eMarketer Webinar: The Evolving Online Video Landscape

Unica OnDemand The Evolving Online Video Landscape: Trends & Insights The Webinar will begin at 1:00 PM EST You will be connected to audio using your computer’s microphone and speakers (VoIP). A headset is recommended. Or you may select Use Telephone after joining the Webinar. Dial-in phone: 916 – 233 – 3088 Access code: 523 – 429 – 565 Presented by: Paul Verna eMarketer Senior Analyst Sponsored by:

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J U L Y 2 0 1 0 The Evolving Online Video Landscape: Trends & Insights

Agenda
Online Video Audience Metrics & Demographics
Content Mix & Venues
Case Studies: YouTube, Netflix, Hulu, Break Media, ooyala
Monetization
Syndication
Technology Convergence: From TV to Internet
Tips & Takeaways

Overview
We’re in a transitional time
Consumer behavior, technology, monetization models, and the relationship between digital and transitional media are all in flux
The landscape will change significantly in the next few years
Opportunities about for those willing to take risks and embrace new paradigms

Online Video Audience Metrics 147.5 million people in the US watch online video, which translates to 2/3 of Internet users

Online Video Audience Metrics By 2014, this number will increase to 193.1 million, or 77% of Internet users. 7% CAGR

Audience Demographics The largest clusters of viewers are ages 18 to 44

Women outnumber men in the overall online video audience, but men outnumber women among heavy TV online viewers

Those under 25 are most inclined to watch ‘all’ or ‘most’ of their TV online

TV Online Increasing numbers of video viewers are watching full-length TV shows online

Content Mix: Movies Online Downloading and streaming of full-length movies rose dramatically in 2009

User-generated clips still lead the pack of online video types watched regularly by US viewers

Case Study: YouTube

YouTube was the undisputed leader by unique viewers, with over 100 million in May 2010 Case Study: YouTube US Unique Viewers to Google Video Sites, May 2010 (millions)

Source: Nielsen Case Study: YouTube Top Online Video Properties by Videos Viewed, May 2010 (billions)

Source: comScore Case Study: YouTube Top Online Video Properties by Videos Viewed, May 2010 (billions)

Case Study: Netflix Case Study: YouTube
Business Highlights
43% market share in May 2010 (comScore)
Third-most-visited site on the web
24 hours of video uploaded every minute
Over 2 billion clips served every day
Cost and technical barriers lower than ever
Preferred hosting destination for media firms
Partnerships with top content owners

Case Study: Netflix Case Study: YouTube
Challenges
DNA is in user-generated video
Interface needs improvement
Stiff competition from Hulu in TV space
Stiff competition from Netflix in movie space
Integration between Google TV and YouTube a question mark
Monetization strategy unclear

Case Study: YouTube “ With respect to how it’ll get monetized, our first priority is on the advertising side. We do expect over time to see micropayments and other forms of subscription models coming as well, but our initial focus is on advertising.” — Eric Schmidt, CEO, Google, in CNET Case Study: YouTube

Case Study: Netflix Case Study: Netflix

Business Highlights
15 million subscribers in Q2 2010, which is up 42% year-over-year
61% of subscribers stream content
Expansion into Canada and other territories
Three platform strategy: game consoles, Blu-ray players, Internet TVs

Case Study: Netflix “ We focus on three categories: videogame consoles, Blu-ray and Internet TV, which is just emerging. We’ve been very happy with the early progress from Sony, VIZIO and others, but that category in the very long term is likely to be the leading category.” — Reed Hastings, CEO, Netflix, Q2 2010 earnings call Case Study: Netflix

Technology Integration “ The recession has increased demand for in-home entertainment, enhancing the TV experience. This, combined with new flat-panel models that access content from the Internet, will further blur the lines between TV and the Internet.” — Ed Moran, director of insights and innovation, Deloitte Case Study: Netflix

Challenges
Direct competition from Hulu, YouTube, Blockbuster, Apple, Amazon, etc.
Limitations on content availability
Long ramp time for Internet TVs to penetrate market

Case Study: Hulu Case Study: Hulu Plus

Case Study: Netflix Case Study: Hulu Plus
Hulu founded on an ad-supported model
Company has crossed the profit threshold
Revenue guidance of $100M in 1H 2010
Joint-venture partners long interested in exploring paid-content

Business Highlights
$10/month subscription
Available on Windows, Mac, iPhone, iPad, Blu-ray, Internet TVs
PS3, Android support in the future
Despite fee, service will carry advertising load similar to current free Hulu

Challenges
High price, no pricing tiers
Service carries ads despite monthly fee
Competition from other paywalls, including newspapers, music services, data plans
Content offerings limited to JV partners

Case Study: Hulu Plus “ If your ambition is to bring the world’s premium content to users, and to do so in a way that produces fair returns to content owners—and it is our ambition—there isn’t one single bullet…you’re going to see a tremendous number of experiments.” — Jason Kilar, CEO, Hulu, in The New York Times

The video content mix is shifting from ad-funded to paid and hybrid models

Case Study: Hulu Plus “ Our research suggests that viewers have a higher tolerance for advertising than they are currently receiving. There’s revenue being left on the table and media companies have not yet extracted full value out of the medium.” — Tania Yuki, director of online video and cross-platform product, comScore

YouTube Promoted Videos
Leverages branded video campaigns
Similar to AdWords for YouTube
CPMs between $100 and $400
YouTube attributes CPMs to higher engagement levels with online video vs. TV

Case Study: Ooyala

Case Study: Ooyala
Using Ooyala’s multi-variate testing framework (currently in beta), a top media company doubled paid-content revenues twice
Extended clip preview length from 2 minutes to 3 minutes
Reduced download price from 99 cents to 49 cents
Ooyala expects monetization income to contribute 20% of revenue in 2011

Case Study: Ooyala
Another Ooyala client increased ad engagement by changing formats
A single 15-second pre-roll produced abandonment rates of 20% to 25%
Spreading out the ad load and using shorter spots brought rates to single digits

Case Study: Ooyala “ There are more and more opportunities to hit a consumer with advertising, but it’s not just about more advertising but better targeted ads.” — Bismarck Lepe, President of Products, Ooyala, in an interview with eMarketer

Case Study: Ooyala
Business Highlights
Customer dashboard enables instant syndication to all screens
Specific moments or entire clips can be shared via popular social platforms
YouTube playback gives customers access to world’s largest online video library
Flexible technology detects playback environment and scales accordingly
Product features enable testing of multiple monetization options (ads vs PPV) to determine best mix for viewer engagement and revenue

Case Study: Ooyala
Challenges
Competition from other players in the online video platform space (Brightcove)
Competition from in-house solutions
Social venues provide ample free syndication opportunities

Case Study: Break Media Case Study: Break Media

Case Study: Break Media
Business Highlights
Well-defined demographic target
Expertise in producing, licensing and distributing content
Branded websites that cater to niches within the target demo
Ad network leverages company’s content expertise with its advertising muscle

Case Study: Break Media “ We’ve created a vertically integrated machine that’s self-sufficient in the sense that we can produce content, monetize it and distribute it….That’s really important, and most important is to do it at the right price points.” — Keith Richman, CEO, Break Media, in an interview with eMarketer Case Study: Break Media

Case Study: Break Media
Challenges
Very competitive space on the professional content side
Equally crowded field in user-generated media
Also competitive on the ad-network side

Facebook is now a key player in online video, proving the importance of social venues in the content syndication loop

Technology Convergence: From TV to the internet

Technology Convergence: More users connecting TVs to the internet

Technology Convergence: Sharp increases in streaming devices

The US will see an explosion in TVs and other devices with integrated web-video widgets

Technology Convergence Phase 1: Set-top boxes, game consoles

Technology Convergence Phase 2: Internet-connected TVs

The online video audience is growing and becoming more demographically homogenous.
The content mix is shifting toward professional, full-length programming.
Monetization models are moving toward paid & hybrid systems but content owners must convince skeptical consumers of the value of paying for video.
Ad-supported models will remain strong.
Technology convergence will be key to the continued success of online video.
Content syndication is expanding the video audience.
Tips & Takeaways

J U L Y 2 0 1 0 eMarketer would like to thank DoubleClick for sponsoring today’s webinar.

There is an advertiser for every video

Thank you for tuning in to the eMarketer Webinar: The Evolving Online Video Landscape Presented by: Paul Verna eMarketer Senior Analyst Questions & Answers Registrants will receive a copy of the slide deck and the playback link in a follow up email within 24 hours of this presentation. Sponsored by:

eMarketer Online Video Coverage Learn more about the online video landscape with eMarketer Total Access. Visit: www.emarketer.com/products Call: 800-405-0844 Email: [email_address]
Recent Reports:
Video E-Commerce: Innovative Models Drive Sales
UK Digital News and Information Convergence
Consumer Packaged Goods Sector Taps Into Online Video
Paid Video Content: Focus on Movies and TV
Marketing to the Online Video Audience
Digital Video Advertising: Where’s the Money?
Video Content: A Premium Opportunity
All reports are available to Total Access clients.

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