Happy Birthday, YouTube. You’re Seven. In internet years, that’s 49.

I didn’t get you a present because I think I only counted 5 YouTubers in this video.

There’s an elephant in the online-advertising living room. Suddenly the Emperor has no clothes. It smells and quacks like a duck. [Insert your overused metaphor here].

AdTech Industry: There's an emperor in the room with the stinking fish and elephant and if it looks like a duck and quacks like a duck it's a duck.

Recent news is shedding light on confusing and dirty practices in the buying and selling of online-video and other legacy forms of digital advertising. The whole thing reeks like the stench of  illegal and unethical retail slotting-fee practices between stores and manufacturers in the 20th century. Proof?

• Digiday chronicles a “Confession of an Ad Tech Executive,” with an anonymous source saying, “It’s crappy inventory for audience buying. You have a finite amount of quality inventory, and there aren’t too many ways to access it… Cookie bombing… keeps shit inventory in business. You can buy dog-shit impressions for 25 cents…” Huh?
• MediaPost reacts with the headline, “Why Can’t The Ad-Tech Industry Speak English.” Indeed you’re not alone if your head tilted reading that first bullet. But the MediaPost article further details an “ugly picture,” that includes poor ad inventory, commodity tech/services, and clueless agencies, vendors and marketers. And there are “ethical dilemmas, like excessive gift-giving and boondogles — even summer houses, vacations, and Super Bowl trips.”
• Online-video ad practices are being called out specifically. Why else would TubeMogul, an ad platform for buying and selling online-video ads, issue a campaign called FakePreRoll.com? It’s designed to expose instances where vendors run auto-play, pre-roll video ads inside banner ad units or small, syndicated players. Says a TubMogul release, “With more exposure of this deceptive practice, brand marketers will be better informed to get the value they deserve.”

So What Does the AdTech Industry Need to Regain Trust and Attract Budgets?

1. Real metrics: This isn’t new, and has plagued digital advertising for more than a decade. Specific to video, an agreement between TubeMogul and Nielsen (reports AdWeek) allows advertisers and agency trading desks to cross-reference audience metrics — like gross rating points (GRPs) for target audience age and gender demographics — with engagement (impressions and clicks) to get a better sense of a campaign’s performance. Meanwhile comScore has its Video Metrix program that claims to provide, “transparent, end-to-end video measurement.” Ultimately we need trusted, vetted ways to correlate ad serving to purchase intent or sales… and a neutral third parties to measure impact. For example, at Merck I hired an independent, digitally savvy consultant (who didn’t work for the media buyer or agency) to assess our online-ad campaign’s impact on intent lift and sales… and translate it in simple language for me, our market research & analytics teams, and senior management.

2. Engrish: I agree with MediaPost’s Max Kalehoff’s “speak English” article. Here’s another actual quote from that Digiday “confession.” WTF?

People operate out of fear. They end up spending way too much time worrying about the 5 percent edge cases like data leakage for publishers or brand safety for advertisers. 

4. Consolidation & Simplification: I vomit in my throat every time I hear about a new advertising network that differentiates through “premium inventory.” Let’s sort this fragmented space out, and get ourselves just a couple ad-buying platforms with different strengths. Unless you’re a hardcore media buyer or publisher, your eyes glaze over on the “how” the campaign is being executed and measured. Marketers just want to know the damned ads are “moving units.” They don’t give a shit about DSPs, SSPs, and RTBs. I don’t know or care what they even are.

5. Scrutiny on Relationships Between Media Buyers and Platforms/Publishers: Let’s be sure ad spending allocations are done with no other agenda than to drive targeted ad reach that moves brands. The incestuous relationships between media buyers and sellers needs illumination. Brand marketers need to trust that agencies, media buyers and providers are operating not to sell themselves but to sell the brand.

Sort it out, folks. Simplify it. Be honest. Heck, even the most competent marketer is feeling like General Beringer in the 1983 film “War Games“:

“Goddammit, I’d piss on a spark plug if I thought it’d do any good!”

There’s a long-time debate about the merits of professionally produced content (TV commercials) and user-generated content (like product reviews or sponsored videos). A comScore report shows that the combination of the two are more effective as measured by lifts in “share of choice” — that’s a comScore metric to quantify the ability of an ad to influence brand preference, and it’s been shown to predict advertising-induced sales.

Interestingly, the study showed user-generated performing better than the professional content on “key communication message,” which is something one might expect of the pro content. It may surprise ad agences that user-generated video also scored higher on “emotional intensity,” “easy to relate,” but not the “importance of key message.” Pro content won there. Of course it’s worth noting that the comScore study was done with Expo.tv, a company that creates and distributes such brand-centric videos as product reviews, how-to’s, demonstrations and recipes.

We don’t know the product reviews or commercials that were tested, but I used Tide With Downy as an example below (this is a slide from a presentation I’m giving at the Association of National Advertisers next week). I’ve also added sample video of both an ExpoTV product review of Tide, and a Tide advertisement I found on YouTube. They’re more different than similar, and it’s easy to see that the one-two punch is going to sell me on Tide more than seeing the TV spot prerolled 4 times alone. According to MediaPost, the study evaluated an actual campaign that included a combination of a professionally produced “how to” video and a user generated product video that was created and submitted by an actual product user.

When measuring “Share of Choice” lift (on both featured product or broad product line ads) the pro content fared significantly better when pitted directly against user-generated content. But the combination was demonstrably better, suggesting we might want to rotate pro spots with low-tech personal testimonials.

“While marketers may already be familiar with the effectiveness of professional video content alone, these results suggest that even greater returns can be had by combining their use with authentic, user-generated content,” said Frank Findley, comScore’s Vice President of Research and Development.

Compare yourself… watch Krista’s review of Tide with Downy then see a professional “Hoodies and Cargo” spot. Thoughts? I find Krista’s review more like a mildly compensated neighbor telling me about the product, and the Hoodies commercial far more entertaining. (But the Hoodies spot on YouTube had 1000 dislikes against 186 likes). They’re different beasts, serve different roles, and need to be seen as complementary not “either or.”

Best sources for online-video marketing information

WillVideoForFood was created to help creators build audiences and make money, but it obviously focuses on online-video marketing. Of course we’re not a news outlet… we’re an author blog. And when we say “we,” we’re using it in a Royal sense. (It’s just me, okay?)

So here’s our definitive list of sources to feed your online-video curiosity — between WVFF posts. If you want to satiate your RSS or fancy reader with nice sources of intelligence, this is a good place to start. Did I miss anything? Let me know below!

Are these sources as fun and personal as this blog? Of course not!
Are they comprehensive, current and betterly written? Maybe.

Industry News Sources on Online-Video, Media and Marketing

• ReelSEO: one of our favorite sites for online-video news, and it includes video creation and marketing tutorials by the affable Tim Schmoyer (which also can be found on ReelSEO’s YouTube channel).
• ComScore is the definitive source of monthly statistics, site ranking, and audience trends.
• eMarketer also publishes nice data and reports about online video.
• TubeFilter: A nice way to stay on top of webisodes and the convergence of Hollywood and online video.
• NewTeeVee: GigaOm’s video site is a long-time player, and has recently refreshed its approach. Similar to Tubefilter, the site focuses on new webisodes and professional content.
• iMedia Connections: A publishing and event empire focused broadly on digital and traditional marketing.
• MediaPost, a behemoth publisher of industry news, has a VidBlog worth checking out (especially to read Daisy Whitney’s prose)
• TubeMogul, an online-video platform, has a blog… it’s usually about the company, but also provides nice stats and trends. Brightcove, another major player, also has a blog.
• AdAge: Digital media and marketing news with an advertising focus. AdWeek also has nice advertising coverage, but less about online video.
• Shira Lazar’s What’s Trending is, while hard to describe, important.
• StreamingMedia is a conference planner and publisher, with an emphasis on the technology behind online video. Even better, see Streaming Media’s OnlineVideo.net.
• Digiday: Digiday is a media company and community for professionals working in digital media, marketing and advertising industry. Its daily “feed” includes web-culture news roundups, infographics, essays and more.

• David Meerman Scott has got a nice blog called Web Ink Now.
• Steve Garfield, author of “Get Seen” (the second-best book about online video) has a blog and a pretty nice Instagram collection.
• Don’t forget Tim Street. And I’ve also just discovered author Pat Ferdinandi’s Viditude blog.
• Jack Myers covers the media space, and syndicates as well as publishes his own content and reports.
• Daisy Whitney may have stopped “New Media Minute,” but she remains the journalist maven and can be read on MediaPost.
• My friend Brad Aronson has a new blog loaded with fresh perspectives and important (but easy to forget) insights for entrepreneurs, managers and leaders. It it video specific? No, but it’s Brad. And it’s called Brad Aronson’s blog, which is a remarkably creative name.

YouTube Specific

• YouTube has a blog, a Creator blog, and a place focused on video trends. There’s even a Google forum for Partners.
• YouTube gossip: “WillofDC” talks about the YouTube community
• Josh Rimer has a blog on “YouTube marketing tactics.”
• Tim Schmoyer has nice YouTube creator tips on ReelSEO.
• YouTube news: Mashable, Google News on YouTube

 What’d I miss? 

“The problem isn’t cost, it’s revenue,” writes WatchMojo CEO Ashkan Karbashfrooshan in a MediaPost story titled “What Revision3′s Sale Means for the Online Video Industry.”

Indeed while I’ve long urged marketers and media providers to keep costs down for online video, that’s because revenue (via ad-sharing) is modest and dependent on finding an audience. There’s no cost that can sustain without revenue. Fortunately the dollars are moving to online video, accelerated by the rapid convergence of television and what we’ve called “online video” (a term that is becoming increasingly obsolete). The article is a nice reminder that the online-video medium is at a point where it needs (and is getting) financing and sales muscle of larger media properties.

As with most industry maturites, the big guys are swallowing small ones.

The article is an informed view about the changing business of online video, and how TMCs (traditional media companies) are acquiring and adapting to online video.

“(TMCs) have the sales force and means to generate revenues; their problem is producing good content in the world of “good enough content” at ever-lower costs,” writes Karbashfrooshan.

This is an important point since most online video providers — even the well financed online-video studios (OVS’s) lack the sales muscle to fetch media dollars. Heck Google/YouTube sales people aren’t even doing a great job of capturing the attention of advertising media buyers.

Here are some important insights from the piece (mostly quotes or paraphrases):

• Revision3 snatched an approximate $30 million from Discovery.  Next New Networks last March sold for approximately $25 million to YouTube. Both companies improved the ecosystem.  ”Both Revision3 and NNN were acquired by companies looking to buy a competency and address a headache.”
• For Discovery Communications to recognize the value that Louderback and his team created is a positive for the industry.
• For online video to flourish, it needs an assist from TMCs. Conversely, after years of trying to build the competency internally, it’s clear that the TMCs need web-natives to produce online content.

Apple is rumored to be launching a giant new iPad to replace your television, and it likely will be called iPanel. Calling it a TV limits the perceived breadth of the device, and iTV is already owned by UK TV). Plus the branding of the existing (and ailing) AppleTV wasn’t consistant with Apple’s rhythmic and simple mega-branding: “give it a P word and slap an i at the beginning.”

The flat HDTV screen is reportedly 50 inches, the price may be as high as $1600, it will include built-in wifi for streaming, it may include Siri to augment your remote control, and it’s being positioned as “more than TV.”

iPanel: Artists rendering of an alleged prototype

But don’t get in line yet at an Apple store… the iPanel may not launch until 2014.

“There hasn’t quite been this much hype, intrique and mystery around an Apple product since the first iPad,” reports CNet about Apple’s second attempt at television. CNet has a roundup of rumors based on talking to suppliers, manufacturers and Apple insiders.

How do you know when it’s coming soon? Someone from TechCrunch will find a giant iPanel accidentally abandoned carelessly at a bar. Really that happens.

Here’s what we’d like to see. If Jobs was still around, the device would include most these elements and a few more surprises we don’t know we want/need.

• The user-interface best-practices of AppleTV, iTunes and the latest round of iPads, iPhones and iPods. CableTV boxes are so horribly painful to use that we’d be happy to bump them. Our TiVo replaces one of our three cable boxes.
• Streaming everything via iTunes cloud, but also non-clunky full access to CableTV features like premium, on demand content. This should overlay and augment Cable unless Apple wants to replace it entirely by bundling live content. Going that route would force Comcast and Verizon to evolve its circa 2002 boxes.
• Absolute seamless portability of our content, which even includes some vintage DVDs (but we’ve phased out the VHS tapes, thank you very much)
• Complete integration with laptop and mobile devices, which should act as remote controls at any location. For instance, my kids love that they can connect their iPads, iPhones and iPads to a dedicated wifi in our home, which allows them to stream their music to an “always on” stereo. We’d expect our iPhone to remotely search and subscribe to content for viewing later.
• Most importantly, we want a small device (like the cute, tiny AppleTV) that also offers all or most of these functions. If Apple requires us to purchase the damned 50-inch monitor the iPanel will have a painfully slow growth curve. People replace television sets currently more frequently than before — every few years instead of decade. But we’re not going to ditch all of our HDTVs to place an iPanel in every room.

I’ve always felt alone in my appreciation for the AppleTV, which never caught on. However I do seem to be using it less and less since the overhaul in the past year or so. It’s far more evolved than Verizon’s crappy Motorola boxes, but it forces me to buy TV shows instead of rent or watch “all you can eat” with a monthly subscription (like CableTV, Hulu or Netflix). I believe that Apple, if it wants to boldly innovate the TV experience, will have to either partner with Cable providers, Netflix, and Hulu… or more likely dissintermediate them if industry players, the FCC and the government (antitrust laws) permit.

The technology will be the easy part for Apple, which could launch a 50-inch iPad tomorrow. To make it game changing, the content producers and networks will have to cooperate. And a bold play for movies and television obviously won’t be as easy as setting up an iTunes music store.

While the online-video space is expected to grow more than 40% annually for the next three years (eMarketer), an AdAge article today reminds us that the boom isn’t “evenly distributed,” with two companies as the primary recipients of shifting advertising dollars.

Online-Video Ad Spending According to eMarketer (Jan. 2012)

The online-video market was about $1.8 billion last year, with half of that going to just two players: Hulu (about $300 million) and YouTube (about $600 million), according to Brian Wieser, an analyst at Pivotal Research Group. ”While our figure remains ahead of the television industry, growth outside Hulu and YouTube seems to be far from exploding,” Mr. Wieser wrote in a recent research note.

Content publishers, the article observes, aren’t seeing their own properties benefit significantly from online-video spend. So they’re increasingly turning to YouTube, which is ”advancing” content creators with large grants. Last week Google/YouTube announced plans to spend $200 million to bring more professional content to its Google Content Network.

What’s slowed down video significantly is the reluctance of content creators to build shows without confidence advertisers will follow:

Many publishers have a chicken-and-egg problem as they vie with these challenges: They’re unable or reluctant to sink big investments into video series until they know they can recoup their costs, but brands will be reluctant to move dollars out of TV until digital video has quality content and significant audiences.

There’s an overused business adage that a happy customer will tell three customers about their experience but a dissatisfied one will tell 7, 100 or even 3000. Until now, I never stopped to think about the fact that only a couple of my 1,000 videos portray a company poorly… and most company references are positive (even when not sponsored). Maybe there’s a reason, and maybe I’m not unlike other social media users…

New research about customer service went beyond marketing hyperbole and showed some actual data about a customer’s word-of-mouth after a positive or negative service experience. It seems an individual receiving good service will tell 9 people, but after bad service they’ll tell 17. So we’re nearly twice as likely to warn people than praise a company. Bad news travels fast (and sells) right? Source: The 2012 American Express® Global Customer Service Barometer.

Now here’s where social-media users differ. We’re telling 42 people about a good experience (and that obviously varies dramatically based on whether someone has a large audience or a “real friends only” Facebook presence). But we’re telling 53 people (only an additional 11, or roughly 25%). Not twice as many people… just 25% more.

The Geek Squad Hates You

In both cases a person with a bad (verus good) service experience is going to tell more people about it. But, again, non-users of social media tell nearly twice as many people (9 vs. 17), while social-media users will tell just 25% more (42 vs. 53). 

This is surprising when you consider the “bad service experience” videos that have gone viral (United Breaks Guitars or my Geek Squad Sucks, which was ignored by Best Buy so I’m still bitching). Maybe it’s because the minor issues get resolved by attentive well-meaning social media managers… especially if the service victim has a large following. The result often can change the victim to a fan, resulting in more “tweets” or videos chronicling the situation’s resolve… usually the victim just wants a minor gesture (apology, token refund, gift) to feel acknowledged.

So how do you explain the gap?

• Lack of precision of survey
• Bad experiences are not for digital, but best left to one-on-one interactions
• People with “followings” online don’t want to be seen as whiney
• Something else?

Several years ago an independent YouTube creator wasn’t just an actor or actress – they actually wrote their own show, owned their own production studio, managed a mini-cable network and oversaw their content’s promotion and distribution. As the online-video leader, YouTube provided a platform to access an audience directly, and eventually helped creators earn money by sharing advertising revenue.

But as the online-video market continues to mature, it’s beginning to adopt industry attributes of early radio, television, cable and film. Small studios have emerged– let’s call them “Online Video Studios” (OVS). These formed in various ways to support creators and make money, and they each are grappling with their role in the emerging media landscape. Most remain small and independent, although at least two OVS companies been acquired: this week Discovery Communication bought Revision3 and a year ago Google bought Next New Networks.

Google itself is investing in “YouTube Originals” content (recently announcing an additional $200 million), but has avoided becoming an OVS. It is ceding content ownership to third parties – perhaps both to keep neutrality and avoid a Paramount-like antitrust case.

Four of the leading Online-Video Studios (OVC) are Machinima, Maker, FullScreen and BigFrame

WHAT IS AN OVS?

Four of the OVS leaders (profiled briefly below) are Machinima, Maker, Full Screen and BigFrame. They have little in common beyond ranking high on ComScore’s list of most-viewed YouTube “channels” (this is misleading because an OVS is, in fact, a collection of separate independent and owned shows or channels).

But what is a traditional media analog to an OVS — is it a star coalition, creative studio, cable station, production company, distributor or promoter? Let’s look at some key points about film, television and cable:

• Growing movie studios in the early 1900 began to control creators and controversially achieved vertical integration by acquiring and constructing theatre chains.
• Star coalitions like United Artists, which included Charles Chaplin and Douglas Fairbanks, formed to offset the muscle of these creative studios (Hollywood producers and distributors).
• Modern film and television production companies include Pixar, Twentieth Century Fox or Paramount.
• Media conglomerates include Disney, Time Warner and Viacom.
• Cable television stations like HBO launched in 1972 as the first pay-TV network.

The OVC takes on some attributes of all, but each OVC varies in its identity. What’s most revealing is its origin, leadership and primary content (in profiles below you’ll see such emphasis as comedy, music and video gaming). Ultimately, of course, their function will be influenced by the roles YouTube and traditional media companies assert in online video. Unlike radio, television and film industries, YouTube’s audience dominance continues to provide Google with the most clout in this online-video marketplace.

Here’s how others are describing OVS leaders:

• “These are new-generation studios, folks that are growing up from the basement who are choosing to collaborate and form these networks,” Hunter Walk, head of product management at YouTube told Forbes. “In many ways they are like the first cable stations 30 years ago.”
• NYC Times writes, “studios are trying to play the same role for the online video service that United Artists did almost a century ago for movies or MTV did for television in the 1980s.”
• DECA (a company that owns Mondversations and launched Lonelygirl15) calls itself everything from a builder of “influence networks around celebrities and brands” to a “women’s digital media company that creates and syndicates premium video content.”

FUNCTION OF OVS

The OVC leaders have monthly views that exceed many network shows or cable channels (according to ComScore, which is US only). Profiled below are four of the largest: Machinima, Maker, Full Screen and Big Frame. To over simplify their role, here are some of the things they do:

• Help creators build and share audiences
• Provide access to common production and promotion services
• Liaison between individual creators and YouTube, since YouTube is unable to work directly with the rapid increase of top creators.
• Seek sponsors for branded entertainment opportunities

HOW DOES AN OVS MAKE MONEY?

These are small, private companies; so it’s hard to be sure if they make money, much less how. But here are some examples of revenue sources I’ve seen:

• Some claim a percentage of a creator’s ad revenue via YouTube. Established YouTube “stars” generally refuse such an arrangement, but “up and comers” are more willing.
• Other models allow the OVC to profit from the gap between what advertisers will pay per view, and the negotiated “cap” it pays creators. For instance, the OVC contractually locks the creator at a ceiling and floor of $1.50 cents per 1,000 views; then the OVC sells ads via YouTube maybe at $2 to $5 per 1,000 views. (I’ve avoided signing onto this model because I don’t like capping my income as online-video ad prices continue to soar).
• A few studios secure sponsorships via brands and agencies, then split the revenue with creators. For instance, the studio gets $200,000 from an agency’s media budget; then they pay each creators $5-$20,000 (depending on audience size) to create a video featuring the product. That was what Hitviews did before they closed shop earlier this year.
• Finally, traditional studios sometimes pay new studios retainers (or revenue splits) to help adapt and promote content via emerging online-video channels.

FOUR OVS LEADERS:

(cited stats are via a ComScore March 2012 data, which looks only at unique US video viewers… obviously total views far exceeds these numbers, especially when we include global data).

Allen DeBevoise

1) Machinima
22.8 MM viewers

Machinima originated as a gaming and media streaming website, then migrated content to YouTube creating some of the most popular channels on such gaming topics as Skyrim, Mortal Combat, Sonic and Minecraft. The Los Angles-based company has begun to sign other non-gaming YouTube channels, and helped launch the YouTube Original, “Dance On.”
Leadership: Allen DeBevoise, chief executive of Machinima, who has 30 years of experience in the multimedia and Internet arenas focusing on early stage companies and technologies.

Danny Diamond, Lisa Donovan and Ben Donovan

2) Maker Studios Inc
14.6 MM viewers

The Maker studio emerged out of The Station, a cooperative channel of top YouTube “stars” like Lisa Donovan (LisaNova), Shay Butler (ShayCarl/ShayTards), Kassem Gharaibeh (KassemG), and Peter Alexis Shukoff (NicePeter). New Channels include: Maker Music Network, The Mom’s View Network and Tutele, a bicultural channel. The studio has $1.5 million in funding in a round led by Greycroft Partners (Ad.ly, Klout and Vuze), and GRP partners, and follow-on rounds according to Maker’s Will Keenan. 5/5 addition: Keenan says Maker does not have an income cap as described in the various revenue models.
Leadership: Dan Zappin, Lisa Donovan and Ben Donovan.

3) FullScreen

George Strompolos

11.9 MM viewers

FullScreen has 400 channels, and connects YouTube stars, advertisers and offline distributors as a “one-stop shop for original content” (AdAge). It lists such clients as Mattel, Nintendo, General Electric and P&G.
Leadership: FullScreen was founded by George Strompolos, a former Google executive who was active in creating YouTube’s Partner program. FullScreen’s COO is Ezra Cooperstein who helped found Maker Studios and was a VP at CurrentTV)

Steve Rayond

4) Bigframe
8 MM viewers

Bigrame was formerly known as The Cloud Media, and was the group behind The Digitour. The music-oriented studio includes some of YouTube’s most-viewed personalities like Joe Penna (Mystery Guitar Man), Tim Destorm, and DaveDays. New content includes Bammo, which “features YouTube’s special effects masters.” The OVC lists clients as Levi’s, Home Depot and Sony. See this article on Gigaom for more.
Leadership: CEO Steve Raymond was a VP at Comcast Digital Entertainment and has been a leader at several digital-media startups. Sara Evershed Penna founded Bigframe, and manages talent management. She is married to Joe Penna, and worked on reality TV shows before moving online.

Editor’s Note: I researched about 35 sources for this information, and tried to credit appropriately.
If I have any facts wrong, please comment below and I’ll fix.