How do you make money from online video?

That is the multi-billion dollar question facing content owners and distributors. Both in form and execution, how can one best monetize (SIDENOTE: should I be spelling it monetise?) this brave new frontier?

Evidently, there will not be one fix-all solution. Different video formats will be better suited to different models. Broadly speaking, there are three formats – TV shows or films as catch-up or VOD, specific made-for-broadband content, and user/consumer generated content.

There has been some research into this area. Work Research carried out an interesting qualitative piece into how people use different forms of online video content (though they segmented the market into catch-up, boutique and snippets), and which type of advertising would be most appropriate.

Furthermore, this chart from Ipsos MediaCT shows that the public have widely different levels of acceptance towards advertising depending on the type of content. However, we are still a long way from accepted formats.

With that in mind, here are some of the options that those in the sphere find themselves deliberating over – both advertising-based and non-advertising based. Multiple options can be used in combination, though one has to consider the extent to which users will be accepting.

A: Advertising models

1: Pre-rolls: The non-skippable adverts that play in-video before the content begins. Many of the big players utilise this method. Despite its acceptance, there is no consensus on the best length of pre-roll. One factor would be the length of the clip – who would want to sit through a 30 second advert to see a 20 second short? Even with longer-form, one would think that shorter (10-15 second) pre-rolls, would work best, but some advertisers are loath the pay the product costs of converting their 30 second TV spot and so these often appear. There is also the question of whether consumers will accept several short pre-rolls

2: Mid-rolls/post-rolls: Not as common as pre-rolls, these cut through long-form content (often mimicking a break as if one were watching on TV), and appear after the content has finished. One might question who would watch post-rolls, since the desired content has concluded, but data suggests that direct response advertising works better as a post-roll than as a pre-roll. This makes intuitive sense, since people would be unlikely to click through while they wait for their video to start, but one has to be careful to ensure that enough people hang around to view the post-roll(s).

3. Sponsorship idents: Sponsors of TV shows may negotiate a similar deal (or have it included in the original deal) to have their continuities included in the online catch-up or made-for-broadband spin-offs. I can see this being an area of growth as scheduled, online-only programmes increase in frequency.

4: Product placement: Currently banned on broadcast TV in the UK, this is where an advertiser pays for their brand or product to appear in a show. Big business in the US, the UK restrictions don’t extend to online. Prop placement, or product plugging, where products are provided for authenticity but no money changes hands, is currently allowed on UK TV, and so in theory this can extend to paid placements online. The LG15 group (who produced Lonely Girl and Kate Modern) seem to be pretty hot on this.

5: Brand integration: A step up from product placement, this is where a brand or product is incorporated into a storyline. To take another Bebo example, The Gap Year looked to integrate brands into the storyline. Advertiser funded programmes, or in-programme live ads, could fall under this banner.

6: In-stream advertising: The next big thing? Youtube toyed with it, and Sky look to be implementing it soon through Adjustables. It is where little strips (like the Sky Sports News ticker) or corner animations advertise brands while the main content continues to play. US TV stations use this to advertise upcoming shows. The trick is for it not the too intrusive. See this in-stream advert during Family Guy as an example of how not to do it.

7: Surrounding white space: This is unlikely to be used on its own, as CPM rates for white space are much lower than they are for online video. However, interstitials and superstitials (full-screen ads before and after a page is visited) could possibly be used as an alternative to pre and post-rolls.

B: Non-advertising models

1: Subscription: Where fee indiscriminate to consumption is paid. It could be purchasing a series or access to a walled garden where the video is but one feature. In some ways, the most popular catch-up service in the UK uses this model, depending on how you view the licence fee underpinning the BBC’s iPlayer.

2: Purchase: Where individual episodes are purchased, such as through iTunes. This is unlikely to be viable unless the show has a serious profile, either through having already appeared on TV/in the cinema, or featuring well-known celebrities.

3: DVD: The programme may be available online for free as a barebones show, but a DVD release brings together extras and behind-the-scenes looks. This is the model that Beyond The Rave will be using, though I think it is most likely to be used in conjunction with other models e.g. Dr Horrible’s Sing-Along-Blog is available via iTunes (purchase) and Hulu (advertising).

4: Merchandising opportunities: I’m not aware of any specific examples of this, but if Dr Who can sell merchandise by the ton, there is no reason why a made-for-broadband show cannot. Speaking of which, I wouldn’t be surprised if physical Dr Horrible comics are released.

5: Events: This would be an attractive option for the online expert. There are many stories of bloggers making money from lucrative speaking gigs as a result of their blogs (Content marketing) – I’m sure this can apply to vloggers

6: Get bought out: Alternatively, one could forget about a business model. Concentrate on finding an audience first. So long as there are venture capitalists, the business side can wait. And if you are successful, someone can buy you out, and you won’t need to worry about it. It’s worked for some people.

Interesting times lie ahead. Whether it is through industry-adopted standards, or research “proving” the efficacy of a solution to a format, at some point a consensus will (hopefully) emerge.

In the interests of exhaustiveness, I’d be grateful if anyone could point out any options that I have overlooked in the above summary.

sk

Image credit: http://www.flickr.com/photos/29607812@N08/

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