As YouTube struggles to make money on advertising, according to a story today in the Wall Street Journal, and reportedly may resort to pre-roll ads (which consumers hate, but advertisers love), maybe they should take a look at some of the innovative ad units coming out of VideoEgg. Today, VideoEgg is launching five new kinds of Web video ads. They are called:
* LIVE: Use real-time RSS feeds to continually update the ad experience
* LOCAL: Deliver zip code-specific messaging
* RICH: Easily deploy and track a rich multi-video ad experience to increase user interactivity
* SHOP: Bring the browser to the user, merchandising multiple items in a single real-time ad experience
* SHARE: Viral capabilities help spread the message through virtually any communication or social channel
The LIVE lets advertisers update the text or images via RSS feeds. In the image from the NBA ad above, the ticker at the bottom and the player’s faces change depending on what games are coming up. The LOCAL ads let advertisers ad a map button, so a Subaru ad could bring up a map of local Subauru dealers. The RICH ads offer different tabbed widgets at the bottom of the ads for different versions of the ad or to more information. The SHOP ads provide deep links to the advertiser’s online store where people can buy the DVD or cell phone being advertised. And the SHARE ads can be grabbed and spread virally on people’s blogs, MySpace and Facebook pages. You can see examples of all these ads here
All of these ad units are designed to increase viewer engagement, and in fact VideoEgg only charges advertisers if viewers engage with the ads in some way. Otherwise they are free. They call it a cost-per-engagement (CPE) model, as opposed to cost-per-thousand views (CPC) or cost-per-click (CPC).
YouTube could learn from these efforts. It is having such a hard time selling ads that it will fall short of expectations, according to the WSJ. Falling short, for YouTube, means revenues of about $200 million this year. The days of building market dominance at the expense of revenues appears to be over, with Google sales chief Tim Armstrong spearheading an effort dubbed “Project Spaghetti” to fix the “105 problems with YouTube’s ad sales,” reports the WSJ.
It looks like Citi analyst Mark Mahaney’s $500 million estimate for YouTube revenues in 2009 is going to be hard to reach. One way to quickly get there, though, would be to put pre-roll and post-roll video ads on the estimated 4 percent of videos that are advertiser-friendly (i.e. are not inappropriate or copyright-infringing—YouTube can’t plaster regular display ads on most of its pages for the same reason).
With more than one billion clips viewed per day, that 4 percent is big enough to generate some serious cash. But pre-rolls and post-rolls (10-second to 30-second video ads before and after each clip) kill the Web video watching experience. They interrupt the flow of watching videos online, which is controlled by the user. The types of video ad units that VideoEgg is experimenting with are more along the lines of what YouTube should be doing. Just as advertisers only pay if someone clicks on one of its search ads, they should only have to pay if someone chooses to engage with a video ad.
The types of ads VideoEgg is releasing may or may not be the right answer, but they are a step in the right direction. YouTube could make those types of ad units the industry standard by its sheer dominance. But if it caves and starts putting up pre-rolls and post-rolls, then these new forms of advertising might die on the vine.
EMI, which is looking less like a music label and more like a lawsuit label, is at it again. This afternoon they filed a lawsuit alleging “massive and blatant” copyright infringement by Hi5, VideoEgg and ten John Doe defendants to be named later. The core of the suit is over copyrighted EMI content that appears on Hi5, particularly music videos.
One person close to the litigation says that the parties have been negotiating with EMI for well over a year to avoid litigation, but that they were unable to reach agreement. The shakedown attempt before litigation is standard practice these days. But what is a little different here is that EMI is going deep into the supply chain to find other deep pockets.
VideoEgg, for example, provided video functionality to Hi5 in the past, but the deal ended in April 2008, and they no longer work together. The ten John Doe defendants are presumably other service providers, and/or executives of Hi5, VideoEgg and those other companies. The fact that EMI included VideoEgg in the lawsuit shows that they care little about current infringement - they just want a payoff for stuff that happened in the past.
VideoEgg CEO Matt Sanchez says that they comply with all DMCA takedown demands, but never received one from EMI. VideoEgg also used AudibleMagic , he says, to identify and proactively removed copyrighted material.
The lawsuit complaint, which was filed in New York, is below.
Videoegg, the one-time video startup that sort of competed with YouTube and sort of competed with BrightCove (very different companies), has basically transitioned itself into a very robust rich media advertising network. In August 2007 they started selling ad units for Facebook applications. Since then they’ve expanded to include advertising for many other sites, including Meebo, Flixster and others.
Today at an event in New York they’ll announce a business model change, moving away from charging advertisers a cost per thousand impressions (CPM) for their display ads to a new model where advertisers pay only when a users has engaged with the ad. The new product is called AdFrame Brand Response Network - quite a mouthful.
Engagement is defined as clicking on the ad, or hovering over it for a second or two. Once that happens, a new Flash overlay pops up over the content on the page and shows a video, Flash game and other content. Once the Flash overlay is triggered, the advertiser pays a fee of $.50 - $1.
VideoEgg CMO Troy Young says its a much better deal for advertisers, since they pay only when they have a verifiable action by a customer. And publishers, while they don’t get a guaranteed fee per impression, may make more money anyway. VideoEgg says they were able to charge $10 or so CPMs for their ads previously. The new ads, which have engagement rates of .5% - 9%, generate comparable CPMs of $2.5 to way above $10. Plus, Young says, advertisers are much more comfortable buying more inventory under this new model, so there is much less unsold advertising. That last sentence is key to publishers, who care about revenue per page view on average, not just small ad buys at high CPMs.
Microsoft has signed up for the new product as an advertiser, and will use it to distribute videos promoting Microsoft Office (an example ad unit is here). There are also a number of examples on the product home page.
VideoEgg is serious about this business - they’ve got 25 full time sales people out there selling ads for publishers in the network. The company has raised a total of nearly $34 million over four rounds of financing.
Advertising conglomerate WPP is looking to increase its Web advertising revenues through more acquisitions. Last year it purchased 24/7 Real Media for $649 million, and is currently making a run at Nurun, a Montreal-based interactive ad firm. But it may try to boost its Advertising 2.0 cred even further with more small acquisitions.
The NY Post, not always the most reliable source but pretty good when it comes to Madison Avenue, reports that possible acquisition targets include Spot Runner (cheap TV ads for local businesses), VideoEgg (video ads and a Facebook play), or JumpTap (mobile ads). WPP is already a minority investor in both Spot Runner and VideoEgg. Quick, sell those ad startups before the recession hits.
2007 has been a milestone year for video advertising with a gamut of companies attacking the opportunity from every which way. Today Adap.tv, a relatively new entrant into the contextual video advertising space, is announcing a new initiative with potential to propel it to the front of the pack. Adap.tv is letting advertisers without any video advertising experience jump right in with practically no effort, and zero production cost.
Generally speaking, advertisers face a number of challenges in respect to in-video advertising: Pre/Post rolls typically cost in the $10-$30 per CPM range. On top of that, producing the ads themselves is a costly endeavor. Then there’s the matter of being able to convey only a single message. Lastly, the inability to safeguard against ad placement in questionable content is a major deterrent for many advertisers.
adap.tv’s new offering tackles most of these issues head-on, with the most interesting aspect being support of keyword and product datafeeds—routinely used to structure search engine marketing campaigns. This is significant because it means that advertisers can reuse existing datafeeds by importing them right into adap.tv for instant targeted video advertising campaigns. Advertisers using AdWords or Overture can easily export their campaign structures to CSV format, upload them into adap.tv, and presto: instant video ads.
On top of datafeed support, adap.tv is also introducing:
Content Rating: Advertisers can employ content rating levels—G, PG, PG-13 & NC-17—in three dimensions: violent, sexual and illegal content. Rating levels are automatically determined for each video through adap.tv’s content analysis technology.
Ad Templates: Brand oriented look & feel can be leveraged through ad templates which can range from flat, to animated, to interactive (see video below).
Amir Ashkenazi, CEO, claims that publisher and viewer growth is doubling month-over-month and that the company serves ads and pays publishers on almost every video view. Advertisers now include the likes of Amazon, Kayak, EVOgear and Let’sTalk.
The race for UGC video monetization is in full throttle and while it’s hard to pin-point a clear leader at this point, adap.tv is certainly positioning itself as a player to keep an eye on. VideoEgg and others are also strong contenders, and YouTube is the 800 pound gorilla.
So Facebook will finally allow users to group friends and control information flow based on friend type. For guys like Robert Scoble, who have 5,000 friends (the limit), this may be a way to finally sort through the real friends from the fans. It’s a much needed feature that people have been requesting for a long time.
It also shows the steady maturity of Facebook from a college network to a full on world network, where friendships, business contacts, family and other types of relationships need to be more fully described. And this is also as much about privacy as it is about organization - users will be able to limit the information that certain friend groups receive.
A few existing applications are going to be affected, like Slide’s Top Friends application, the most popular third party app on Facebook. Lots of other applications will likely need to be tweaked to work properly when this launches (so many of them access the friends list). And this will shut down at least one “startup” we’ve been tracking that was creating this exact feature as an application. At least they can quit now and stop putting good time and money after bad.
Building Facebook applications is a big dice roll. If it’s too popular or too obvious of an idea (even if it hasn’t been done yet), Facebook is just as likely to compete with you as pay a few bucks and just buy you (they are probably more likely to compete with you than buy you, actually).
Some developers will probably wonder if getting a cash grant from Facebook’s just-announced fbFund will lessen the likelihood of direct competition from the company. Only time will tell.
Update:Wired is writing about a slew of Facebook ad networks and the almost inevitable fact that Facebook will be competing with them directly, too. We’ve covered most of these: SocialMedia, VideoEgg, Lookery, fbExchange, and RockYou. Also mentioned are Cubics and Appfuel. Lots of brave souls racing to build a business before Facebook comes in and stomps all over the scene.
VideoEgg has just closed a $15 million series D round of funding led by Focus Ventures with WPP, Maveron, and August participating. VideoEgg cites plans to accelerate the development of their ad products and international sales network as the reasons behind the investment.
VideoEgg started off as a white-label video host, powering some notable web properties such as AOL sites, Bebo, hi5, Piczo, myYearbook, Dogster, Tagged and others. They then quickly incorporated an ad network. Like many other video startups, they did it through overlay advertisements (Yes, before YouTube). Startups are experimenting with other video ad formats “>as well. VideoEgg has been driving “significant” revenue through their overlay advertising.
Recently they applied that overlay model to Facebook as a new ad network, helping users monetize videos and applications. They reportedly pay a healthy CPM (developers have reported ~$8-10 CPM). Other Facebook ad networks include Lookery, RockYou, SocialMedia, and FB Exchange.
VideoEgg wants to continue developing their ad platform, moving from an impression model to an engagement model, while making ads more social. Although they remain tight lipped on the plans, ad networks on Facebook aim to make ads more engaging by tying virtual rewards to user’s contributions.
When I wrote a post earlier today suggesting that YouTube was not the first to use a Flash overlay advertisement for online video, I didn’t realize I’d be getting so many emails and comments disputing exactly who first invented the unit.
VideoEgg has certainly been doing this for a year or so. In a comment to that post, though, an (unconfirmed) ex-YouTuber says the idea was “discussed long ago inside the company” and follows up with:
All other video sharing websites that came out around the time YouTube emerged were still using Quicktime or Windows Media. YouTube might as well accuse VideoEgg of stealing the idea of using a Flash video player.
Next up was Adbrite founder Philip Kaplan, who emailed me to say that Adbrite has had their own overlay product for nearly a year. He also pointed out that I wrote about it. The ad unit is less sophisticated, but it is certainly a Flash video overlay ad unit.
And finally, Brightcove CEO Jeremy Allaire sent me a long email saying they’ve been doing this as far back as October 2005. He also says the ad units are not particularly popular with advertisers:
I caught your post on VideoEgg taking credit for video overlays as an ad format vis a vis the latest YouTube ad product introduction.
To reinforce this point, while I don’t want to claim “invention”, we were certainly very well ahead of the market when we introduced video overlay ads back in October of 2005, just as YouTube was getting their first pirated episodes of The Sopranos on their site. At the Web 2.0 conference that fall, Brightcove debuted our beta service and as part of that both demo’d and discussed how we wanted to changing video and television advertising with new formats that could engage the user in a non-intrusive manner while creating opt-in ‘takeover sponsorship’ units that a marketer would be excited about. We demo’d overlay ads from Coca Cola running in a MTV Networks channel that we were just launching with them. The New York Times covered this debut.
We subsequently demo’d and introduced these formats again at AdTech in New York that fall, and if you speak with any number of a major content owner brand partners, it has been part of our platform since then, along with a wide range of other innovations in video ad formats, policies and targetting mechanisms.
Interestingly, despite having been 18+ months “ahead of the market”, to our disappointment, there has been extremely limited uptake by the advertising community around these formats. There are a lot of factors behind this limited uptake, including:
- the advertising community buying video have been very focused on leveraging existing creative and buying patterns in the online video space
- most content publishers and media owners have been focused on getting the ‘basics’ up and running, and also responding to the RFPs from marketers and advertisers, which are almost 100% focused on basic short-form video commercials
- for premium brands and content, the basic pre-roll and companion banners are yielding extremely attractive CPMs and there is little evidence that :15 ads have any negative impact on end-user viewership behavior — in fact, our own metrics show that sites that run without any ads, and then introduce :15 pre-rolls and banners achieve identical usage and performance (e.g. no drop-off in users because of ads) on their content.
Nonetheless, we remain very bullish about ‘composite’ video advertising formats that combine overlays and unique and non-intrusive calls to action with deeper interactive marketing experiences. We’ve been pushing this for years and only now are starting to see the publishers and media owners that we work with begin to take an interest in these formats. I believe this is because we’re now entering a phase where content companies are looking at ways to maximize yield and revenue within their content, and they are introducing more mid and long-form content which require, by economic necessity, a different suite of formats to deliver a good user experience.
So where does that leave us? Maybe none of these startups did - Om says it all goes back to old school television. We’ll see if VideoEgg’s patent filing is unique enough to be issued. But they’ve already said they won’t be using it offensively to stop others from doing this. The market will sort it all out.
VideoEgg’s overlay advertising system has been in the market for a year and is driving “significant” revenue for the company. it’s so successful, in fact, that they recently launched a Facebook advertising network based on the same technology.
The idea is to use a Flash overlay advertisement with some basic information and graphics that takes up a small part of the viewable video area. Users click the ad and get a more in depth video ad. It’s less intrusive than a pre or post roll ad, and has far better performance than ads placed around a video. It’s likely to become the standard way ads are placed on video, even potentially on normal television as the thirty second ad spot continues to decline.
Given VideoEgg’s success with the unit it’s no surprise that YouTube has adopted the same format with their advertising. But it is surprising that YouTube failed to give even a passing mention to the company that invented the unit. VideoEgg also claims to have a patent application on this - something YouTube will certainly have to deal with down the road.
Nick Carr points out that much of the early press on YouTube was written by people who failed to do their homework. Carr trashes a CNET article that he says was basically an ad for YouTube. CNET subsequently changed the title of their article but there is still no mention of VideoEgg’s invention of the unit
Meanwhile, VideoEgg seems to be handling the situation well and taking advantage of the publicity. They added the graphic above to their home page, and are talking to press about their product. Suddenly, everyone is interested.
VideoEgg has been exceptionally good at thinking ahead in their business and changing strategies when it made sense.
They launched in September 2005 as a way to publish video to the web from mobile and other devices. Soon they were allowing people to publish videos directly on the site, like YouTube. And they then aggressivelypursued partnership deals to power the video feature on social networks and other sites. Today, they power video on 14 of the 20 largest social networks. And they also monetize those videos with a number of innovative ad units, sharing the revenue with partners.
Today VideoEgg is powering 680 million video plays per month, from 23 million unique users. They’ve built a large ad sales team to sell into those videos with flash pop-up ads that don’t disrupt video play but get in front of the viewer.
That ad sales team now wants more inventory. And so VideoEgg has morphed yet again. Their video business remains in place. But now they are leveraging that ad sales team to sell their flash ads directly into Facebook applications.
EggNetwork, A Facebook Ad Network
There are already at least three advertising networks aimed at Facebook applications - Lookery, fbExchange and a RockYou product. VideoEgg now jumps in the mix with EggNetwork, and they have an immediate and distinct advantage: a huge ad sales team with experience selling into big brand advertisers.
They’ve been quietly active for weeks, testing the platform and gathering data. The Flash ad units (example) don’t do much until you mouse over it, and then text is displayed along with a video clip or interactive game of some sort. CEO Matt Sanchez says that they are selling at above $10 CPM. And they will split revenue from the ads 60/40 with the application providers (60% to the application).
These ads will eventually be targeted demographically based on user data. For now, though, Facebook has put a use of most of this user information on hold as it figures out its strategy. When Lookery launched they had one set of rules in place in their terms of service. Now, they are taking a hard look at what data can be used by ad networks for free, and what should be used at all.
EggNetwork is clearly going to be an attractive option for larger application providers who don’t want to sell ads themself. VideoEgg already has a bunch of them using the service: Rock You, J. Squared Media, Graffitii, Renkoo and Flixster have all incorprated the ads into their applications. Early advertisers include Discovery Networks, Electronic Arts, Fox Searchlight, FX Channel, Paramount Pictures and Universal Pictures.
App-Camp 2007
VideoEgg is also hosting an event, called App-Camp2007, in San Francisco in late October. They’re promising a fun and informative environment for people to learn about application creation and monetization, and will be bringing in marketers and venture capitalists to make connections and provide further device.
There are already at least three advertising networks aimed at Facebook applications - 
