Joost's Volpi Touts 'Targetability'

by Gavin O'Malley, Wednesday, Jun 6, 2007 6:00 AM ET
WEB TV STARTUP JOOST HANDED the reins to Michelangelo Volpi on Tuesday, naming the seasoned Cisco executive as its new CEO effective immediately. Joost's founding CEO Fredrik de Wahl will retain his role as the company's chief strategy officer.
Volpi, who sees his engineering background meshing well with Joost's tech culture, explained the power of Joost in one word: "targetability."
"Our biggest asset is targetability, and our belief is that TV advertisers want a high degree of targetability," he said. "From an advertiser perspective, we know exactly who's watching what content."
Joost can tailor its ads to individual users based on information they provide--including geography, tastes, and demographic information--along with behavioral patterns.
At Cisco for 13 years, Volpi most recently managed Cisco's $11 billion routing and service provider technology group, including Scientific Atlanta, as senior vice president and general manager. Previously, he headed Cisco's M&A activity, acquiring some 70 companies during his tenure.
"Mike's track record speaks for itself," said Janus Friis, executive co-chairman and co-founder of Joost. "We've known him for many years, as he was a Skype board member."
With regard to Joost's ad model, Volpi assured that pre-rolls will be rare, and will last no longer than five seconds when they do run.
"We want to hold [off] on the ad until the user is highly engaged," explained Volpi.
Joost, founded by the same entrepreneurs--Niklas Zennstrom and Friis--who brought the world Skype and Kazaa, last month announced a lineup of 32 major brand advertisers aided by a year-long partnership with Interpublic Group's Emerging Media Lab. The advertisers include Microsoft, Intel, Motorola and Sony Electronics. Separate deals have been made with Hewlett-Packard, Coca-Cola, Procter & Gamble and Nike.
Even before its beta inception in May, Joost explored original ad formats, attempting to improve on the glaring faults of pop-ups, banner ads and pre-rolls.
One new format is an "ad bug," or a brand logo that briefly floats in the corner of a user's screen after encountering a streaming video ad. If users decide to click on the tiny image--designed not to be too intrusive--a new browser window opens with the brand's site.
Unlike video-sharing sites like YouTube, which are dominated by short clips, Joost's mission is to popularize long-form, high-quality, ad-supported content.
The startup has clearly convinced major media companies that it will deliver on these promises. Last month, Joost received $45 million in investment from five prominent media and venture capital companies, including CBS, Viacom, and Silicon Valley venture capital firm Sequoia Capital.
The company made headlines earlier in the year when it signed Viacom as a content partner, shortly after the media titan filed suit against Google for alleged copyright infringement by YouTube.
Since then, Joost has signed a number of additional content partners, including Warner Music, National Geographic, Turner Broadcasting, The Cartoon Network's Adult Swim and CNN--along with programming from Hasbro, the NHL, Sports Illustrated and Sony Pictures Television.

Going Vertical !!!

By Cory Treffiletti

With the entire buzz being generated through numerous consolidations and mergers, it's interesting to witness the trend towards vertical ad networks and away from the previous model of broad-reach, broad-targeted networks.
The first wave of the network model focused on large reach networks, such as ValueClick and Advertising.com. These folks aggregated a large volume of audience for advertisers to speak to, and allowed for contextual targeting and demographic targeting, mostly via contextual relationships. The second wave focused on behavioral targeting being layered over the existing infrastructure, offering advertisers the ability to reach the same audience either contextually or based on previous traffic patterns and usage, thereby giving birth to behavioral targeting. The current trend appears to be focused on building a singular portal to reach a specific audience by tapping into them via a collection of smaller to medium-sized sites of a similar contextual relevancy.
One of the first (apparent) players in the category was Gorilla Nation. The company amassed a large collection of sites reaching the entertainment category, and has continued to build them over the last few years, while acquiring more into the mix. Recently we saw Jumpstart Automotive Media be acquired by Hachette Filipacchi for a large sum of money, aggregating together a large collection of automotive targeted sites and inventory, in some cases building relationships with larger portals to weave together its inventory, either contextually or through behavioral targeting, to reach in-market autobuyers.
Even the start-up world is getting into the act, with properties like Real Girls Media and its first site, DivineCaroline. These folks are trying to pull together women-targeted sites in much the same way that early trailblazer iVillage did, but is focusing on the Web 2.0 elements such as blogs and user-generated content. Going beyond the network model, we are even seeing the development of platforms and services to help advertisers reach the types of verticals they are interested in. Centro is a platform and service that objectively aggregates together local online content for advertisers, while Adify is a start-up that professes to build out vertical networks for specific advertisers, then is able to reuse that inventory, building a marketing asset for later growth.
All of these models signal the shift away from large aggregate audiences towards the development of solutions to reach the long tail and provide advertisers with the ability to go deeper into the lives of their audience. In our planning way back in 1996, we used to say that this was a means for reaching the portal audience without advertising on the portals. It was a means of going around them when they cost too much or wanted too much in the form of an upfront deal. Now we know that these are all ways to build to the ever-important tools of reach and frequency. These long-tail vertical networks provide access to a targeted audience at a lower cost, in a way that is attractive to advertisers. You are able to do more than just run banners and buttons. You are able to run large page take-overs and larger rich media units, but in a smaller, more efficient, and possibly more effective environment.
The venture capitalists seem to have gotten the message loud and clear. The majority of the dollars I see going to these models are focused on video and vertical. Of course, that means that a vertical video network or platform would be the most attractive option for VCs and advertisers alike.
Please excuse me while I go work on that business plan!

Content Businesses Don’t Scale Anymore

Content Businesses Don’t Scale Anymore

Posted By Scott Karp On 3rd December 2006 @ 09:16 In Blogs, New Media, Publishing 2.0, Digital Content, Media Economics, Online Publishing, Content, Business Model | 51 Comments

Can anyone think of a content business — meaning a company that produces original content — that has scaled dramatically in recent years? I can’t. Look at the businesses that have scaled — Google, MySpace, YouTube — all platforms for content, but not producers of content. Compare those to original content businesses like [1] Weblogs, Inc., [2] Gawker, [3] TechCrunch, [4] Paid Content — they are successful at their scale, but that scale is still tiny compared to the scale of the aggregation businesses. Even portals like AOL and Yahoo are much more aggregators of content than original producers of content.

Last spring I wrote about the [5] Long Tail of Revenue 2.0, observing that the most of the revenue goes to aggregators in the head, and the rest is spread very thinly across an ever growing and ever thinning tail of content creators. Tim O’Reilly has posted a version of this obeservation in [6] The Economics of Disaggregation:

…long tail businesses disproportionately benefit the aggregator. While they create new opportunities for content providers “down the tail” who might not otherwise have been noticed, they create even greater collective benefits for the Amazon, the Google, the Netflix, who hosts the entire collection, the dog who wags the tail.

William Bulkeley put this phenomenon in a larger context in a WSJ article title, “[7] The Internet Allows Consumers to Trim Wasteful Purchases“:

Marketing 101 says success comes from selling things people want. But advanced marketing calls for companies to leverage the relationship to get the buyer to pony up for other products — or at least for extra product. When customers find a way to avoid buying the excess baggage, they change quickly.

Take the film business. Eastman Kodak and Fuji Photo Film had a highly profitable duopoly for 20 years before digital cameras came along. They never dreamed customers would quickly abandon film and prints. But customers are happy to pay for new digital cameras because the cameras let them pick the good pictures without having to pay to print out a roll of mostly mediocre shots. Now film sales are dropping 20% or more a year and Kodak has reported losses for eight consecutive quarters while closing plants around the world and laying off thousands of people.

[8] Jack Shafer in Slate narrows the lens on the newspaper industry:

Bulkeley could have easily applied the wisdom of his lesson more broadly to newspapers. It’s not that the complete gestalt of local, state, national, and international news plus sports, comics, classified, opinion, and hints on fashion, home, entertainment, and food isn’t still useful. It is. But given a choice, and the economic means to make a choice, many buyers prefer to make an unbundled purchase. Unbundling the news they want from the news they don’t want is what the Web allows readers to do now.

The result of unbundling, disaggregation, the loss of pipe control (to use [9] Andy Kessler’s construct) — i.e. the inability to force people to consume content they don’t want — is that content businesses don’t scale anymore. That doesn’t mean creating content isn’t profitable — independent publishers like Mike Arrington and Rafat Ali can have nice little businesses — but the same phenomenon that allowed them to become business at all will probably prevent them from becoming large businesses. I’ve heard Mike Arrington say he wants TechCrunch to be as big as CNET — the problem is that CNET’s audience is not only being chipped away by TechCrunch but also by hundreds of other independent technology publishers, which limit the growth of TechCrunch as much as they shrink the reach of CNET.

Robert Young posits the “[10] fat belly” as a missing link in long tail economics:

The recognition of the existence of the Fat Belly is critical for many reasons, but allow me boil it all down to this overarching statement: Any economist or political scientist will agree that the health of any democratic society that’s fueled by free market capitalism is measured by the robustness of its middle class. A large and vibrant middle class demonstrates a healthy redistribution of wealth within a nation and its economy, ultimately serving as a catalyst for the power of one vote and equality amongst its peers/citizens.

The comparison to the middle class is exactly right — content businesses will have a share of the welath, but they will never scale to be “wealthy” like the aggregators.

So does that mean that content creation will forever be a small business? Likely, yes, unless you can aggregate your way up to scale — this is what Weblogs Inc attempted, realizing that none of its blogs would ever be a big business unto itself — aggregation also enables an internal network effect that gooses the scale. But even Weblogs is still dwarfed by the aggregator businesses, even after it was acquired by one (AOL).

The democratization of the content businesses, like any other democratization, requires a flattening of the business — a lot more people can play, but the opportunity is limited by each successful entrant. There’s still a finite amount of attention for content. And let’s not forget that much of the new content is being produced by people who have no interest in being in the content business — they just want attention in some form. But all those MySpace pages and silly YouTube videos take dollars off the table — except for MySpace and YouTube.

The real wealth generation opportunity for businesses like Weblogs, TechCrunch, and Paid Content is the prospect of being acquired by an aggregator — but I think we’ll see the continued growth of a new breed of “mom and pop” content business, content (pun intended) to make an independent albeit middle class living.

UPDATE

Some additional thoughts occurred to me on the treadmill:

Many of the aggregator businesses, like YouTube and MySpace, are better described as platform businesses, i.e. they provide a platform for content creators and distributors, which makes them de facto aggregators. Also, new platforms like [11] Brightcove are likely to support lots of small content businesses rather than launch any large scale businesses.

The content creation space is also being crowded by brands, which are increasingly trying to create content as a destination rather than commercial messages as an interruption — and because they can leverage platforms like YouTube, they no longer have to pay content creators to ride along with their content. Every minute we spend with a brand’s content, whose objective is selling the brand, is a minute we don’t spend with content whose objective is selling the content.

Jonathan Miller at Web 2.0, shortly before his abrupt departure from AOL, effectively conceded that the content business is losing scale. John Battelle asked him whether portals like AOL can hold onto their monopoly, or whether they will go the way of cable TV, i.e. infinite fragmentation. Although he gave the dutiful public company answer, that in practice he didn’t see why AOL wouldn’t hang onto its monopoly, his first answer was frank and honest — in principle, there’s no reason why these monopolies shouldn’t unwind.