As loyal SAI readers know, we’ve been down on much of the online video business for a while (the countless me-too upload-your-videos-here sites, for example.*) This said, we remain enormously optimistic about the growth of online video consumption, and we think many leaders, niche players, and ancillary businesses will thrive.
For example, we like the positioning of AOL’s Truveo. Truveo is not a video hosting/streaming site. It is a video search/aggregator. Truveo has two advantages…
- It avoids the enormous bandwidth and storage costs of hosting/streaming, and
- it aggregates videos from multiple third-party sites, thus (theoretically) enabling it to have a selection far larger than any individual site.
The former advantage should allow Truveo to have high gross margins at scale, similar to those of a regular search site. The second advantage should give Truveo a shot at becoming a start-page for many folks who are either looking for a particular video or just want to watch some video. Because Truveo doesn’t have to worry about hosting, transcoding, and streaming (headaches for many video storage sites), it can focus on the search and presentation experience–which, in general, has a long way to go. And because the video world is likely to be disaggregated for many years to come, especially with the entry of Hulu, Truveo should be able to maintain a selection advantage.
Truveo does have vast and supremely powerful competition–namely YouTube, Yahoo Video, and some of the other video behemoths. These sites are so large that they are already start pages. Also, given how well Google understands the search-and-aggregation business, we expect that it will soon begin to convert YouTube into more of a hosting AND search site, with links to third-party video hosted elsewhere. With only about 250,000 monthly users (per Compete), Truveo needs to skedaddle, or it, too, will be roadkill. But video search is still a lousy experience, and there should be room for a few dedicated search/start sites to be built.
*In fact, we’re so confident that there will be a big shakeout in hosting/streaming segment of the business that we’ve started a “Pick-the-Roadkill!” project (see middle link above). Thanks to all the companies who have weighed in on this, by the way: You have helped us understand your businesses better, and in almost all cases, this has improved our prognosis for you.
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