Five years ago, when online video was just getting started, individuals flocked to platforms like YouTube to share their stories with the world under the mantra "Broadcast Yourself."
A half decade after YouTube's birth, the site exceeds 2 billion views a day. It seems that everyone--from music labels to mainstream Hollywood studios to television networks--has joined the movement. Amid this vibrant, fertile, and expanding landscape, a creative class of budding, do-it-yourself media moguls--part distributor, part content creator, part producer, part entertainer-- is emerging.
The online-video ad market is growing up
A key catalyst for this new creative class is a maturing video monetization market. What was once mocked for offering mere online pennies, compared to analog dollars, has grown in effectiveness and sophistication to generate real revenue. The basic online display ad adjacent to a video has evolved to include in-stream ads, overlay ads, and even click-tobuy e-commerce links to sites like Amazon.com and iTunes.
In the last two years, for example, YouTube's home page went from offering one to now seven ad formats. Even online marketplaces have emerged to make it easy for anyone to buy and measure national cable television advertising across offline and online networks, all for as little as $20 per TV spot.
More ads, greater formats, and simpler sales methods enable a wider range of advertisers across the head, middle, and long tail of content. More advertisers bring more money to the savviest of online video content creators, and more money creates better content. The ecosystem is starting to feed itself.
Meet new media's emerging creative class
Fueled by the evolution and growth in advertising, new media's emerging creative class represents brands that few in the mainstream have heard of, yet it commands weekly audiences that often dwarf some of network television's biggest shows on a good night. Like the cable brands of the mid- and late 1970s (Showtime, HBO, etc.), their slow and steady success has transformed them into video juggernauts and positioned them to dominate the online (and potentially offline) video market in the years to come.
They are not only the actors and stars of their show, but they are the producers, the copy editors, and cinematographers; they work to market themselves, close advertising deals, and sometimes employ a team to support and promote them.
They have names like Machinima, Next New Networks, and Demand Media. Collectively, they represent billions and billions of online-video views. And many have transformed their fledgling businesses into successful and profitable online brands.
Take, for example, Shane Dawson, who commands more than 35 million monthly views across his latest YouTube videos. That exceeds the typical "American Idol" finale. Or YouTube user Phil DeFranco, whose channel on YouTube, as pointed out by a recent article in Fast Company, "has beaten 'Larry King Live' and 'The O'Reilly Factor' in daily audience." Views interest advertisers, and advertisers bring in money. As DeFranco points out in the same Fast Company article: "Some YouTubers in 2010 will make seven-figure incomes."
Independent musicians, likewise, are taking advantage of emerging revenue opportunities around online video to build a business by engaging their fans directly. Just one example is YouTube's Musician's Wanted campaign. The Partner Program extension enables independent musicians, bands, and labels to serve ads against and make money off of the original music videos they create, upload, and share on YouTube.
The secret of their success
New media's emerging creative class isn't lucky; it's just damn smart and hard-working. It's easy to dismiss a user like Lucas Cruikshank as a niche player whose obnoxious Fred Figglehorn character speaks only to tweens while making parents' ers bleed. The truth is, the 16-year-old and others like him are far savvier than the establishment thinks.
They are not only the actors and stars of their show, but they are the producers, the copy editors, and cinematographers; they work to market themselves, close advertising deals, and sometimes employ a team to support and promote them. They seek film projects, and engage brands and even traditional networks to potentially act as a distributor. After all, being able to directly reach an audience of 30 million 15-year-olds is clearly a channel many advertisers and established media would pay good money to connect with.
The emerging creative class is also young, so it gets the Internet. Its members understand that the Web affords them the unique opportunity to interact and engage with their fans. They do this by responding to comments, uploading and sharing response videos to fans, going to Twitter to share their latest videos, or connecting with and talking to fans on Facebook. They take advantage of deep analytical data provided to them by online platforms like YouTube to learn from and better understand what their audiences like and don't like; they study not only when they watch, but in what regions are they watching it.
One such partner, who was in the habit of uploading new videos on Wednesday mornings, noticed that most of his views took place on Thursday evenings. He started uploading new videos on Thursday evenings and immediately doubled his audience. Everyone has this data; it's just the new emerging creative class that understands how to find it and use it.
Enter the online rental
Online video producers--and more importantly, online-video consumers--are getting serious about transactions. A few years ago, the appetite wasn't there. But today, most platforms understand that not all content can, or should be, supported by the advertising model. The emerging creative class understands this and wants a scalable rental model that reflects its unique needs--in other words, a platform that has the flexibility to react, in real time, to market forces created by a dynamic and unpredictable online audience.
Given the proper tools, these content creators and distributors determine the cost and availability around their content. They will charge $5.99 the first week, $2.99 a month later, and then migrate to an ad-supported model to sustain demand and broaden their audience. This model is still in its earliest stages--after all, the vast majority of Netflix's revenue still comes from traditional mail route--but the times are changing, and so are consumer habits.
When it comes to the online-video revolution, we haven't even gotten past the first inch of the first yard. Only five years have passed, and there are many, many more years to come that will usher in more innovation, more users, and more smart and ambitious content creators.
The democratization of consumption and creation of online video have changed. Today, it is the young, nimble creator who understands that his audience must stay engaged; his competition is a mere click away, and if she doesn't use every tool at her disposal while controlling a 360-degree understanding of the business, someone smarter and faster will take the lead.
The money is already starting to come. The question really is, who is positioned to capitalize on it?
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Monday, May 17, 2010
GM Reports First Quarterly Profit Since 2007
Ten months after emerging from a government-orchestrated bankruptcy, General Motors Co. on Monday reported its first quarterly profit in three years, driven by dramatic cost reductions and improved global sales.
GM made $863 million in the first three months of 2010, compared with a $6 billion loss a year earlier, a performance that surprised analysts who expected more modest results. Revenue grew 40% to $31.5 billion, and the company generated $1 billion in cash.
But GM finance chief Chris Liddell warned that the next few quarters may not be as strong, as troubles loom in Europe and the U.S. recovery remains tenuous. Mr. Liddell, in a clear effort to avoid GM's old ways of promising results it couldn't deliver, made a point to play down the possibility that the solid quarter signals GM will go public this year.
"My mantra is to focus on the day job and the [initial public offering] will be successful," he said in an interview. That could happen anytime from a few months until next year, he said. "This is an industry where a lot of variables can change. There is no reward in my field for being overly optimistic."
GM is being propped up by about $43 billion in U.S. loans. The government can't try to recover the money until GM returns to the public stock markets and the Treasury can begin selling its 61% stake in the company.
Neal Boudette reports that the auto maker's financial situation improved dramatically as its sales rose and the company realized billions in cost savings from last year's bankruptcy reorganization.
However, the U.S. did share in GM's earnings, which totaled $1.66 per share. The company paid $203 million in dividends to the U.S. and Canadian governments and a union retiree health care trust, all of which are GM's preferred shareholders.
Several analysts had predicted GM would deliver a narrower profit and only break even in North America, where GM made $1.2 billion. One unexpected factor is that consumers were willing to pay more for GM vehicles. The higher prices contributed $1.7 billion in first-quarter revenue in North America despite the depressed auto market. U.S. sales rose 17% from 2009's first quarter.
"The biggest problems they've had for a long time is that they were effectively paying people to buy their vehicles" through incentives, said Deutsche Bank analyst Rod Lache. "This has tremendously positive implications in terms of what they can do."
GM has managed to drive up prices by building fewer vehicles and turning out cars and trucks more desirable to U.S. consumers, such as GM's revamped Chevrolet Equinox crossover, while tighter supply means the company's doesn't have to rely on deals to clear out inventory.
Another factor: In North America, GM's factories are operating at 84% of capacity, up from less than 40% a year ago. Underutilized factories are a major cost drain for auto makers.
The company, meantime, has increased global sales by 24% amid rapid growth in emerging markets, including China.
Cost reductions made possible by last year's bankruptcy were a major factor in GM's profit.
Experience WSJ professional
Editors' Deep Dive: Auto's Bumpy Road With Workers
Access thousands of business sources not available on the free web. Learn More
The world's largest auto maker until a few years ago, GM shed thousands of jobs, shuttered factories and closed hundreds of U.S. dealers. It had $53 billion in debt going into bankruptcy but it now owes closer to $8 billion, according to the company. GM's interest expenses fell by $863 million.
Mr. Liddell said he sees no reason GM can't continue to make money, but warned that momentum in North America could be slowed by a sales slide or costly incentive war among auto makers.
He said GM likely won't be profitable in Europe until 2011, where the industry has been hit by an end of government "cash for clunkers" payments and the region's economic turmoil. The Chinese car market also is slowing.
Meantime, a number of factors that boosted GM's results won't be repeated in future quarters.
The car maker spent just 13% of its $6 billion capital budget in the first three months of 2010, meaning capital spending will increase in coming periods. The company also produced a larger-than-usual volume of high-margin trucks to replenish short supplies.
The results marked GM's first quarterly profit since it made $891 million in 2007's second quarter. The company lost more than $80 billion since 2005 and hasn't been profitable for a full year since 2004.
Last month, GM repaid a $6.7 billion U.S. government loan ahead of schedule, but it still faces the stigma of being a government-owned company.Just do it
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GM made $863 million in the first three months of 2010, compared with a $6 billion loss a year earlier, a performance that surprised analysts who expected more modest results. Revenue grew 40% to $31.5 billion, and the company generated $1 billion in cash.
But GM finance chief Chris Liddell warned that the next few quarters may not be as strong, as troubles loom in Europe and the U.S. recovery remains tenuous. Mr. Liddell, in a clear effort to avoid GM's old ways of promising results it couldn't deliver, made a point to play down the possibility that the solid quarter signals GM will go public this year.
"My mantra is to focus on the day job and the [initial public offering] will be successful," he said in an interview. That could happen anytime from a few months until next year, he said. "This is an industry where a lot of variables can change. There is no reward in my field for being overly optimistic."
GM is being propped up by about $43 billion in U.S. loans. The government can't try to recover the money until GM returns to the public stock markets and the Treasury can begin selling its 61% stake in the company.
Neal Boudette reports that the auto maker's financial situation improved dramatically as its sales rose and the company realized billions in cost savings from last year's bankruptcy reorganization.
However, the U.S. did share in GM's earnings, which totaled $1.66 per share. The company paid $203 million in dividends to the U.S. and Canadian governments and a union retiree health care trust, all of which are GM's preferred shareholders.
Several analysts had predicted GM would deliver a narrower profit and only break even in North America, where GM made $1.2 billion. One unexpected factor is that consumers were willing to pay more for GM vehicles. The higher prices contributed $1.7 billion in first-quarter revenue in North America despite the depressed auto market. U.S. sales rose 17% from 2009's first quarter.
"The biggest problems they've had for a long time is that they were effectively paying people to buy their vehicles" through incentives, said Deutsche Bank analyst Rod Lache. "This has tremendously positive implications in terms of what they can do."
GM has managed to drive up prices by building fewer vehicles and turning out cars and trucks more desirable to U.S. consumers, such as GM's revamped Chevrolet Equinox crossover, while tighter supply means the company's doesn't have to rely on deals to clear out inventory.
Another factor: In North America, GM's factories are operating at 84% of capacity, up from less than 40% a year ago. Underutilized factories are a major cost drain for auto makers.
The company, meantime, has increased global sales by 24% amid rapid growth in emerging markets, including China.
Cost reductions made possible by last year's bankruptcy were a major factor in GM's profit.
Experience WSJ professional
Editors' Deep Dive: Auto's Bumpy Road With Workers
Access thousands of business sources not available on the free web. Learn More
The world's largest auto maker until a few years ago, GM shed thousands of jobs, shuttered factories and closed hundreds of U.S. dealers. It had $53 billion in debt going into bankruptcy but it now owes closer to $8 billion, according to the company. GM's interest expenses fell by $863 million.
Mr. Liddell said he sees no reason GM can't continue to make money, but warned that momentum in North America could be slowed by a sales slide or costly incentive war among auto makers.
He said GM likely won't be profitable in Europe until 2011, where the industry has been hit by an end of government "cash for clunkers" payments and the region's economic turmoil. The Chinese car market also is slowing.
Meantime, a number of factors that boosted GM's results won't be repeated in future quarters.
The car maker spent just 13% of its $6 billion capital budget in the first three months of 2010, meaning capital spending will increase in coming periods. The company also produced a larger-than-usual volume of high-margin trucks to replenish short supplies.
The results marked GM's first quarterly profit since it made $891 million in 2007's second quarter. The company lost more than $80 billion since 2005 and hasn't been profitable for a full year since 2004.
Last month, GM repaid a $6.7 billion U.S. government loan ahead of schedule, but it still faces the stigma of being a government-owned company.Just do it
Ask for more
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The choice of a new generationhttp://www.arlo.net/resources/forums
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