September 16, 2006
I am enjoying having a front row insider’s view of a fascinating (and significant) debate:
What is the winning business model for broadband video?
Umair from Bubblegeneration has done a nice job framing the debate in a widely read and discussed post this week.
On the one hand, video-sharing site YouTube has demonstrated the most explosive growth and enjoys the most traffic among video sites. But, given the random and unpredictable nature of YouTube content, it seems far from settled how well YouTube will attract advertisers and scale a repeatable revenue model. Umair doubts YouTube will be able to capture the $15 CPM that other video sites can.
Heavy.com, on the other hand [disclosure: I am an investor in and on the board of Heavy], is a site that creates, curates and owns its content, and has been quite successful scaling a revenue model and attracting advertisers to pay much higher CPMs. Umair predicts that Heavy will be able to sustain CPMs as high as $40. While this has lead some, like The Financial Times to “unquestioningly” make Heavy out to be “juggernaut,” Umair points out that the picture is not all roses for Heavy either. Because of video consumers’ fickle tastes and behavior, traffic growth for sites like Heavy tends to be inconsistent.
[Brief digression: Umair’s reliance on Alexa may have led him to mischaracterize Heavy’s traffic growth. Based on data from Comscore and Nielsen, we think Heavy actually is one of the fastest growing and most widely viewed video sites out there, in fact second only to YouTube amongst private companies. I’ve posted on this before, and think this detail, while important for Heavy, is less interesting than the broader debate].
So what is the winning model?
My own conclusion, at least for now, is that both types of players would benefit from taking some of the winning formula from the other.
With its phenomenal traffic, YouTube should put more effort into curating its content and creating more “channels” “programs” or whatever you want to call thematically organized content. And, in particular, they should do so in a way that (a) that minimizes advertiser skittishness over questionable content and (b) integrates advertising more seamlessly into the user experience. I think YouTube is taking the first step, but has a ways to go on the second.
Heavy, on the other hand, should offer some features that MySpace and YouTube have shown web users love — programming your own content, connecting with others who are friends and/or have similar tastes, contributing content for the world to see, and sharing. In fact, the Heavy team is doing this with its new “MyHeavy” offering. Early results are promising, and I think this will be an interesting test case for integrating social features into a popular content site.
Curious in readers’ views and opnions here.