As discussed in previous installments of our Economics of Online Video series, we expect a major shakeout in this overcrowded space in which most companies will disappear. Whether the companies disappear in a good way (sell out early for a nice price) or a bad way (go bankrupt and/or sell for pennies on the dollar) will be a function of both time and competitive differentiation.
Specifically, to survive the shakeout, we believe video-sharing companies will need either:
- Industry-leading scale (at most three companies will clear this hurdle)
- Well-defined, defensible niche audience or services.
Companies that lack either of these attributes, in our opinion, should immediately sell out or focus on a defensible niche. Right now, the video market is growing fast enough that the tide is lifting most boats. The economics of the business are already brutal, however, and sooner or later investors will get gun-shy. (At which point, everyone will race for the doors).
PICKING THE WINNERS
The next step is separating winners from losers. Specifically, we need to figure out which of the 20-odd video sharing companies have a chance of surviving. We have developed a preliminary analysis (here), but our data is incomplete, so we need your help. (Our preliminary WINNERS include YouTube (GOOG), Yahoo (YHOO), and blip.tv. The LOSERS include Crackle, Video Egg, Revver, Clipshack, Motionbox, and Hulu. The rest should start thinking about selling or focusing).
Do you work at a video-sharing company? (one we have listed here or one we’ve forgotten)? Please let us know whether the traffic, year-over-year growth, and strategic differentiation data we have noted on this sheet is reasonably accurate–and if not, please send us more accurate data. On the “strategy” point, if our preliminary determination is that you have no strategic differentiation–and you disagree–please explain in detail why we are wrong (reminder: cool features aren’t a strategy).
We want to stress that this a business analysis, not a feature analysis (like the nice one TechCrunch just did). We have no opinion on where users should watch or upload videos (except that we might suggest choosing a potential survivor). All we are trying to determine is which video sharing businesses are going concerns and which aren’t. We will compile all your input and release our formal VIDEO WINNERS AND LOSERS conclusions later this month. Thank you in advance for your help.
(If you want your input to be public, please enter it in the comments. If you’d like us to keep it on background, please send it to [email protected]).
In the meantime, here’s our preliminary list of VIDEO-SHARING WINNERS AND LOSERS. We’ve divided the companies into three basic categories: WINNER, SALE, and FIRESALE. If the SALE companies wait too long to sell, they will migrate to FIRESALE.
Preliminary analysis of video-sharing sites. Traffic from Comscore and Compete. Please send updated traffic info and/or competitive differentiation arguments to [email protected]. For better formatting, please click here:
Site Traffic (000s) Y/Y Growth Differentiated? Prelim. Prognosis Logic
YouTube 206,000 96% Yes (Scale) Winner Scale
Yahoo Video* 48,000 NA No Winner Scale
Google Video 38,000 NA No Winner Scale
Metacafe 27,000 NA No Sale Not enough scale
DailyMotion 26,800 NA No Sale Not enough scale
Veoh 11,500 848% No Sale Not enough scale
Heavy 7,700 27% Yes (Audience) Sale Some scale, focus
Megavideo 4,550 NR No Sale Not enough scale
Break.com 3,100 144% Yes (Audience) Sale Some scale, focus
Crackle 2,200 16% No Firesale No scale
Spike (ifilm) 1,500 -35% Sale
Joost 1,000 NR Yes (software) Sale Wrong format
Blip.tv 885 NR Yes (niche) Winner Niche focus
Revver 745 345% No Firesale No scale
Video Egg 740 400% No Firesale No scale
Vimeo 570 250% Yes (community) Sale Little scale
Motionbox 308 NR No Firesale No scale
TAKKLE 238 NR Yes (Niche) Sale Focus, but little scale.
ClipShack 18 NR No Firesale No scale.
Hulu 0 NR No Firesale No real differentiation
Economics of Online Video: One Tough Business
Economics of Online Video 2: Unit Economics
Economics of Online Video 3: $5 Net CPM = Keep Day Job
Economics of Online Video 4: Revver P&L
Why Hulu is Screwed, 1
Why Hulu is Screwed 2: Bad Economics