Turning Video Value Into Real Wealth – Interview With Shelly Palmer

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shelly palmerI recently interviewed Shelly Palmer of Advanced Media Ventures and host of MediaBytes last week after his Digital Media Boot Camp at the recent ad tech conference in San Francisco.

I asked Shelly about the challenges for monetizing video content into a sustainable business model, his 3 video marketing models, his cost benchmark for producing sustainable professional video, the dangers of Video SEO creating false “success metrics,” and how we’re still in the very early days of figuring all of this out.

Listen to our podcast interview above for the full interview with Shelly and commentary.

The Current Problem with Turning Value into Wealth

It seems that in earlier times, most companies were complacent with just being in the online space – getting found, getting attention – and that was considered all you needed to have a successful video campaign, or even a successful business model around video as your media of choice. However, in 2009, we can see that video now has got to be about monetization. As Shelly Palmer puts it: a direct translation of value into wealth.

However, here’s the problem I find: I don’t know what large scale business models are out there that have necessarily “succeeded” with online video by that standard. That especially goes for the publishing industry, where online video is most prevalent, but seems to be having the biggest problems. Right now it doesn’t seem to me that there’s a match between the proliferation of video content and sustainable revenue. I’m hearing people at this conference talk about trends, but I’m not yet seeing case studies, or numbers in the black.

“I don’t think you’ve missed anything,” said Shelly. “I think there’s a real problem now, where the actual cost of production and the cost of distribution exceed the revenue potential. That’s true in the broadcast television business – for the first time, pretty much, ever. It’s always been true in the online video business. In fact, for an online video business perspective, the more successful you are, the worse-case scenario you actually have; because it costs you on a per-watched hour basis. Whereas for other vehicles, like broadcast, you don’t have a cost-per-watched hour; it’s already built into the program.

Different Online Video Models Monetize Differently

Shelly explained that in order to understand what video monetization models are working really well, you have to break it down into 3 silos: Internet television, download-to-own, and video snacking.

Internet Television – “Internet televsion is profitable, people are making money there because they’re selling ads – its television over the public internet,” said Shelly. “Its working just fine.”

Download-to-Own – “Download-to-own is an OK model, too. …sans the piracy, people know what the pricing is, and they get to download whatever content they want, they pay for it and own it, and they’re done.”

Video Snacking – aka, short-form videos. “So the only question you have to ask yourself is when people are trying to monetize video snacking or short-form videos, with traditional kinds of advertising – call-to-action, branding, or direct response – they’re having some issues.”

“But, they’re really not having issues!” Shelly added, going on to explain the different types of video snacking.

The Challenge in Monetizing Short-form Video (aka, video snacking)

“A direct response video is dispassionately measured; it either works or doesn’t, so they’re fine,” said Shelly. “The only other two questions you have is: Where are the call-to-action commercials and the brand commercials fitting into this new video-snacking paradigm? …They work fine in Internet television, and they work fine in download-to-own; whether its pre-roll or post-roll, even if they don’t belong there, they’re being used effectively there.”

“So when you talk about the online video business not working, the only part of it not working is YouTube,” said Shelly. “That’s because YouTube is video snacking; its relatively short-form content that’s not monetizeable, in the way that normal advertisers want to monetize. And, there’s no currency. You can’t trade currencies for a YouTube. So, putting a 15-second pre-roll on a YouTube video doesn’t make any sense. Putting branded content on YouTube, its hard to measure its efficacy and effectiveness. So you find yourself in this kind of funny place where you don’t have currencies to trade, and you’re building one-off’s; you’re building individual programs, and you’re trying to measure those against a benchmark which you’re making up as you go along.”

Producer/Advertiser Benchmarks (and challenges) for Measuring Success

“The only real benchmark of a successful campaign, from a cash perspective, is, did you sell more stuff if you’re an advertiser, or, did you pay for your production and get a premium for having produced it, if you’re a producer? The ROAS (return on advertiser spend) or the ROI (return on investment) is the only true benchmark. We don’t have very clever ways to measure that right now, so I think its way too early to sit back and indict online video, or indict the processes and say ‘it doesn’t work, people aren’t making money.’ We’re not quite sure how to measure the effectiveness and efficacy in a big environment with online video. And in a small, individual environment – unfortunately we find ourselves where the cost of production almost always exceeds the dollars that can be brought in.”

The “Cost Benchmark” for Video Production

So I asked Shelly, how should companies keep their costs manageable if they’re regularly producing professional online video?

“Keeping the costs down is a funny concept,” he said. “Video is $3,000 for the first 3 minutes, and $1,000 for every minute there after. No matter who does it, no matter how you do it. If its sustainable – if you’re going to do it for every day and do a lot of it. That number is not fictitious.”

“Sure, you can do it for free, and people do video for free. You can do it one time; you can get all of your friends to work for beer and pizza one time. But when you need a writer, when you need a producer, and a camera person, and an editor, and you need them to have sustained jobs – this is what they do. They produce video for you, and they all need a salary. When you add all of those salaries up, and you look at the quantity of video they’re able to produce in a given week, those numbers are sacrosanct; they don’t change. No matter how cheap the equipment gets, no matter the infinite number of cameras and video editing software and everything else and wherever you buy it from, still doesn’t change the fact that someone has to write it, someone has to edit it, someone has to be the on-camera talent, someone has to put on makeup, someone’s got to have a costume, someone has to have a background, you have to be on location – those things don’t change.”

What Defines “Quality” Video Content?

Shelly explains another big challenge: the discipline of making a video for business – where that’s going to be a managed message, where video is the medium of choice – is a discipline where very few businesses have ever been in.

“I don’t think many more will get into it now, than in the past,” he said. “Now the main caveat to that is, its a big exception – is that the average 14-year old with a home camera in iMovie, is making an awful lot of stuff. And as our tastes in music change, our tastes in video are changing. So what you may call quality, or I may call quality, as our tastes change, we’re going to see video become a lot less expensive. If you don’t care about the script, if you don’t care about the story arch, if it becomes more of an interactive kind of little piece… there are so many ways for this to metamorph into something new, exciting and different.

“I think its harder for us who come out of the old-fashioned TV business to accept this, where costs will come down and tastes will change.”

Benchmarks Standards and Success Metrics for Online Video

Shelly has mentioned often that when it comes to online, we’re defined more by our metadata than our actual data. Video SEO plays such an important part in how our metadata defines us today. So I asked Shelly, does that make things intimidating for most businesses to really understand what to do and where to go to be financially successful with their video content online?

“I think these are new disciplines and these are very early days,” he said. “Companies don’t have the people on staff now for this; they don’t have the job descriptions for this yet. We the public, we the professionals, we the audience, don’t understand enough about what we’re doing as a group, for it to evolve into a formalized business practice with a job description and metrics, that would allow you to hire somebody, and judge their performance as good or bad… yet. We’re just too much into the early days.”

“No matter how evolved we think this is, its not evolved enough for you to say, ‘If I had this benchmark, and I reach the next benchmark…’ that the differential between those two has a dollar value associated with it, and that its a success metric. All that we can do is look at the old success metrics, and they don’t really apply. Someone could say, “Oh, I had a 100 thousand views.” Well, does that make it a good video? Because I’d rather have 10 of the right people viewing my video, than a hundred thousand people who don’t care much about it, and who will not come back and become part of the circle of the world that I need it to be. And if they’re not part of my virtual designated market area, if they’re not part of my community of interest, if I can’t capture those people, then what’s the point of having them watch it if I never see them again, or somehow haven’t collected the data.”

The Dark Side of Video SEO and Metadata – Faking Success Metrics

“So the metadata becomes super important, but also the measurement of the efficacy of what you’re doing becomes important. You need to know when you’re successful. Right now, what we’re doing to say that we’re successful… honestly… doesn’t really resonate as successful. You see, I can show you something on a given day where I can manipulate the video on MediaBytes. An average 35,000 – 50,000 people watch MediaBytes every day. If I want 100,000 people, all I need to do is mention something stupid that Britney Spears did, and I’ll get my 100,000 views. But they won’t come back the next day, because it was the metadata that drove those people. They were searching for Britney, they were searching for Lindsey, they were searching for Rhianna, and I had something about them, and they watched. You can look at the bounce rates and understand that you can manipulate the total audience views by the SEO. But, that doesn’t do a thing for your core audience.”

“Which is more valuable to me – the top quintile of my audience that comes literally every day to my site and watches my stuff every day and is really where I’m making my living, or the couple hundred thousand people that flood in and flood out with a bounce rate of 80 percent or something, that I’m never going to see again? I can fake the metric either way, and SEO can be manipulated, to the good or the bad. There’s a dark side of SEO, and that is you can trick yourself into believing that you’ve done something of value; when in fact, I would much rather tweak the SEO and tweak the content so that more “look-alike people” that I care about show up.”


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