2008 and Future Online Video Value Chain Predictions

2008 and Future Online Video Value Chain Predictions

Every Thursday at AltSearchEngines, they feature posts from Guest Authors from from the search engines themselves. Today, AltSearchEngines posted the following future predictions from Tom Wilde, CEO of EveryZing, the multimedia search and merchandising platform.

In addition, ReelSEO spoke with Tom Wilde yesterday and we plan to publish a post in the coming weeks that reviews the EveryZing platform in detail. We were amazed with the technology that EveryZing as well as the extensive knowledge that Tom Wilde shared with us regarding Video SEO. If you have the time, please go to EveryZing and do some test searches. You will be able to get an idea of the power of their technology from the results that you find. Stay tuned for that post.

Below is the article from Tom Wilde as published on AltSearchEngines.com. Thank you to Tom W. and to Charles Knight for allowing ReelSEO to share this with our users. ;-)

2008 and the Video Value Chain Predictions

Leaving 2007 and entering 2008, we continue to witness the explosive growth of the next phase of the Internet's life cycle – multimedia. Forty-five percent of users' time online is now spent consuming content, and 77 percent of unique users have consumed online video. Video advertising is predicted to increase from $700 million in 2007 to $4 billion by 2011, according to eMarketer. As with the rapid growth of any market segment, the complexity of the opportunity grows, attracting a large number of companies seeking to solve the challenges it presents. Whether or not we are in a bubble, and whether or not online video will be big enough to support all of the players, will only be known in hindsight. That said, the online "video value chain" is beginning to take shape, with strong players across the various pieces.

As a corollary, its clearer why the major media companies have struggled to create large revenue streams online from their video assets. As illustrated below, it's not trivial to assemble the pieces needed to create a viable online video business. In 2008, I see the industry players beginning to group around two major segments of the value chain: 1) production and delivery, and 2) discovery and consumption.

Production and Delivery
This includes the various pieces needed to move assets online to make them available to end users. It includes the portions of the value chain that primarily face the content producers, including:

Encoding: As with all format decisions that have preceded online video (going all the way back to BetaMax vs. VHS), format decisions plague content producers, as their decisions can heavily impact the available audience for their content. The omnipresence of flash clearly provides an advantage to Adobe, and the launch of AIR and support of MPEG4 seems poised to extend this ubiquity. That said, it's viewed as the expensive choice, and Microsoft's willingness to alter the business models via Silverlight could be a disrupter. New entrants, such as Move Networks, attempt to solve the cost and quality equation through proprietary encoding and serving formats.

Meta Data & Indexing: With my obvious bias aside, this is a critical piece of the value chain that is being overlooked today. The ability to create a robust and normalized source of meta data across all content creates powerful opportunities down the chain for categorization, search and navigation, which in turn creates increased abilities to manage syndication, SEO and discovery of content. There are two primary approaches to meta-data today: automated and manual. I would argue that both are important. The ability to create a consistent layer of meta data in a scalable manner is critical. In addition, creating contextual tags and meta data editorially creates the fine grained control needed in a media environment.

Content Management System (CMS): Multimedia assets have unique content management requirements, and a new category of solutions have emerged. These needs include the ability to manage complex licensing, syndication and expiration rules, as well as the provisioning of editorial rules for playlists, ad tag insertion and more.

Content Deliver Network (CDN): Again, multimedia presents a new set of challenges for the content delivery space. Large file sizes, especially with the advent of HD, will place enormous loads on the Internet for years to come. In addition, IPTV's success will depend on the ability of the industry to replicate the quality of today's digital cable while unlocking the possibilities of "infinite" channels and personalization. This need is still largely unsolved, as the industry powerhouse Akamai works to maintain its premium pricing in the face of innovators trying new approaches, such as BitTorrent's DNA platform or Panther's pay as you go pricing model. 2008 will also see activity from the big consumer ISP's such as Verizon and Comcast as they are forced to face the strategic challenges of attempting to become relevant as media companies while still controlling a critical chokepoint for players such as Joost trying to enter the space via peer-to-peer delivery.

Discovery and Consumption
The next segment of the value chain centers on discovery and consumption. This includes the pieces needed to create a business model from these assets and are the elements that primarily face the end user.

These pieces include:

Media Player: This is a segment most likely to see major changes in 2008 as several factors compete to influence the ultimate solutions in this space. Virtually every company on the illustration above has some kind of player strategy, which can be broken down into four categories – all of which I see lots of activity from in 2008. Those categories include:

1) Encoders and Video Servers: Encoding creates a significant advantage in that it can be used to dictate consumption environments. For example, Move Networks requires the Move player be used to decode its stream, while Adobe pushes flash as a means of reinforcing its ubiquity across users, who naturally upgrade to the latest version of flash to consume their favorite sites and content.

2) Meta Data Solutions: Tightly integrating the meta data to the player experience enables advanced user functionality such as jump to, tag overlays and other forms of in-file navigation.

3) CMS: Again, coupling the backend CMS to the front end player ensures that the user experience takes advantage of the backend capabilities such as playlisting.

4) CDN's: The CDN's largely view players as more value added to go with their solutions. In addition, in some cases they can build QOS controls into the user experience by deploying an optimized player.

In regards to monetization and the media player, in recent years, several of the video ad networks launched with a strategy of requiring publishers to use their players in order to "optimize" the monetization opportunity. While this value hasn't largely panned out, we will see video ad networks abandoning this piece of their strategy in 2008. With that said, the player continues to be a critical piece of their success, regardless of monetization. In fact, I would argue that the single biggest driver of YouTube's growth was the simple innovation of the embeddable flash player. In addition, the video entertainment portals such as Joost, Veoh and Apple all require proprietary player environments.

Monetization: This will remain largely unsettled and unsolved through 2008, with the primary challenges being format, followed toward the end of 2008 by increased focus on targeting capabilities. The formats today are varied-pre-rolls, post-rolls, video "bugs”, companion ads, etc. Two things seem clear: video ads work in terms of driving recall and awareness for marketers, but that consumption will be stunted if the ads create too much of a tax on the user experience. Targeting is largely unsolved today, primarily because there isn't enough video creative inventory to move the segment toward more of a long-tail targeting opportunity. Targeting today is constrained largely to the blunt edge demographic targeting of the television world. As new technologies develop to parse the contents of a video combined with behavioral segmenting, targeting will create the drive to produce more targeted creatives toward the end of the year.

Portal/Syndication: Also sure to be volatile in 2008, as media companies continue their love/hate relationship with 3rd party distribution. Whether it's suing YouTube while simultaneously pumping promotional clips onto the site or battling with Apple over pricing, the content producers will continue to be frustrated trying to find the formula to spark consumption at levels meaningful enough for them to build real revenue online.

Search/SEO: This element is ripe for innovation in 2008, as the state of the art in video search and SEO is primarily constrained to indexing tags and titles, which was also true in 1999. As the state-of-the-art advances in terms of speech recognition, facial recognition, image recognition and audio fingerprinting, the ability to discovery and navigate the vast amount of multimedia content online will dramatically improve. However, with the launch of universal-search type interfaces across all the major portals, combined with the fact that 77 percent of unique users can be found at just three sites – YouTube, MySpace and Yahoo – the creation of consumer destinations specifically for video search are not likely to achieve significant levels of market share.

Concluding, if nothing else, 2008 will bring an even faster pace of innovation and evolution in the online video space than anything the industry has experienced prior.

Tom Wilde is the CEO of EveryZing, the multimedia search and merchandising platform.


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