We recently published our 2011 predictions for Online Video (Platforms) with input from 8 OV leaders, one of whom was co-founder Luke McDonough the CEO of new comer RealGravity. Luke’s no stranger to the online video space, he was the founder of several video-related businesses including Thinking Pictures back in 1996, IFILM (sold to MTV Networks), and Sportnet (sold to Grind Networks). His latest OV venture was founded with long-time partner F Sid Conklin, co-founder, President and CTO of RealGravity. Sid was the mastermind behind the massive unified platform of multiple video portals for the action sports site Sportnet where he and Luke met.
In 2008 Luke was well aware of how crowded the OVP space was when he founded RealGravity, in fact he saw the space quickly becoming commoditized and realized that all the standard services that came with most OVPs were not going to generate the revenues the SaaS-based businesses where hoping they could in licensing fees. Luke and Sid figured the real value in online video was distribution and monetization, not in “me too” services like customized video players, content management, and analytics. So they set out to build an “all in one” service allowing customers to easily syndicate and monetize video within a complete OVP solution built on open source technology including branded video players, a robust CMS, detailed analytics, adaptive bit rate streaming, HTML5 (and Flash) along with deep ad targeting, ad ops, content programming, and geotargeting services down to latitude/longitude…all for “free”.
Their approach was fairly straightforward:
Problem – Premium content, distribution, monetization (built in sales team, inventory, ad network deals), recession
Solution – Give away full featured commodotized part for free, rev-share on advertising, all in one bundled approach with CMS, player, ad network
Approach/Technology – Tracking (ads served with players for full data analytics), rights management, ad sales, sophisticated data warehouse and reporting, monetizable embed codes, open source + ruby
They began to prove out there business model within a few categories at first starting with travel and music signing Tribune Company, Vibe.com, Universal, and NBC Corporate whom were previously with two other high-profile OVPs and whom decided to uproot their video businesses to give RealGravity a try. The goal was to make it drop dead simple to deploy fully monetized video from the onset whether content owners had internal sales teams or not.
Following is a question and answer session from several phone calls and email exchanges with Luke digging into the details of their service offering, and the methodology behind their approach.
VC: Describe your syndication services and what makes them unique.
RG: We provide two kinds of syndication, and content providers can choose to do one or both:
- “Private” syndication: An example of this would be NBC, who uses our platform to syndicate their sports content across an affiliate network which NBC controls, and which they sell, exclusively. NBC strikes whatever business deal they want with their affiliates, and RealGravity provides NBC with contract management tools and real time analytics that allow NBC to track, report, and pay their video affiliates.
- “Public” syndication: Howcast is an example of this type of syndication: Howcast uploads their content to the system, and then any publisher who uses our tools can search and access Howcast content, and add it to their pages at will. RealGravity tracks all usage of Howcast’s content, and Howcast gets real time reporting on where it runs, with detailed analytics down to the page level. Howcast can also “turn off” access to any publisher in our network, if they do not want that publisher to use their content, for any reason. RealGravity charges each publisher that uses Howcast content a flat CPM fee for use of the content, which RealGravity then pays to Howcast, less our transaction fee.
We also support hybrids: For example, many of our content providers are also publishers, and vice-versa. The system allows them to keep some content exclusive to their site or affiliate network, while allowing other content out into the public content market.
VC: There are some very high profile OVPs putting forth big efforts and money to build world class video monetization tools like Ooyala. What do your monetization tools include?
RG: There are two kinds of monetization:
- Direct sales: We provide dedicated, integrated account access to Yume’s ACE platform, at no additional fee, for each publisher that has their own sales team. This integration supports direct sales, but we also provide real time integrated analytics which combine ACE revenue data with the traffic data from the publisher’s players, in a simple, unified UI.
- Ad network sales: We have integrated Yume, Tremor, TidalTV, DBG, Brightroll, and Adconion into the platform. At publisher discretion, we will solicit bids from these ad networks for any portion of a publisher’s unsold inventory. We inform publishers of the highest bid, and if the publisher accepts it, we traffic the campaign, and pass through the revenue.
We work hard on monetization and yield optimization, because we only charge our higher transaction fee for “sold” streams. This pricing structure aligns our interests with that of our publishers, and it is what makes us a “media” service, rather than a software vendor…we give the software away for free, and we focus on providing content access, content syndication tools, and ad sales optimization.
VC: You say you give your OVP services away for free, but there are fees associated with the streams. Can you explain the details?
RG: All of our OVP functions are FREE:
- Upload as much video as you want, which we will transcode and store for you at no cost
- You will get a dedicated login to our full-featured OVP, which will allow you to:
- Build as many custom players as you like, with total freedom on branding, including many pre-designed skins, along with tools to customize every aspect of player design to your own spec
- Deploy your players on as many sites and pages as you like, whether you own or control those sites or not
- You can set up as many admin users as you like, with a multi-tier, drag and drop hierarchy system that lets you easily set application, reporting, and content permissions for all admin users across your site(s)
- All publishers get full access to all features: Analytics, variable bit rate, HTML5, etc…
This is all FREE: No set up fee, no minimum monthly fee, no support fee, no max bandwidth cap, and a month-to-month contract.
Here is what is not free:
First, bandwidth is not free. This may be splitting hairs, since we do charge publishers once they actually run a stream through our free system, but we charge only for bandwidth, at less than $0.10 per GB, which is much, much less than any of our publishers were paying on their own for bandwidth alone, never mind OVP software.
To make an apples-to-apples cost comparison, we have to convert their pricing into a CPM equivalent: If the publisher uses exactly the amount of allocated bandwidth in his package, (which never happens, and which is extremely favorable to the OVP in terms of comparison to RealGravity). This conversion assumes that the average data transfer per stream is in the 5-10MB range, which is where the average actually falls for most of the tens of millions of streams and hundreds of publishers in our network…remember that this is not “file” size, but the actual data transfer average, which takes into account the fact that some people watch only a few seconds of some videos, while others are long videos, and it also takes into account variable downstream bit rates…it equates to a couple minutes per view, on average.
Now keep in mind that if the standard OVP publisher uses less than their allocated bandwidth, then the effective CPM goes up: So if a “40GB” package user only uses 20GB in a given month, then his actual CPM cost for that month doubles. And if the same publisher uses more than the 40GB allocation, then they get penalized, usually at a higher rate, for the bandwidth overage.
Before we compare this to RealGravity, we must also stop to note that it is impossible for a small publisher to make money on this: Even if the ad networks sell out the inventory, this is still a money-loser, by a wide margin. Also, most OVPs don’t plug publishers into the ad networks: They provide plug-ins for integration, but it is up to publishers to get those deals done, and to manage ad ops. We provide access to six ad networks, including all ad ops, from day one, for free…we sell out inventory when publishers ask us to sell for them, and and we pas through 100% of the revenue from the ad nets: 100% of our current publishers, including all of the small ones, make money on their video with us.
By comparison to another well-known OVP’s standard package, here is what RealGravity charges:
- Bandwidth: For streams that run without ads, we charge for bandwidth only, at a $0.50 CPM…that is 95% less than what the other OVP charges for their cheapest edition. Furthermore, they are limited to 1 user, and 50 videos at the low end, and it is 3 users and 500 videos at the high end, with limited functionality, and a player that carries the OVP’s logo. Ours is for unlimited videos, unlimited users, all functionality, and a white label player.
- Ad-serving: For streams that run with an ad, (whether it is sold by the publisher, or by one of our ad networks), we charge $2.50 per thousand streams for sites who run fewer than 500,000 streams per month, and this rate discounts for volume down to as little as $1 per thousand streams for customers who run tens of millions of streams per month. Even at our highest, $2.50 rate, RealGravity costs 75%-87% less than what the other OVP charges, with or without ads.
- Content: Unlike all other OVP’s. Our system comes loaded with on-demand access to over 500,000 professional videos from dozens of branded content providers. If a publisher uses content from one of our network providers, we charge the publisher an additional $1 CPM, out of which we pay the provider. So the most that a publisher can be charged is $3.50 CPM, and that is for small publishes that run fewer than 500,000 streams, and it includes the content itself, and yet this is STILL 60%-80% less than what other OVPs charge for the software and bandwidth alone.
We also provide a dedicated account with an enterprise ad-server, (currently Yume’s ACE platform), at no additional fee, to any publisher that wants to sell their own inventory. This typically costs $0.50-$1.00 additional CPM, depending on which video ad server you use, and we provide it for free.
RealGravity is growing as they just closed their first round of $3.2 million in venture funding. The Series A round was led by Kohlberg Ventures, and was joined by Transmedia Capital, individual investor Peter Boboff, and RealGravity’s founders, Luke McDonough and Sid Conklin. They will use the funds to further develop their technology and grow the team in the areas of sales and engineering. One of the most interesting aspects of their video monetization strategy is the notion of monetizable embed codes allowing them to target at the site and domain level. This allows publishers great flexibility as they can add or remove players by site, and control ads by site.
We are clearly nowhere near a standardized approach to monetizing online video which has put a damper on publisher’s ability to significantly grow revenues with video content, so it’s refreshing to see a new angle playing out which could open more doors especially for those with constricted engineering resources and small budgets.