Early stage Super-Investor Josh Kopelman writes that his half.com co-founder Sunny Balijepalli is preparing to launch a new startup called Cuts.com. There sure is a lot of movement in the video space these days. I’m looking forward to seeing what this is – there are next to no details on the site currently. Sign up for the beta on the home page.
by
Michael Arrington
on
March 24, 2006
Advertisement
- Actively Discussed Posts
- Want To Try Out Google Chrome OS For Yourself? Here's How.
325 comments - TechCrunch Readers: God is Your Co-Pilot, and Stuff that Piggy Bank
67 comments - Facebook's iPhone App Is Broken. Who Will Fix It?
64 comments - CrunchUp Starts Off With A Bang Tomorrow With Twitter COO Dick Costolo
62 comments - Twitter COO: We'll Have An Advertising Business Soon. And You're Going To Love It.
53 comments
Responses
Comments 
Leave Comment
Commenting Options
Enter your personal information to the left, or sign in with your Facebook account by clicking the button below.
Alternatively, you can create an avatar that will appear whenever you leave a comment on a Gravatar-enabled blog.
Trackback URL
- Actively Discussed Posts
- Want To Try Out Google Chrome OS For Yourself? Here's How.
325 comments - TechCrunch Readers: God is Your Co-Pilot, and Stuff that Piggy Bank
67 comments - Facebook's iPhone App Is Broken. Who Will Fix It?
64 comments - CrunchUp Starts Off With A Bang Tomorrow With Twitter COO Dick Costolo
62 comments - Twitter COO: We'll Have An Advertising Business Soon. And You're Going To Love It.
53 comments
Information Filters
Screening The News »
Skypetastic
Skype CEO Josh Silverman Can't Stop Smiling »
This week on TechCrunch
Real-time distractions, India, rumours, Scoble's future and more »
List Mashups
Facebook Agrees To Set Friend Lists Free. »
Realtime Crunchup
Salesforce’s Benioff Talks Social Enterprise Strategy, Chatter, More »
I am becoming a beta list groupie… I have got to out out more and off of my computer! ****logging off…but not without signing up for the early alpha list for cuts.com****
I love this video mashup idea. I tried out EyeSpot a few weeks back, and while it’s fairly limited right now, remixing video on the fly is going to be a huge trend. Still, I can imagine copyright infringements would be a real concern, not to mention the amount of bandwidth you’d consume.
Dabble is supposedly entering this space, too.
All I know is that there seems to be way too much competition in this space. It feels like we have one line of thinking around homepage, video and rss web2.0 applications. Lots of companies, lots of slightly different slants; but a future?
Lots of companies, lots of slightly different slants; but a future?
Saul,
I have to agree with you here. The rate at which new services are being released is extraordinary. However, we are not seeing business model innovation. There needs to be more business model innovation. How are they services going to be monetized? How can you change the model of delivery in order to create revenue streams…not simply adding Adsense ads. Although we are experiences a plethora of releases…I think the vast majority of them are not solving any real business problems or they are not creating user value well beyond what the marketplace currently offers. I would second your question…how many of these companies have a real future as an independent offering? ***I thought I said I was logging off for the night****
Eric,
Yup, it’s a mini web2.0 bubble. My gut says because VC firms have too much money to chase too few firms.
Don’t get me wrong. There are lots of great companies and ideas, but their portion of the new release pie seems to be getting smaller.
so many have said 2006 is the year of online video. I agree with this statement, but am disappointed with the user generated content that is sweeping the world. I can only stand amatuer video occasionally, as a source of entertainment.
Video needs to be created with online delivery in mind. This will take time and a degree of professionalism, but it will happen.
I have not checked out the cuts.com site yet, but if it is another social network of amatuer video, I’ll pass.
Let’s see some innovation.
I definately agree Saul. Over the last couple of years, I have read countless articles about the glut of VC money sitting idle in the coffins(ironically the money earned from the last bubble)…at record levels with no place to go. I know many Venture Capitalists have nightmares about the possibility of returning millions of dollars of money just because they could not find a deal to place it. Not only does that effect their return levels on the backend..but they also lose the fee on the unplaced capital on most cases. I have been amazed at some of the companies being funded..ones that seem to have no chance of survival..but I have been more suprised the size of these placements. Either those VC firms are taking an extraordinarily larger percentage of the company than usual or we are seeing a return of the irrational exuberance of the late 90s..though certainly not at those levels.
Hope this becomes yet another haven for anime music videos (AMVs).
yup, things tend to work in waves (fibonacci waves, I figure). I figure that folks have at least learnt from some of their mistakes
> “…How are they services going to
> be monetized? How can you change
> the model of delivery in order to
> create revenue streams…not simply
> adding Adsense ads….”
While I can’t speak for YouTube, Vidilife, VSocial, VideoEgg, DropShots, and all the other video start ups of the last 9 months, I can only speak for my Company, Vidiac. We started in September of 2004 with our 1.0 release and really kicked it in gear with our 2.0 Release in February of 2005. By the numbers YouTube published in their Podcast interview on TWiT.tv this week, we are a third of their size which also makes us the third largest Video Site in this space behind YouTube and Google Video (our Alexa Stats don’t show our coverage as we enable other people’s URLs with our service, but we provide services to 250 web sites like http://videos.StreetFire.net and are now adding new URLs with our service at a rate of 4+ a day).
Anyhow, I agree with you that there is a lot of VC money being thrown at this, but it is a high growth sector. That said we were able to attain profitability (on text ads actually) in Q4 2005 and are about to announce our second straight profitable quarter in Q1 2006. We attained this self-funded and now boast 7-digit annual revenues.
Is a VC interested in this? Not really. While having a profitable company a year and a half after start-up is great for an entrepreneur, it’s not how a VC makes their money. We’ve stayed under the radar because we’re just looking to make a profitable company that the founders enjoy working at, sort of a “Craig’s List” of Web 2.0 if you will. YouTube and the rest are on a different growth arc from us. What was Flickr’s business plan? Build it, grow it, sell it. If YouTube and the rest are the “Flickr of Video” then why not the same business plan? This is what VC is trying to do in this space, and it will probably be very lucrative.
So who is going to buy these companies and why? Traditional media probably. When Jib Jab’s “This land is your Land” gets more views than an episode of Sienfeld, traditional media sits up and takes notice. Reality TV is the current hot property in television, but the next wave is consumer generated content, so you have new video start ups nearly daily now that are making a land grab for these properties. My prediction is that the half Billion spent to acquire MySpace will be less of a shock than the coming buy for video on the Internet. While it’s a little bit of a business model change for Fox to go from video advertising on TV to banner advertising on MySpace, picking up a YouTube and moving their existing video-ad sales force into the space is fairly easy.
Here is some easy math for Big Media. They typically average $30CPM (Cost per Thousand Impressions) for untargeted non-demographically placed television advertising. Never mind the premium they can demand from their advertisers to guarantee that a Gillette Razor for men ad gets served only to Men, let’s just say for the sake of argument that they get the same $30CPM rate. YouTube claims 6-9 Million video streams per day. If you put a video ad on every one of those videos (which you probably wouldn’t on a short clip). You’re looking at $270,000/revenue per day or just shy of $100 Million per year.
The “cool part” is a traditional media company has to change very little about their business model in order to realize this revenue stream. So ~$100M/year is what YouTube is worth to a Viacom or Time Warner today. Additionally television advertising dollars are drying up and moving online anyways, but ad agencies are still set up to produce video advertising, and they’re still set up to work with a Viacom, Disney or Time Warner first.
There are still some loose ends to tie up. Many of these sites have used porn and copyrighted materials to aid their growth and that will make acquisitions trickier. But even if they don’t get acquired, we at Vidiac have already proven you can build a mom and pop free video hosting company and be profitable on AdSense alone. Heck our Google rep even hinted we’re making more money for Google than Google video is, how funny is that?
The next 12 months will be an interesting exciting time, we’re pretty content to kick back pop a beer and watch the coming fireworks. Heck we’re pretty content to remain the Craig’s List to YouTube’s glitzy eBay, but they deserve the spot light as they’ve built a feature rich highly successful site on very little money.
Adam Bruce
Vidiac.com
PS There are other less obvious revenue paths, but since this question has been asked quite a bit I thought I would just add my two cents to the obvious goal here given the market. YMMV.
Uh! Cuts website design is myrecap.com ripoff. And colors – Argh!
Bubble bubble…
Only 2 or 3 of those services will still be online in 5 years.
Adam,
Thanks for the response. It is 6am saturday morning where I am. I will definately respond thoroughly tomorrow. Again, thanks for the thorough response.
web beta, again
yeah i think this is broadcast.com part 2.
Why on earth would the majors need to buy a video service full of clips from their own video library?
I dont think I can take a company seriously if even their beta signup page is a copy (Recap). It’s a page with a form.. it’s not hard! Sure. the service sounds interesting, but that’s a big turn down.
Looks a lot like YouTube.
Looks like a designer goofed big time Brian! We had used myrecap.com’s page as a starting point about 3 months ago but that page was redesigned months ago and was posted accidentally – it wasn’t even our colors! We put the right page up as soon as we found out. Apparently QA isn’t our strength yet. There is a lot more info on the site now – in the correct sign up page. Sorry everyone
Some more info .. the site is absolutely not a YouTube or Google video. We think those sites are great, but there are plenty of them. We are not a hosting service and we never store any video. I encourage everyone to sign up for the beta – we should be sending out our alpha software in the next couple weeks to selected users. We’re really appreciative of all of your attention, and we hope that you love our service once we’re there. It’s very hard to watch all of these conversations and the assumptions people have to make when we can’t lay everything out yet!
So it probably has to do with DRM, PPV or DVD video.
With Amazon’s S3, just about anyone can create a storage website … its the sharing and DRM aspects that people should focus on.
Ad revenue will only last as long as people figure out how to use players that skip through ad’s … like the banner ads of the web
Adam,
Again, thanks for such a detailed response. I really appreciate the info that you provided. Also, I want to let you know that I was speaking about this current generation of 2.0 startups in general..not just user generated video startups. Many of these startups are really just simple feature releases and do not constitute what I would think of as a PRODUCT. I will give an example later. This is what I meant by a product or company having no long term viability. Also, in terms of your comment on being supported by Adsense. I would have to question the sanity of a VC that would invest 10s of millions of dollars into a startup that solely depended on Adsense for a majority of its revenue and also with the company in question not producing any defensible technology or even at the point where they have some type of network based critical mass like an ebay, skype, craislist,etc. I am not questioning whether you can be profitable..but you have a very limiting factor in terms of your profitable because of your dependence on Adsense. This is as much of a restriction as the limitations placed on public utilies in terms of their pricing capabilities..their is a build in cap on profits. My point is that creating a very profitable enterprise is very much limited when solely dependent on Adsense. I think you would have to agree with me there. However, the bigger issue was not even the source of the revenue…it was the lack of innovation in the marketplace in general.
Markets tend to gravitate towards a very dominate #1 player who enjoys the Gorilla position which often provides high margins, pricing power,etc. Then you have usually a weaker #2 and #3 who are still fairly profitable, but certainly not as strong as the Gorilla…then you have a bunch of me-too players that come and go and do not enjoy the profitablity of the larger players and often close their doors. Then you have the niche players who can be profitable, but they serve a select portion of the market and thus remain on the smaller side of the revenue chain..(i.e. Alienware who was just purchased by Dell)..however, they serve their small niche very well because of their focus.
My contention is that in general, we are seeing alot of ME-T00 startups. How many Ajax start pages, feedreaders, bookmarking, photosharing sites can the market support when they relativaly share the same feature set? For instance, over the last month I have seen several SLIDESHOW CREATOR and COMMUNITY sites. Check out mashable.com for the journal list. How can one expect to create a company out it this? Maybe they do not plan to. What is the business model? However, the more important issue is how many slideshow products can the marketplace support that all share the same feature set and deliver their product in the exact same way. I was not questioning the viability of the video-sharing market…I am question the viability of many of the startups who seem to add no value to the marketplace and have no working model for monetizing their services besides throwing up some Adsense links.
I guess my issue is that we are not seeing releases that are carving out new marketspace.
This is a different type of bubble..instead of just saying..Hey…lets sell pet food online and then raising tens of millions of dollars and having several companies enter this market that maybe only one could serve( like in the late 90s net bubble).. We are seeing..Hey…lets throw in some Ajax….some Tagging…and add some sharing capabilities…and they are raising money. We are seeing AJAX used for the sake of using AJAX..same with Tagging. The point of using technology is because it is the best solution for a particular problem..not because it is COOL and the Buzzword of the moment.
As you mentioned, the ability of using the web not only to target advertising but to track it is very enticing to traditional media and their advertisers. This has been the pull of web advertising in general..the ability of detailed metrics. I forget the executives names…but a famous saying was…I waste half of my television advertising budget, but I do not know which half. So I understand the value proposition of metrics that advertising online provides. Certainly tradition media companies will be compelled to enter the space as the web continues to infringe on their space.
you wrote
”What was Flickr’s business plan? Build it, grow it, sell it. If YouTube and the rest are the “Flickr of Video” then why not the same business plan? This is what VC is trying to do in this space, and it will probably be very lucrative.”
You mentioned Flickr, but Flickr at the point of its creation was not build to flip..the founders have been very clear that Flickr took at life of its own…the key was really innovation…they brung value to the marketplace with their tagging capabilities. The current product was not even the original conception..but from a technical perspective, they solved a problem and then the project took a life of its own. They created value. Also, timing and a host of other issues can sometime account for the growth of something like Flickr(Tipping point)…and often these intangibles can not be copied. So simply taking the route of following the Flickr format is not a long term viable or even rational business decision. Simply taking the Flickr concept and adding nothing to it is not bringing value to the marketplace. You can apply the Flickr concept to other sectors and bring value to that sector…but by entrant #50 who has done nothing but clone the first 49 entrants…there is an issue.
The late 90s bubble was the very lucrarive for the VCs, but what is lucritave for the VCs is not what is always good for the market. I do not think that creating companies with the hope of flipping it down the line absent of fundamentally understand how you plan to create a profitable enterprise is a healthy concept. A few people will make short term profits, but long term this is a viable business practice. I personally do not value the flip of a Myspace for 600million the same as a company that has created the profitabilty that its cash flow position and technology actually merits that type of value. Even Murdoch has said that his purchase of Myspace will be very cheap or expensive. It was a gamble.
Adam,
I forgot to mention. Great job with Vidiac.com. I am browsing it now.
Great insight Eric, and I agree with you on many points. I’ll respond back shortly, but for fear of hijacking the original posintg I think I should sign up for Cuts.com and see what they are bringing to the table.
Hey,
I think I am guilty of hijacking this post already. Sorry Mike. Look forward to your comments Adam. I think we are making many of the same points. I plan on digging through your site more later on. Pretty impressive numbers btw on Vidiac. I am always looking at new products, services, companies and I have never seen Vidiac! Congrats on the profitibility as well…that is always a great position.
> …..I was speaking about this current generation
> of 2.0 startups in general..not just user generated
> video startups…{snip}….Many of these startups
> are really just simple feature releases and do not
> constitute what I would think of as a PRODUCT.
Yes, then I would agree with much of your assessment then. Some of these Web 2.0 companies are just “Feature releases”. In that regard I’m not expecting another “eBay” or “amazon.com”, but if you take the expectation down a notch, I think many of these companies will be successful on a smaller scale. I get really excited by a start-up like Vast.com where you can use their features for your own web site. FWIW I’m not talking about a “WebMashUp” in and of itself. I’m talking about http://www.CorvetteForum.com being able to use Vast.com’s inventory of Corvette’s for sale so that CorvetteForum can have a pre-populated classified system. Even though some of these are just features, I think they may be successful if they’re useful to the right population.
>…in terms of your comment on being supported
> by Adsense. I would have to question the sanity of
> a VC that would invest 10s of millions of dollars into
> a startup that solely depended on Adsense for a majority
> of its revenue
I think very few if any VCs are looking to invest in companies because they’ll make their money back on revenue. Sure its lower risk, but it’s also much lower reward. In my space (video) specificly I feel VC are looking at the eventual move of legacy media to the net and buying up broadcast properties the same way Clear Channel bought up Radio.
> I guess my issue is that we are not seeing releases that
> are carving out new marketspace.
I think we’re seeing the natural ongoing process of competitive innovation disrupting existing market places. Digg disrupted Slashdot, Gmail disrupted Hotmail. This isn’t necessarily “2.0″ so much as the ongoing competitive redefinition of existing markets.
Even video hosting is an established industry with companies like Akamai and AT&T supporting products specifically for it. Companies like my own are the disruption to hosting providers as we offer services to their lower end customers and even markets they couldn’t reach before (Like the teenager wanting to host a cell phone video).
> …We are seeing AJAX used for the sake of using AJAX..
> same with Tagging. The point of using technology is
> because it is the best solution for a particular problem..
> not because it is COOL and the Buzzword of the moment.
I agree with you there. These are features used for a “Web 2.0 Investment Checklist” and really you must have them in order to get noticed with someone wanting to invest in this market. That said, I personally think “features” are useless if they can’t be turned into a “user benefit”. A User really doesn’t care if your site uses AJAX or Flash, they just care that it works and works well. Heck, sometimes to many features can really kill a site, or even overwhelm users with functionality. When you want to eat dinner do you pull out a Swiss army knife when you just need a spoon?
> …..the ability of using the web not only to target
> advertising but to track it is very enticing to traditional
> media and their advertisers.
To a large degree this is the business need that online video sites plan to fix for traditional media providers. Little known fact, the reason that consumer generated content is so attractive to big media is that their existing “premium” content libraries are held under strict syndication contracts that do not allow them to broadcast their content online. How much of a no-brainer is it to put some video-Ads into Sienfeld and make it available online? The issue is that almost all of these properties are held in actors union contracts, syndication contracts, even advertising contracts. For example, Ford may write a contract that says they are the only Truck manufacturer allowed to advertise on “Sienfeld”, but Buick can still advertise cars.
This is what’s holding up video on the web. To make matters worse, with Tivo putting pressure on networks, advertisers are moving funds online for the reason you mentioned. Traditional media needs a property they can put online to keep a hold of this revenue. (I could go on for pages about this..)
> …..I do not think that creating companies with the hope
> of flipping it down the line absent of fundamentally
> understand how you plan to create a profitable enterprise
> is a healthy concept. A few people will make short term
> profits, but long term this is a viable business practice.
As I said in the start, I can only speak to the industry I know (online video) and say that there is a viable exit strategy for VC selling to incumbent media. While selling is always an option, we wanted to make sure it wasn’t our only option which is why we aimed for a profitable company first. That said, if I wanted to aim for a sellable company first I would have taken VC, skipped revenue all together and focused on attaining market share. Vidiac’s revenue plan isn’t “secret sauce”, and it wouldn’t take much for YouTube to turn on some ads and make some money too. But Advertising eats up page real estate, clutters up the interface and annoys the user, so for as long as they’re aiming for market share, they can ride on their VC’s investment. This is the main reason I say we’re on a different Arc from them.
>>>#15 Comment by anoncritic — March 25, 2006 @ 8:15 am
>
>yeah i think this is broadcast.com part 2.
>
> Why on earth would the majors need to buy a video service
> full of clips from their own video library?
I think they care worry more about buying a video service full of clips that their competitor has that opens them up for a law suit. But as I said above, most of the clips you find on YouTube can’t be (legally) put online by the people that own the copyright because of the contracts they have in place. In some ways this is negotiation power for the copyright holders to be able to go back to their contract holders and set up internet distribution. Probably too long of a subject to discuss in the comments section of a Blog.
In summation though, legacy media isn’t dumb, they know that advertising is moving online, they know they have to get there, and they are moving as fast as their existing structure allows, so to some degree, the success of the Video Hosting sites is acting as a disruptive event to speed up this transition.
>>> #23 Comment by Eric Willis — March 25, 2006 @ 4:28 pm
>
> I have never seen Vidiac!
Since we don’t provide service under our own URL, and provide it to other web sites, it makes our brand very weak. We’re cool with that though. Building software is a lot easier than maintaining a community, so we leave the hard parts to the guys that want to use our software to make their own “YouTube of {insert your hobby here}”
> Congrats on the profitibility
> as well…that is always a great position.
Thanks! Hopefully more companies will make similar announcements too!
-Adam
Adam,
Thanks for the response. We are in agreement on many points. I am also aware that you are speaking mainly on the online video market and I am speaking in more general terms.
>>In that regard I’m not expecting another “eBay” or “amazon.com”, but if you take the expectation down a notch, I think many of these companies will be successful on a smaller scale. I get really excited by a start-up like Vast.com where you can use their features for your own web site>>>
I agree. However, I still come to Techcrunch everyday waiting to see the next big thing. Some of the products very well may be the disruptive…but they are still in private beta *frowns*. I agree with on the Vast.com and corvette forums example. Open APIs and open standards are a beautiful thing. There have been some great mashups. However, I am still with the opinion that we are seeing a lot of uninteresting startups that are cloning existing technology without adding any value.
>>>I think very few if any VCs are looking to invest in companies because they’ll make their money back on revenue. >>>
Adam. I need to clarity. My contention was that VCs are making placements in companies with NO REVENUE expectations and without any type of substantial market innovation all because they may be web 2.0…. very much like the first bubble..to me..build a community and flip it is the same as the GET a critical mass of eyeballs and then figure out how to monetize it later talk of the late 90s. It is not a sound business practice in my opinion.
>>>>I think we’re seeing the natural ongoing process of competitive innovation disrupting existing market places. Digg disrupted Slashdot, Gmail disrupted Hotmail. This isn’t necessarily “2.0″ so much as the ongoing competitive redefinition of existing markets.>>
In my opinion, disruptive technology is radical, revolutionary alignment of a service, product, technology or contrasting market alignment(innovating pricing model) that turns the existing marketplace on its head. This is a revolutionary leap or alignment and not evolutionary in nature. In my opinion, Gmail and Digg do not qualify. When you think of disruption, one thinks of Dell with its direct selling method and manufacturing capabilities to support this method when entering the computer marketplace…or you think of Google in the late 90s with its Page rank technology. Disruptive technology often leads to the displacement of the incumbents. The Ford Model T and the displacement of the horse drawn carriage or the possibility of Skype and its VOIP technology displacing traditional telephony and mobile carries in the communications market. They were disruptive to the point that the market no longer exists in the what in which it did before their entry. You can even place the Ipod and Itunes in this category.
What we have seen with Gmail and Digg was incremental improvement. Gmail with its use of Ajax and increased storage was evolutionary. Gmail was definitely a great release and I particularly love the chat in email feature;however, it did not fundamentally shake up the email industry. It put pressure on providers to increase storage for their users which was good for the marketplace, but fundamentally it was still just another email application that was not magnitudes greater than what the marketplace already offered. Also, gmail still has a small user base in comparison to its competition. I believe it is still in the 8th position in terms of users. The alignment of the technology and offering that Gmail represents was not radically different that the hotmail. It was different but not RADICALLY different. Same with Digg. Digg offered a more democratic method than Slashdot. However, there is nothing that would lead one to believe that it will displace Slashdot…there is nothing radical that provides Digg with the leverage to displace Slashdot. It has grown into a strong position relative to Slashdot…..however it has not disrupted the viability of Slashdot. It also is a great product..but I would not call it disruptive..maybe more so to traditional media outlets but not to Slashdot.
>>>While selling is always an option, we wanted to make sure it wasn’t our only option which is why we aimed for a profitable company first>>>
Smart. This is my exact complaint about many of the startups.
Thanks for the responses. I have learned many new things about the online video market from your detailed responses. We have to do this again sometime!! and keep kicking tail at Vidiac.com
Adam what is the best way to contact you?
Hi,
very interesting thing to come maybe with this Cuts.com beta service.. Let’s hope to it!
In my web surfing, I found today an other website company like cuts.com, that is preparing a web video product compare to what they indicate on their website :
http://www.wevod.tv
I don’t know what it could be exactly, but I share to you..
bye
> #26 Comment by SImon — March 27, 2006 @ 11:15 pm
>Adam what is the best way to contact you?
Simon,
Just give us a ring on our main phone line off our web site. Looking forward to hearing from you.
-Adam