By Rob Israch
You click on a video of a rat carrying a pizza through a New York alley, or maybe you even go one step further and share that with your friends, coworkers and followers. Guess what? Even though no one paid or likely would pay to watch that video, the video’s owner was paid subsequent to the video going viral (maybe from ads for local pizza companies). In fact, an entire operation is in place to ensure that little rat doesn’t show up in other videos or is used in other media without proper rights and permissions.
We’ve reached the monetization age where every digital asset is likely monetizing itself.
How did we get here?
There’s been a confluence of societal, business, and technological changes that have led to this moment. Tracking and audience data is improving in terms of information available. We know well the rise of digital and social media, and the vastly improved broadband and mobile has spurred viewership, but other drivers are also at work.
Consider the millennial generation that experienced a historically major recession. At risk of generalizing, this has led millennials to cord-cutting in a time where nearly every form of video media is subscription based (e.g. Netflix, Hulu). Advertising then becomes critical to bring about this large audience that values frugality without compromising access to streaming, on-demand media.
And even the content itself is more fragmented. The length of videos ranges from seconds to hours. The topics are wide ranging and niche. And anyone with a camera can participate.
Beyond YouTube: Who are some of the monetization network players?
Digital marketers are constantly looking for an advantage with better defined and understood audiences. That means smaller video networks offering unique audience types with a greater affinity for the destination content.
Monetization of video harkens back to the TV days when you’d watch commercials along with the programming. Digital video entertainment is “sponsored” through advertisers looking to target specific topics (cooking, parenting, movies, music, etc.). Some video ad networks beyond YouTube include Vungle, Sovrn and YuMe.
One offshoot of video networks is a growing list of multichannel content networks (MCNs) that provide agency-level support to creators that includes rights-management, help to strategize distribution, identify content partners, and even negotiate direct advertiser relationships.
MCNs are also being acquired by traditional media companies like Disney (Maker Studios) and DreamWorks Animation (AwesomenessTV), often as a beachhead for their own digital strategy or as an integration play with their other brands. Here’s an interesting side note: gaming and gaming culture MCNs are some of the most widely monetized.
How do you grow a video monetization network?
As a business model, video monetization networks have inherent challenges in growth, scalability, and efficiency of operations.
New networks face a chicken and egg conundrum. They need enough quality creators to form a viable network, yet they need enough revenue potential to make it attractive for partners to join.
That’s why to start, many emerging networks take on some technical aspect of content management (analytics, audience insight, one-stop distribution, etc.) or provide agency services (PR, negotiations, content guidance, cross promotion) to build up the partner base. In fact, the agency services model provides for interesting off-network opportunities for creators that see themselves as subject matter experts, artists, or personalities. For example, Omnia Media has helped video stars gain notoriety in other media as spokespeople or promotable acts.
New networks are born all the time and competition is brisk. A video has very limited space for advertising without it detracting from the audience experience. This means a greater focus nurturing partners, developing quality partners, and keeping them happy with repeatable, substantial revenue payments. Plus new creators are always entering the fray so continually researching and onboarding new talent is a heavy task. Networks may also expand globally to broaden their reach, so those operations that have an international framework.
Lastly, in order to be profitable, a certain amount of scale must be achieved. Margins are not super high and rarely do smaller networks have dozens of people working on every aspect of the business, so it’s important to employ lean, streamlined operations that address the entire partner lifecycle.
What does the future hold?
It’s highly unlikely we’ve reached peak monetization. Media types are blending and becoming more sophisticated and more networks are appearing, so we may not be able to put a piece of content into a well-defined box. With the M&A activity associated with MCNs and the propensity of cord-cutters, there likely will be greater investment and involvement by “traditional” media. And the more digital media we consume and are introduced to, and the less friction we have to access it, the more we will find ourselves audiences to marketers.
Rob Israch is the CMO of Tipalti, a provider of a global payments management platform. Prior to Tipalti, Rob served as VP, Global Marketing Programs at NetSuite where he led global branding, demand generation and international marketing.