Online video bubble alert
Numerous speakers at this week's Advertising 2.0 conference in New York commented on the gap between the amount of video people watch on the Web and the money advertisers spend on online video. The gap represents a huge opportunity to some, with billions of dollars shifting from traditional media outlets to the Web. But the five venture capitalists and investors who spoke Thursday suggested that the short-term outlook wasn't so rosy. As Roger Lee, a general partner at Battery Ventures, put it, the online video field is "dramatically overfunded." Lee said that there are more than 200 companies in the online video market and more than 200 in social media. "Probably 90% of them will disappear in the coming year," he predicted. Other panelists saw overfunding among online ad networks and mobile content plays, too.
One reason for the spending gap, said Dennis Miller, a general partner at Spark Capital, is that "advertisers are lazy." He added, "They talk a big game about getting involved in the brave new world.... [but] they've spent the last 50 years buying [advertising time on] three TV networks and playing golf." They're reluctant to buy time on sites featuring user-generated content for fear of running ads next to something inappropriate, Miller said, yet they don't hesitate to run commercials during the Jerry Springer Show or the Ultimate Fighting Championship. "We're in the very early days, it's very challenging still, but a lot of the onus is on the advertising community to step up, take some chances and stop with the double standard." (Spark's investments include EQAL and Veoh.)
James Slavet, a partner at Greylock Partners, said much of the viewership online has been for videos produced by professionals and semi-professionals (think broadcast TV for the former, lonelygirl15 for the latter). This content is "relatively easy for advertisers to embrace, compared to viral, user-generated stuff," so it's likely to drive a lot of growth in online advertising, Slavet said. But advertisers also have to adapt to content getting chopped into smaller pieces and redistributed unpredictably by viewers. So, too, do content companies -- Slavet said Viacom's lawsuit against YouTube "makes no sense at all," and that the company needs to "embrace users as a distribution channel." (Graylock's investments include Facebook, LinkedIn and Digg.)