10 conditions of success for online video

Today, I received my daily email commentary from my friend Matt Coppet, who runs global media and strategy at UBS. He & I occasionally discuss the new media space & share ideas, and I wholeheartedly agree with his thoughts today. His commentary is reproduced below.

Since we published our "10 conditions of success for online video" three weeks ago, new announcements came in. CBS started the CBS Interactive Audience Network and syndicated its content to ten online channel partners. The NBCU-NWS partnership signed up Comcast and added new cable networks to its future line up as well as offering new distribution outlets through Comcast online sites.

CBS and the NBCU-NWS venture offer diverging economics but aim at a similar outcome, the creation of a new syndicated marketplace, matching growing online content inventories to currently strong advertiser demand.

*CBS decided to give up some of its distribution control (and surrounding environment) for broader penetration (working with all the potential core players such as Joost, Brightcove, AOL, Microsoft and Veoh). By broadening its online distribution sooner (using IBM "hyper-syndication" term), CBS could forgo some potential monetization in the longer term and suffer conflict with its brand (some of its partners have varying traffic quality).

*The NBCU-NWS venture has a more daunting task, which is to generate user destination traffic. The capability for the venture to invest in marketing the new site(s) will be key. Comcast's ownership of several high profile technology partners should facilitate that work. Our conversation with The Platform (Comcast owned) CEO Ian Blaine highlighted many potential synergies, mainly for content management and syndication support. Our conversation happened before yesterday Comcast announcement.

Implication => We believe a syndication model would enable studios to regain eye balls online. It is too soon to estimate how user generated content (UGC) demand will evolve following the massive arrival of easy to access, indexed and searchable studio content (both in long and short format). AOL, NBCU-NWS venture, Joost (expanded beta in May) and other platform would likely take market share away from current UGC leaders.

We highlight again our 10 conditions of success for any online video ventures: Traffic optimization, advertising integration, brand focused, syndicated model, social media friendly, independent decision making, bandwidth costs control, leveraging data mining, bit sized content available and predictive marketing

(1) High web traffic from start is necessary to sustain advertisers' interest and to soften the impact of higher ad inventories on CPMs. Current CPMs up to $50 would be tough to retain in a basic streaming environment (no targeted ad).

(2) Integrated ad servicing process is key (no ability for each partner to sell its own ad inventory, which would defeat the purpose). It also eliminates channel conflicts.

(3) Brands/advertisers friendly (brands should be able to go behind pre roll/post-roll ads. We believe opening the full interface to branding/ sponsorship - including the player skin - is key. Ability for users to bookmark content and distribute segment is important.

(4) Syndication model can work with compelling content. It is not a surprise to see NBC Universal in the venture. It recently pre-launches the National Broadband Co. (nbbc), a content syndication marketplace. We do not know yet if nbbc would be integrated into the venture or become an infrastructure partner.

(5) Minimal social-media (web 2.0) function (such as users' commentaries/ ratings/chat). Over promising in term of user customization could conflict with future branding/sponsorship. For instance, mySpace users would be able to embed those videos from the NBCU-NWS venture on their webpage. Any venture would have to make sure of the integrity of the player branding (against program scripts that could remove them).

(6) Independence is important. Operating power should not be shared among partners, which could slow down the decision making process. It also eliminates conflict of interest.

(7) Contextual advertising (or predictive marketing) should enable advertisers to focus on branding as well (and not only on shorter term promotion). As relevance improves, brands would likely spend more driving monetization up.

(8) Managing bandwidth costs is central to any ventures success.

(9) Moving from simple data gathering to leveraging data. Understanding the customer (analyzing databases) offers a potential viewer "lifespan value". Package goods companies for instance could be inclined to spend more for addressable advertising.

(10) Offering content in the format customers want (such the 5 minute signature moment in a sitcom or a specific candidate performance on American Idol). Smaller length would respond their younger demo aspiration and could increase the ratio ad over content.