Editor’s note: This is the fourth in a series of posts by guest writer Ashkan Karbasfrooshan.Previously, he wrote about the State of Online Video, 12 Surprising Things Holding Back Online Video Advertising, and Context is King: How Videos Are Found And Consumed Online.  In part 4 today, he examines where he thinks the sweet spot is for making money in onljne video. Karbasfrooshan is the founder and CEO of WatchMojo.

In Search of Profits

Ten years ago, web companies didn’t generate much revenue.   These days, web companies are some of the most profitable around.  Online video is where the Web was ten years ago: in investment mode as video companies that are generating high revenue are not necessarily the most profitable.

Are those companies suffering low margins because they’re investing in the future or are they fundamentally lower-margin businesses?

Ad Networks Are Low Margin Businesses

This week, video ad network Brightroll raised $10 million from Scale Venture Partners.  Ad networks aggregate audiences and sell ads to marketers, sharing the proceeds with publishers/producers.  Scale’s Rob Theis’ argues: “the most strategic Internet investments are those that compete not with other Internet businesses, but with the much larger amount of money still being spent offline.”

Brightroll’s CEO Tod Sacerdoti added: “I think by this time next year the majority of the top five to ten video properties by any measure will be aggregator networks.  The best example for this is display advertising.”  Indeed, networks have an unmatched ability to scale but can also crash to the ground awfully fast.

The low margin is the least of their problems; differentiation and defensibility are.  Blue Lithium and Right Media hit jackpots by selling to Yahoo!  But those who didn’t sell (Tribal Fusion, Valueclick) suddenly found themselves under pressure from search advertising on performance and video on branding.

Content Networks Have Little Differentiation

Similarly, aggregators gather videos from content providers, sharing ad revenues.  iFilm (sold to Viacom, renamed Spike), Guba, Grouper (sold to SONY, renamed Crackle), Revver, YouTube (sold to Google), Veoh, DailyMotion, Metacafe, Viddler, blip.tv, are all vying for content, audiences and dollars.

YouTube is master of this domain.  Hulu is giving YouTube a run for its money, but the business model is anything but certain and its long term exit strategy is murky (Disney, News Corp. and NBC Universal/Comcast are shareholders but also competitors).

Ultimately, ad and content networks operate in a high-risk, winner-take-all game.   For publishers, it’s a lower risk world.  Consider the two acquisitions News Corp. made in 2005: Rupert Murdoch paid more for IGN ($650M) than for MySpace ($580 million), but MySpace’s subsequent growth made him look like a genius (for a while).  Today, MySpace is searching for its raison d’etre while IGN treks along as an unstoppable force in its sphere.

The Myth of Hyper Distribution?

In online video, producers are agnostic to distribution channel or platform.  To reduce risk, they diversify distribution, but the jury’s out on whether hyper distribution bears fruit.  Hyper distribution refers to syndicating one’s content as broadly as possible with little or no restrictions.

When it comes to generating revenues, is hyper-distribution wise?  Not according to Chris Pirillo, a prosumer video producer who leverages video to promote his empire but only counts YouTube as a commercial platform: “YouTube offers the largest audiences and generates most the revenue.  If you’re not YouTube, you have challenges in creating value for content producers”.  If that changes, look out for Freewheel, which according to CEO Doug Knopper allows “media companies and content owners to be able to monetize their video libraries across multiple channels and devices”.

Advertisers Follow Audiences…

Ex-Disney CEO Michael Eisner doesn’t pretend to know how the industry is going to play out, but he’s got no doubts what the end result will be: “I don’t know if the growth in content made for the Internet will be evolutionary or revolutionary, but it can’t not happen: a death march has been going on for other media who are in trouble because there is a more efficient way to share content around the world with the Internet.”

Business Models Take Time to Develop

Eisner made his fortune in television.  One VC who’s made his online has another opinion.  In Fred Wilson’s influential 2005 post “The Future of Media (aka Please Take My RSS Feed)”, he suggests to:

1 – Microchunk it – Reduce the content to its simplest form.
2 – Free it – Put it out there without walls around it or strings on it.
3 – Syndicate it – Let anyone take it and run with it.
4 – Monetize it – Put the monetization and tracking systems into the microchunk.

In theory, in the future when video streams monetize the way search queries have (whereby a search query is always associated with some kind of paid listing) then perhaps Wilson’s thesis will prove right.  But in practice, at least in the five years that have passed since the post, it’s been a recipe for financial disaster.

Hyper distribution is great for promotional purposes but not necessarily for commercial purposes.  Marketers do pay more attention as an audience grows, but they also pay a premium for scarcity and exclusivity.

This is the fundamental conundrum facing new media producers who rely on hyper-distribution to build brands and audiences but who weaken their pricing power and ability to secure guaranteed dollars by giving away their videos.  This can work if you can build ad-supported businesses, but that takes time and money.

Today, a few new media producers have managed to build ad-supported businesses, namely Revision3 and Next New Networks.  But between the two, they have raised over $30 million in venture capital.  Most producers don’t have that luxury.  For those others, I recommend creating content that other media companies will pay for, to buy them enough time to build a syndication business and eventually, a fully ad-supported business which commands the large ad dollars.

An imperfect but useful analogy I use is the banking model, where retail, corporate and investment banking fees can create a large business.

This diversified strategy provides:

• a safe income stream:  licensing, like retail banking, provides a recurring and non-volatile revenue base.
• a growth business: syndication, like corporate banking, requires other companies in the ecosystem to do well.  This can provide higher CPM rates by placing content in the right context.
• a wildly lucrative stream: advertising, like investment banking, takes time to develop, is speculative and seasonal, and risks drying up abruptly.  Notice how advertising revenue spikes each fourth quarter, for example.

The reason why I place content producers in the highest Profitability circle over time  in the first chart above is because only they can build such a business.  (The Profitability Index represented in the chart takes into account operating margins and total return on investment, including likelihood of a liquidity event).  And, yes, I am completely biased, since this is the kind of business I am trying to build with WatchMojo.  Aggregators and networks are solely advertising based businesses; just ask YouTube who generated $10,000 in a paid model test, even though it can generate billions in simpler ways.  Video advertising will be a bigger business, but not necessarily a higher-margin business.

Video will be Everywhere: on all Websites

Video on the Web is no longer just about entertainment.  It is also about marketing, instruction, and conveying information of all kinds.

• Content bellwether Wikipedia announced it will be rolling out videos soon enough.
• e-Commerce leader Zappos encourages users to submit their video experiences which increase sales 6% to 30%.  In 2010, it will create 50,000 videos.
• It won’t be long before organizations feature their accountants, lawyers, management, VCs in videos too.

Video will be Everywhere: in Ads

Videos won’t simply be on all websites; video ads will converge with rich media and display banners.  Publishers and ad networks will swap out low yield ad placements for videos that sell at a premium.  Rupert Murdoch is right to say that there isn’t enough advertising to make all publishing online profitable, but if you insert a video-enabled ad where a display banner exists today, maybe it will become more profitable, as video rates tend to generate a tenfold premium over display banners.  Of course, the flip side of that argument is that if video ad inventory lost all scarcity as display banners have, then it rates would also see a steep drop.

Video is the Anti-Search

Google’s dominance of the Web today stems from a perfect storm.  Search benefitted from low expectations.   Whereas Google’s competitors threw in the towel to focus on portaldom (or outright handed them the business), online video companies’ war chests seemingly have no bottom as they wage the war for the online audience.

With YouTube being a unit of Google, it’s hard to compete being a pure video aggregator.  Those who have tried are flailing badly.  Yet video’s expectations have always been high and will only get higher.

History Repeats Itself

Video will follow search in two ways though.

Search is software and Google is the only successful ad-supported technology company.  Video is media, which has a natural disposition to embrace ad-supported models.  As such, advertising will monetize video streams.  In fact, as large ad agencies and marketers shift online, they’ll embrace branding campaigns and push video advertising could eventually top search advertising.  Once that starts, online advertising will surpass television, it’s already happened in the UK.

Search for The Leading Ad Format

Everyone agrees that video advertising will be huge but what will the prevailing ad format be?

Stakeholders are obsessed with finding the ad format likely to follow television’s 30-second ad spot and search’s paid listings.

What might lead the way?

Pre-rolls are the equivalent of pop-ups (and mid/post rolls the equivalent of pop-unders) in that users hate them, but unlike pop-ups, I actually think pre-rolls won’t disappear, mainly because

• They’re the most in-demand ad format (according to Brightroll CEO Tod Sacerdoti)
• It is easier to include a pre-roll when you’re syndicating to other websites and platforms (says blip.tv co-founder Dina Kaplan)
• But largely because they’ll get more user-friendly: the 30-second ad will make way for 5-10 second interactive pre-rolls (SpotXchange CEO Michael Shehan).

However, there will always be properties which will forego pre-roll revenue to improve the user experience in order to build audiences, and all else being equal users will migrate to those sites.  So I’m not sure the pre-roll will remain all that ubiquitous.  The other problem with pre-rolls is lack of attention.  When a pre-roll starts, I tune out and look for my headphones or go grab a coffee.

That’s why I like the contextual display banner (and not necessarily the companion banner).  A companion banner comes bundled with the video pre-roll, but sits alongside the video  A contextual banner comes without the pre-roll.  Whereas most banners disappear quickly next to text with one downward scroll of the mouse, alongside a video player, that banner becomes quite valuable and top-of-mind since people are just staring at the video.

We’ve also seen the rise (and fall) of overlays, which is basically an expanded Picture-in-Picture (PIP) format; we know how that fared.

Of course, content producers are also salivating over branded content (more than product integration and product placement, the brand becomes central to the story) or outright sponsorships.

Finally, there’s the Web’s favorite offspring: the viral video.  Viral video is not an ad format, of course, but it is not quite branded content nor is it supported by ads.  As these become more common, achieving success with content alone becomes a sure-fire recipe for failure.  All content will need to be supported by a media buy or some kind of promotional push.  After all, on TV you spend millions creating an ad but you need to buy media spots to promote it.  It’s not going to be that different online.  Yes, it’s a meritocracy, but it’s a loud, cluttered one.

KISS: Keep It Simple Stupid

There won’t be a single dominant ad format but the holy grail will prove simpler than expected.  It always does.

Remember Don Lapre’s infomercials?  He would go on and on about placing “Tiny Classified Ads” in newspapers.  I never thought much of those ads until Google’s adoption of (essentially) little text ads next to search results led to their explosive growth.

Sometimes in business, the solution is simpler than you can imagine.

Read more…

Sony’s media business, Sony Pictures Entertainment, will be using the types of production techniques that it puts into movies and TV to resemble other online programming by staying short, often no more than five minutes long, reports Reuters. Crackle’s season begins December 1.

Last August, Sony Pictures partnered up with Rocketboom, acquiring the worldwide distribution rights to Rocketboom.com in all media, putting the daily show on Crackle.com, presenting the show with a Crackle player on the Rocketboom.com website and distributing it over its syndication network. See RocketBoom founder Andrew Baron’s take on the upcoming announcement here.

Crackle used to be Grouper, before Sony bought the startup for a reported $65 million in the Summer of 2006. The Reuters report cites 2.4 million visitors in October, according to research firm The Nielsen Online Co., while Compete shows higher number and a nice growth pattern.

Sony’s new HDTVs have another feature you’re not going to find on many other models: YouTube. Using the optional Internet Video Link, users can browse and view almost all of the content on YouTube with their remote.

YouTube isn’t the only vieo content available, with other providers like AOL, Sports Illustrated, Comcast’s FEARnet and many others contributing.

Another channel available is a custom version of Crackle, an internet video blogging portal Devin and I covered at CES, where we interviewed its number one charmer Penn from Penn and Teller.

Even if your cable gets turned off, if you have Internet access, at least there’s always something on.

Still want more info?

YOUTUBE™ CONTENT NOW AVAILABLE ON SONY BRAVIA® INTERNET VIDEO LINK

Wired.com and Crackle’s C-Spot Channels Also Added

NEW YORK, June 5, 2008 – Sony announced today that YouTube is the latest online video provider to join the company’s BRAVIA Internet Video Link service. The service went live today providing BRAVIA Internet Video Link users access to millions of videos on YouTube at no additional charge.

Joining YouTube are Wired.com and C-Spot, which offers original episodic short comedy series.

“Sony was one of the first to bring streaming Internet video to the television in the United States without a PC, and now you can access one of the most popular online video destinations, YouTube, on your BRAVIA TV,” said Randy Waynick, senior vice president of Sony Electronics’ Home Products Division. “There are literally millions of videos to choose from on the BRAVIA Internet Video Link service and we’ll continue to add the most compelling content available on the web.”

The BRAVIA Internet Video Link is a small module that attaches to the back of a selection of the the company’s 2007 and 2008 BRAVIA LCD flat-panel television models. The service seamlessly streams on-demand entertainment including movies, TV programs, your favorite YouTube videos and a variety of other free content as well as news, weather and traffic informaiton via an existing Ethernet connection without the use of a personal computer. A broadband connection of at least 2.5 Mbps is recommended. Content is easily navigated with Sony’s Technical Emmy® award-winning Xross Media Bar™ (XMB™) user interface.

Once the TV and BRAVIA Internet Video Link module have been purchased, videos are available at no charge, bringing content to Sony televisions not found on network or cable/satellite TV stations.

The new content adds to existing channels including Yahoo!, AOL, Sports Illustrated, blip.tv, CondéNet’s Style.com, Men.Style.com, Epicurious and Concierge.com channels, Sony Pictures’ Crackle, The Minisode Network and Inside Sony Pictures channels, FEARnet, Ford Models, SingingFool, and VideoDetective.

Sony will continue to add new content partners and increase the growing list of on-demand video content.

“The partnership with Sony helps us achieve our goal of making YouTube accessible on any screen,” said Chris Maxcy, YouTube’s partner development director. “The integration of YouTube into the television enhances the living room entertainment experience by offering a large number of channels for people to select from, enabling them to watch what they want, when they want it.”

The Wired.com channel delivers exclusive, original reporting at the point where technology intersects with business, entertainment, politics, culture, science and art. Content will include Game|Life, Wired.com’s weekly web video covering the world of gaming, and AltText, a satirical commentary on technology, business, entertainment, communications and culture.

Crackle’s C-spot offers original character and story-driven episodic series.. The channel will offer series including “Hot Hot Los Angeles,” The Writer’s Room,” “Penn Says,” and The Roadents.”

Sony’s BRAVIA Internet Video Link module is currently available for about $300. It can be purchased online at sonystyle.com, at Sony Style® retail stores and at Sony authorized dealers across the country. The module used with a consumer’s existing broadband Internet connection is compatible with a majority of the latest 2007 BRAVIA television models, as well many new 2008 models.

After Sony’s announcement, where Penn swallowed a bean and then worked it into his nasal passages and then expunged it via his right eye socket (really), talked about Mormons and their “magical underwear”, and having sex with a nun while a prominent Democratic presidential nominee wathces, we were allowed a couple of minutes to sit with Penn and Crackle’s Senior VP of marketing, Jonathan Shambroom. They were gracious and friendly, and totally NSFW. He started by trashing that other site. It was awesome.

Matt: Thanks for meeting with us lowly bloggers, we appreciate it.

Penn: Yah, thanks for talking to me. Which blog is yours again?

Matt: CrunchGear, the gadget arm of TechCrunch.

Penn: OK, you’re not the one with “gadget” in the title, good! F*** those guys, they keep sending me all kinds of emails, something-gadget. I hate them. Glad you’re not them.

Matt: No, we’re not them. I like your show Bullshi*t though, especially the Bible episode. It’s maybe my favorite episode of anything on cable ever.

Penn: Oh, thanks for that. Thanks a lot, that’s very nice of you.

Matt: So do you guys have a pitch, or can we just ask our questions?

Jonathan: Nope, whatever you want to do, go for it.

Devin: Awesome!

Matt: Yah, that’s maybe not a good thing to say to guys like us. We’ll start talking about things like “2 Girls, 1 Cup” or something.

Penn: “2 Girls, 1 Cup” is nothing, man.

Matt: Have you seen it? I’ve got a copy on my iPod if not.

Penn: I’ve seen it, man. I’m an old carnie, I’ve seen worse in real life. If you really want to watch a video that’ll give you nightmares, google “One Got Fat.”

Jonathan: One gut fat? Like, gut?

Penn: Got. Like became. “One Got Fat”. It was produced by the US Government and they showed it to grade school kids. Watch it and think about that. The stuff I do is tame.

Matt: I’m writing that down. Thanks for that.

Penn: You’re very welcome.

Matt: By the way, just a warning, the guy coming in after us is a Mormon.

Devin: Yeah, we were making fun of Mormons with him and he mentioned he’s from Utah and we were like, “Um, are you Mormon?” And he is.

Penn: Really!? Great. Thanks. You know, I have friends who’ve f*cked just about everything, catholics, jews, muslims, you name it. But none of them have ever f*cked a Mormon girl. Ex-Mormons, sure, but no Mormons. What is that?

Matt: They’re afraid of going to Hell if they take off their magical underwear.

Penn: I guess so, or something. Why just them? It’s like you’ve got to f*ck your friends just to make sure they’re not Mormon.

Matt [to Devin]: You heard the man, drop trou and let’s see if you’re Mormon. Penn, you want to watch?

Devin: Well they did say we could do anything.

Penn: You think I won’t call your bluff, but you’re mistaken. Let’s see you guys go for it.

Devin: OK, I’m gonna blog it.

[for context, Penn had been riffing on Mormonism in his live performance, and we were making fun with the Mormon guy behind us, not at his expense.]

Matt: If it’s OK, then let’s start with the technical stuff. Sony’s given you a few cameras, four you said, to record your thoughts. After you’re done with the video, do you have help editing it? Do you give it to someone to clean up or anything?

Penn: Nope, not at all. It records on to one of those little card thingies–

Jonathan: A Memory Stick

Penn: Yah, a Memory Stick. So I put it into my computer and just upload it to the site. That’s it. They add a header and a tail at the end, and I think the legal guys look at it for a minute so they can pull things when I say I’m going to f*ck a nun with Hilary Clinton watching, but otherwise, it’s just me.

Matt: Cool, so it’s “raw” as they say. What format is it going to be shown in? I’m guessing Flash streaming?

Jonathan: Yah, it’ll be — it’s in Flash now. We’re launching with content today, which went live just a few minutes ago.

Matt: Ok, another question, more off topic: Is Teller jealous?

Penn: Is he jealous? Not really. I mean, he’s directing Macbeth right now, which he’s always wanted to do. He’s doing it at the Jersey Theater, and then in DC. He’s doing a supernatural, horror-film take on it, which he’s wanted to do since he was eleven. I’d love to be doing that, but I’m doing this instead. So he’s not jealous of this any more than I am of that. We all do our things and that’s that.

Matt: Well that’s awesome, I saw a vampire-themed version in Olympia years ago that was actually really good.

Penn: Vampires? Wow, I haven’t heard of that one, but I’m sure Teller has, he’s an expert at this stuff.

Matt: When will the video of today’s announcement be available on the Web?

Jonathan: Hopefully later today. This week for sure.

Matt: So you’ve got these cameras, are you going to have one backstage, or does that violate some sort of “Magician’s Code” or something?

Penn: There is no “Magician’s Code.” The code magicians live by is the same as the code you live by and I live by: Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances. [Yes, he quoted it verbatim, and didn't miss a thing. Rad.] I mean, I could tell you how Criss Angel does half of his tricks but you already know, you go on YouTube.

Anyway, I’ll have the camera, so I can show what I want and not show what I want. It’ll be backstage.

Matt: Well, we’re here at CES. Have you been on the floor yet?

Penn: No, I’m like in that one Beatles movie: I’ve been in a car, a room, a room, a car, a room, a car, a room, a room, a room, a room. I haven’t set foot on carpet not owned by Sony in awhile.

Devin: That might become a pattern.

Matt: Well who has?

Penn: Right. I might check it out. I don’t know.

Matt: Well, that kills my “what have you seen at CES that you like” question, doesn’t it?

Penn: Yah, I guess so. What about you? What have you seen?

Matt: A couple neat phones, but the best thing is the saddle thing from last night.

Devin: Yes! The saddles!

Jonathan: What thing?

[At this point I pulled my camera out and showed them this photo which I offered without comment yesterday.]

Matt: We think it’s some sort of game controller. I hope they are, anyway.

Penn: Those are great! We have to find those!

Jonathan: What do they do?

Devin: Show them the video, dude!

Matt: We took this last night as we were leaving.

[Please, watch the video below. We're still not sure what they're for.]

Penn: That’s great. I don’t know what it is, but that’s great. Wow.

Matt: CES, man. So then, here’s one: What cell phone do you carry?

Penn: Oh, a Treo. This one here. It’s purple.

Matt: That appears to be a 755p, from Sprint.

Penn: I dunno, it’s purple. That’s how I select my electronics.

Matt: Great, that’s just perfect.

Penn: I also have an 80GB iPod and like 3 or 4 Apple TVs at home. I love that thing.

Matt: Me too.

Penn: I’ve got a touch, and I guess it’s a flash-memory thing, but they’re only 16GB. That’s not nearly enough.

Matt: See, that’s the thing: there are two different inds of iPod owners. I have a Touch and it’s fine for me. But you want control over your music and have it all with you all the time. I just fill it up and use it as a soundtrack.

Penn: I guess, I mean, I have a half-terabyte of music at home — all legally purchased, no limewire or anything — and they give me an iPod that’s 80GB and want me to use it. How can I possibly do that? What if I want to listen to Tiny Tim and follow it up with Gladys? I can’t unless I anticipate and load them on there.

Matt: Give it time, it’ll all catch up capacity-wise. We’ve just been given the signal that our time’s up, thanks for doing this with us.

Penn: No thanks, you guys are all right.

Matt: I have a story about Mormon underwear that would blow your mind, but we don’t have enough time. I can try to send it to you over email.

Penn: I don’t email much, but you’re tempting me. I really want to know what the story is with that. I might just let you if my curiosity gets the best of me.

Matt: It has to do with a wedding night and you won’t believe me, but it’s all true.

Penn: I don’t believe you at all. I’ve heard all kinds of stuff about that, and if it’s all true, then it sounds better than “One Got Fat”, so I have to hear it. I don’t email much, but I might have to just because you liked the Bible is Bullshi*t episode. Dammit.

Now, to be honest, the idea of the outspoken and frequently obscene star teaming up with a Sony media factory seems pretty weird, but we talked with Penn afterwards (look for the interview in a few minutes) and he thought it was a pretty good deal. I haven’t watched any episodes yet, but he’s an entertaining dude and I may just make a habit of checking his little vlog out. It just went live today, so go check it out and let us all know how it is.

Penn Says @ Crackle

Schroter estimates there are 15,000 roles being cast at any given time by about 400 studios and networks, and 85 percent of those are for non-scripted parts. Yet the casting industry today, says Schroter, “is built for scripted talent,” not the everyday Joes and Suzies required to make reality TV believable. “Casting directors are going to YouTube and MySpace to find this talent,” says Schroter, “but there is not an organized way to do it.” That’s why he built GotCast specifically to find and surface talent for shows, both on TV and in emerging mediums like cell phones and the Web. Casting directors and talent agents can set up casting calls, and aspiring actors can upload images and videos of themselves onto a profile page, along with a bio and crucial stats like age, height, and weight. Anyone who visits the site can sign up to vote other members up or down. The top ten for each casting then go to a group of judges made up of real talent agents and casting directors. The finalist is flown to Hollywood for a shot at the part.

The site is all about self-promotion. You are encouraged to recruit your friends to vote for you through blast e-mails, and posting GotCast widgets on your MySpace or Facebook pages, or uploading your video to YouTube. Schroter’s business plan calls for 250 castings the first year, which he hopes will attract five million registered users (1.25 million contestants and 3.75 million voters). He thinks he can get that up to 750 castings by 2010 and attract 30 million registered users (7.5 million contestants and 22.5 million voters). He might have stars in his own eyes there. As I said, these are the numbers in the business plan, so they don’t mean anything. But it does illuminate the business logic behind the site, even if the actual numbers come in to be much less.

The two casting calls on the site right now are for Young Hollywood, which is looking for a fresh face to do red-carpet interviews of celebrities, and Get Out, an adventure travel show that will be on HDNet. Schroter has lined up future castings for G4 (the videogame network), SiTV (a Latino TV network), Ripe TV (on-demand channel that’s like Skinemax on steroids), and GoTV (mobile TV). These are all pretty niche, but you’ve got to start somewhere.

So far he’s bootstrapped the site with about $500,000 of his own cash, but he is looking to raise an angel round of $3 million or so in the coming weeks. He plans to make money primarily with regular ads, but also with sponsorship castings, and a $10 subscription for members who want to be able to contact other members in a HotorNot double-blind fashion. The sponsorship castings would be promotional in nature. For instance, an upcoming movie like Transformers 2 could run a contest to play a bit role in the film, which would attract all the fanboys and get buzz going about the movie. (A sponsorship like that would cost between $50,000 to $250,000). The dating part seems a little off target–is GotCast a celebrity wannabe site or a hookup site?

Whether this succeeds or not will depend on one thing: the quality of the talent it attracts. Right now the profiles seem a little cheesy, and there are other sites that look for talent through video uploads, like Crackle (which is owned by Sony, mind you). But GotCast is a sign of the times. The Internet obliterates search costs, for talent as well as for anything else. And in the Age of American Idol, everyone wants to be a star.

Time for another roundup, and this one coincides with a notable first-year anniversary: that of Google’s $1.65 billion acquisition of YouTube, confirmed on October 9th, 2006.

Since then, the name “YouTube” has become virtually synonymous with “online video sharing”. According to Comscore, the website maintains a sizable lead over competitors with 205,593,000 unique visitors per month. Second-place Yahoo Video trails with 48,026,000 visitors. But must YouTube remain the clear winner in the online video space? While they have certainly captured the largest audience – which may in the end be all they had needed to do to secure their position – we shouldn’t underestimate the many other companies vying for mindshare.

Even if YouTube remains the destination of choice for the vast majority of consumers, producers ought to take a serious look at the alternative services. They often support more file types, bigger uploads, and higher resolutions. They also place fewer restrictions and provide an array of features simply overlooked by YouTube. That said, a few of these services are mere YouTube clones and hope to follow in YouTube’s footsteps by providing very basic features.

These are the services we looked at: blip.tv, Brightcove.tv, ClipShack, Crackle, DailyMotion, Sony eyeVio, Google Video, Megavideo, Metacafe, Motionbox, Revver, Spike (ifilm), Stage6, Veoh, Viddler, Vimeo, Yahoo Video, and YouTube.

Since they are all about 80% the same, I’m not going to go through each of them one-by-one at length. However, there are some overall trends that ought to be pointed out, as well as some key differentiators. To get into the details as to how all of these websites differ, check out the comparison chart we’ve provided above. You’ll notice that there are some gaps, so please email me if you can help us fill in the holes.

First of all, only YouTube, DailyMotion, and Metacafe appear to place any hard restrictions on video length. With the rest, video lengths are determined indirectly by file size restrictions. While YouTube and several of these sites place the file size cap at 100mb per upload, others place it higher at 250mb, 500mb, or 2000mb. Veoh places no limitations on file size, but they recommend you use their desktop player for files over 100mb. If you’re willing to fork over some cash for a premium membership, Brightcove.tv and Motionbox will also let you upload files of any size.

While YouTube allows users to upload files only formatted as .WMV, .AVI, .MOV, or .MPG, other services accept a much greater range of file types. If you want to make your life easier, however, get into the habit of encoding in .MOV (Quicktime) and you’ll be welcome at almost all of these sites.

When it comes to video quality/resolution, it’s not perfectly clear how these services compare, because most of them don’t state their video bit rates or explain their transcoding processes. However, several of them clearly blow YouTube out of the water. Stage6, a DivX-based service, and Sony’s eyeVio, a Japanese-only service, support the most stunning video quality. Videos hosted by Veoh and Crackle also look very sharp.

Out of all these alternative services, blip.tv stands out as the most professional video sharing solution. The website and player are cleanly designed, they accept perhaps the widest range of file formats, they will automatically syndicate your videos to many other websites, and you can choose to place midroll, postroll, adjacent, and overlay advertisements in your uploads. Additionally, you can track your shows’ statistics quite closely and allow users to download your videos. I could go on and on about blip.tv’s useful features. The only major bummer with blip.tv is that you can’t seek ahead to points in a video using their Flash player.

It’s no surprise that shows like Rocketboom have decided to migrate over to blip.tv. We even decided to use them for our TechCrunch40 conference. And PC World agrees with us that blip.tv tops them all.

While we have a strong preference for blip.tv, the others have their own peculiarities that may make them more attractive to you. ClipShack, while mostly a YouTube clone, has an area where you can use a webcam to add movie, book, video game, and TV show reviews directly to the site. Crackle serves as a talent discovery system through which amateur producers can win a chance to pitch ideas to Sony and other media executives.

Dailymotion, Metacafe, and Megavideo support a wide range of languages. Sony eyeVio, which unfortunately doesn’t plan to roll out an English version, enables users to download videos straight to their PSPs, Walkmans, iPods, and mobile phones. Metacafe and Megavideo both have programs with which they pay content creators according to how many people view their videos. Motionbox, the most private of the services, has a video player with a unique filmstrip that can be used to visually locate segments in a video (they also provide a simple online video editor).

Revver provides a WordPress plugin so that video bloggers can upload and manage their content more efficiently. Veoh lets you both upload videos to other sharing sites and watch videos from all over the Web in its download client. Vimeo sports the best-designed website and a strong community feel. And Viddler’s player packs in a bunch of features, including the ability to leave comments in videos at particular points.

Since embeddable video players are the faces of these services, we have placed screenshots of them below (click to enlarge). We are also in the process of uploading a sample video to each of these websites so you can compare their video qualities. Links to these videos can be found in the comparison chart.

The company will be putting the investment into finding and financing novel digital entertainment web properties. Deca, however, will not serve as a destination for these properties, but rather invest in them and distribute them through their partner’s channels. They’re being rather tight lipped about what properties they will focus their money on, but they will be announcing their first 3 projects soon. Web video shows are definitely in the cards, with non-video properties on the horizon as well.

The model is indicative of how the web is changing the production of entertainment. As Allen Morgan of Mayfield notes, “The separation between content, the audience, and the advertiser has now completely disintegrated”. Studios now have the ability to access and filter through more talent better than ever before, case in point, Crackle’s user generated web shows. The internet’s “fame machine” is getting better, and we’re all sure to benefit.

There’s a more serious version available here.

http://www.grouper.com/p/Funny/Crackle_Presents….swf

The new property will be a destination video site, consisting of 12 branded channels for different show concepts such as comedy, music news, and animation. The site consists of a channel guide and high quality 16 x 9 embeddable video player. Advertisers will be able to place 5 to 15 second ads between the videos and banner units on the site.

Crackle’s Branded Channels

Crackle will seed the channels 1000 of their own professionally produced videos. They will add the top user generated content following the channel’s show concept (comedy, music, etc.) as selected by the community and their team of editors.

In return, Crackle will reward the producers in varying degrees, ranging from revenue shares to mid seven figure production deals. All winners will recieve distribution across Sony’s network of hardware and film properties. Sony’s distribution network and 60 person advertising team really pushes this open studio model beyond anything other video startups can currently offer.

The site is launching with 4 of the 12 user supported channels. Judgment Day is a channel where the hosts will “judge” other people in the public and then find out if their judgments are right. Scrambler is a video music magazine for indie rock. High Wire is a virtual stage for stand up comedy. Wet Paint is an animation channel. They also have a channel devoted to America’s Firehouses, whose content will be paired with Sony’s “Rescue Me” series. Finally, Moving Targets is a sketch variety channel coming soon.

Rewarding Producers

Crackle will allow users to climb the “fame pyramid” as pictured on the right. Anyone will be able to submit a video to the channels, which will be put into a general video library. Viewers will vote for the best videos and during contest periods for special deals, the two top user selected videos will join the editors picks to be chosen for production deals.

The possible rewards for producers will vary based on the channel. All the chosen content will be distributed across their network of embedded video players, along with Sony PSP, Bravia, and Sony Vaio. Crackle claims an audience of 25 million unique visitors per month.

Quarterly winners of their Shorts and Moving Targets channels will get a pitch meeting with Columbia Pictures about deals produce more videos. Winners on the comedy channels will get the chance to perform on stage at the IMPROV comedy clubs in LA, NY, or Chicago and pitch their shorts to IMPROV Comedy Lab. Animation winners will get a cash prize, the chance to pitch the studio on a theatrical release of their short, and tickets to Siggraph 2008.

Their first example is Mr. Deity, a comedy show produced by Brian Dalton, which Grouper lured from YouTube with the promise of greater distribution. Since March, the show’s 10 episodes have received over 5.7 million views. Sony has picked up the show for an additional 10 episodes to premiere on their Moving Targets channel.

How Does it Stack Up

Crackle is a big shift from the plans originally announced after Grouper turned down a $10 million second round and sold to Sony last August. We reported Sony would use Grouper’s technology to share lower quality Sony videos online, distribute DVD quality video by P2P and allow users to create mashups of select Sony media properties. Both of these ideas were very similar to what Veoh and Eyespot are already doing.

YouTube can still drive more traffic to your videos (this one did over 1 million in a day) and make you famous. However, Crackle has what no other video network has, Sony, which means they can offers top producers access to fatter budgets along with Hollywood style fame.

It is a model that can be reproduced with some effort by other sites. iFilm, with it’s parent Viacom, could similarly strike deals with top producers and distribute across their properties. Other social video sites like Veoh, with their P2P player, Joost and Babelgum, while lacking Sony’s clout, could also step into the ring. Increased competition for top content from all of these sites spells good news for the burgeoning internet video industry and may mean bad news for existing video content networks that can’t match what Sony has to offer.