It is interesting that the most successful tech company since the dawn of the Internet makes most of its cash from something as simple as text ads. Yahoo is still in the bits and pieces high traffic ad blasting business, the reason Google has taken every other tech company to the cleaners in recent years is that it is the only company which has fundamentally changed the way advertising works.
Online video doesn’t really make money because it doesn’t really change much from the original model. How is watching an episode of the Office on Hulu with an ad break that much different to watching it on TV? It’s on demand but from the advertisers perspective it is not much different. They look at the demographics of the viewers and blast them all with the same ad. They may tinker with better contextualisation but the model is essentially the same just with slightly better tools. The fact is that when people watch a TV show they want to see that show, not an ad. Advertising something they put up with, not something useful to them.
Content and hardware
Investors are piling money into online video hoping for big returns as their startups become the new broadcating giants. I think those investing now are going to lose their shirts for two reasons, content and hardware. At the moment getting content deals is absurdly difficult and those that manage it are tied to astonishing price levels. Content owners are wary of cannabilising their existing revenue streams and are choking online video with patchy deals and high prices.
It will take time for them to be convinced that online can produce substantial revenues and they will be wary to back it. The only impetus for change will be seeing their content distributed for nothing by pirates. Judging by the time it is taking the music industry to embrace new models it will be some time before that happens. Film has the added insurance of the big screen and the communal experience which people will always want.
Hardware is also nowhere near where it needs to be for online video to be a viable mainstream business. Watching video on a computer screen is not a good experience. Until we get easy to use, smart set top boxes attached to the Internet and capable of delivering online services direct to the TV the ordinary person will stick to broadcasts and dumb DVRs. The Netflix/Roku and Apple TV/YouTube deals show the way forward but it will be years before these go mainstream.
Pic: gunthert
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