial streaming capabilities.

“Hulu will help us with content sampling,” predicts Stephanie Fried, director of strategic digital insights and development for NBC Universal. “We’re bringing their people to us. But, we think real TV show fans will come [straight] to NBC.com.”

Small video sites without powerful partners have their work cut out for them, according to one large advertiser. “The amount of money coming from mega-brands for TV is increasing,” says Mark Jechura, marketing director for JP Morgan Chase, and a former top media exec at consumer products giant Proctor & Gamble. “[But] you need to deliver scale and the talk needs to be about an audience of millions, not tens of thousands.”

One site that’s gone from zero to 60 virtually overnight is CelebTV.com. The entertainment video destination since has found a solid partner in Comcast Interactive Media, the unit behind Fancast.com. The two have entered a partnership whereby the cable giant prominently will showcase CelebTV.com videos of celebrity news and related content as a key component of its highly touted Fancast.com Web site.

CelebTV www.celebtv.com

Comcast Corp. www.comcast.com

Expo Communications Inc. www.expotv.com

Facebook www.facebook.com

Google www.google.com

Hulu LLC www.hulu.com

MediaZone www.mediazone.com

MySpace www.myspace.com

National Lampoon Inc. www.nationallampoon.com

NBC Universal Inc. www.nbcuni.com

Pixsys Corp. www.pixsys.com

YouTube www.youtube.com

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