Posts for 'Google'

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Daisy Whitney and I are pleased to present the 54th edition of the VideoNuze Report podcast, for March 26, 2010.

This week Daisy starts us off by reviewing new research on the iPad's appeal as an ebook reader. Daisy also reviews sobering forecasts suggesting that the iPad is unlikely to change people's willingness to pay for content (regarding video specifically, Daisy and I agreed a while back that for now its impact for video specifically is likely to negligible). I'm not convinced the iPad will trigger a wave of people willing to pay for content, but I do believe any iPad research is still very preliminary. It's only when users get their hands on the device that we'll really start to learn how impactful it is. The iPad is of already available for pre-order and is set to debut in stores late next week.

We then shift topics and discuss my post from earlier this week, "Here's How Google TV Will Work - And What It Might Mean," in which I described Google's new set-top box and the company's strategy for entering the market. Google's move is likely to set off a fascinating negotiating dynamic with incumbent video service providers, and Daisy and I get into some more of the details.

(Note, Daisy's mic isn't working that well on this podcast, so please be patient)

Click here to listen to the podcast (14 minutes, 13 seconds)

Click here for previous podcasts

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Google's recently-announced fiber-to-the-home experiment (which I estimated could cost the company $750 million or more) looks even sillier in the context of continued announcements by cable operators of faster broadband deployments. As an example, this week brought news that Virgin Media, a large U.K. cable operator, is launching 100 megabit/second service by the end of this year, and also intends to expand its trial of 200 megabits/second service. Virgin's announcements came on top of Shaw Communications (a large Canadian cable operator) news from last week that it would soon test expanding its current 100 megabit/second service to 1 gigabit/second, a 10x increase. And big U.S. cable operators themselves continue deploying "DOCSIS 3.0" equipment to offer ever-faster broadband services.

What do you think? Post a comment now (no sign-in required).

In yesterday's post, "Google's Fiber-to-the-Home Plan Could Cost $750 Million or More" I sounded a skeptical note about the company's intention to build out 1 gigabit/second experimental broadband networks to between 50,000-500,000 U.S. homes. Yesterday I was a guest on the Emily Rooney radio show which airs on WGBH 89.7 FM in the Boston area, and I provided further detail on why I think Google's plan is suspect. (Click here to listen; you need to select the Feb. 11th show and my segment starts at about the 21 minute mark.)

While Google's plan has stirred up a lot of conversation, I've yet to talk to anyone who believes it will have much actual impact. I know this will sound cynical, but if Google's real intent with the gigabit experiment is to promote the company's net neutrality position and influence Washington broadband policy-making, I think a far better use of its resources would simply be to spread significant lobbying largesse around to key legislators. Regrettably, that's a much more direct way of getting Washington's attention. Building physical residential fiber networks is very heavy lifting, even more so for a company that's operated strictly in the ether. And the potential cost of this project is daunting, even for Google. If anyone has some real insights into what Google's thinking here, I'd love to hear them.

What do you think? Post a comment now (no sign-in required).

I hope for Google's sake that it understands the cost to build its 1 gigabit/second ultra high-speed fiber network experiment announced today could be $750 million or more. Even for Google that's a very big number, especially considering the company has said it has no intention of actually pursuing this as a business. Of course, we don't know exactly what Google is forecasting its project costs to be, but using Verizon's FiOS numbers wouldn't be a bad starting point to do the math. So here goes.

Google said it would offer the gigabit service to between 50,000 and 500,000 people. Let's start at the high end of that range. Verizon has disclosed that it will spend $18 billion to pass approximately 18 million homes in its footprint with its FiOS fiber-to-the-home network. It's not fair to do a straight average and assume that Verizon is still paying $1,000/home passed given that its costs have no doubt declined over the years. However, in Google's case, since it has approximately zero experience laying fiber in neighborhoods, and won't get the same level of vendor discounts that Verizon enjoys, it is probably fair to assume Google will spend at least $1,000 per home passed. So if it goes all the way to 500,000 homes, that's $500 million in neighborhood build-out costs.

But that's only to wire the neighborhoods, then the service has to be deployed in the homes themselves. That means in-home wiring, on-premise equipment, labor, trucks, insurance, overhead, etc. Estimates for Verizon's per home cost vary, but $500 is in the range often cited. In Verizon's case they're also deploying a set-top box to deliver TV, which Google hasn't announced plans to do (more on that below), so that cost should be deducted. But on the flip side, once again, because Google has never wired a consumer's home (that I'm aware of anyway) it has a steep learning curve ahead of it, meaning its costs could be much higher than Verizon's.

But to make things easy, let's just use the $500 per installed home. So 500,000 homes at $500 apiece, another $250 million for the project. Add it to the $500 million for the neighborhood build-outs and the total is $750 million. This assumes Google decides to go all the way to 500,000. Obviously if it stopped at 50,000, the costs would be a lot lower.

Executives at cable operators and telcos - who build and operate residential networks for a living - are very familiar with modeling network deployment costs. But I wonder, how familiar do you think Google is? Does it know what it has bitten off here? And for what benefit exactly - to test next-generation apps? Hmm. Everyone knows video is the biggest bandwidth hog; an expensive experiment isn't going to change that. And also remember, Google only plans to sell broadband Internet access, not a full bundle with TV or voice. It says it will do this at competitive prices, which means around $50-$100/mo. At these revenue levels and with operating costs that I haven't even mentioned, it's inconceivable to me that there's a positive business case for Google's gigabit experiment.

I'm all for innovation and for pushing competitors along. But Google's experiment really has me scratching my head. No doubt the folks at Verizon, Comcast and other big broadband ISPs are wondering as well. It's one thing for Google to throw $2.5-$3 million at a 52-second Super Bowl ad, but quite another to be contemplating a $750 million experiment with ambiguous goals. What am I missing?

What do you think? Post a comment now (no sign-in required).

Google and Apple both unveiled key mobile initiatives yesterday, underscoring the collision path the two companies are on, and how long-term, video is poised to benefit from their battle.

First, as you no doubt already know, Google introduced the Nexus One, an Android-powered smartphone that it is selling directly to consumers. It is Google's first foray into consumer devices and many more products sure to follow. Meanwhile, Apple, in a rare significantly-sized deal, acquired Quattro Wireless, a mobile advertising company, for around $300 million. Quattro represents Apple's first real push into advertising, an important shift from its traditional iTunes-driven paid media model.

With its own device, Google is primarily looking to compete against Apple's iPhone, which has practically owned the U.S. smartphone market since its introduction 2 years ago. And Apple, with a toehold in the exploding mobile advertising market, is positioning itself to disrupt Google's planned dominance of mobile advertising through its pending $750 million AdMob acquisition. If Apple were to make additional acquisitions, particularly in the online video advertising space, that would further strengthen its position.

Mobile video is poised to be a real winner in the Google vs. Apple face-off. At a minimum, the two companies' considerable marketing spending (plus those of competitors Palm, RIM, Nokia and others) will mean smartphones in millions more consumers' hands, dramatically expanding the video-ready universe. In addition, the experience of watching mobile video will just keep getting better. For example, the Nexus One's screen resolution (480x800) surpasses the iPhone's (320x480), which only means Apple will need to up the ante even further with its next generation. The range of video applications is sure to surge as more and more players stake out their ground.

Importantly, because there are no powerful incumbent distributors in mobile video - as there are in the living room, with cable/satellite/telco - I believe there is more flexibility in how premium video can be distributed to smartphones. Until recently mobile was an "on-deck" world where everything had to be approved and carried by the wireless carrier. But mobile is quickly evolving to take on open Internet-like characteristics, where applications and services are not gatekeeped by a distributor. In short, mobile looks to be more like online distribution than traditional video distribution. As power in mobile shifts to players like Apple and Google, it should also be a wake-up call to the FCC, whose planned wireless carrier-focused net neutrality paradigm already looks out of date.

While there have been recent rumbles about Apple doing something with subscription video for the living room, instead the company likely has more latitude in mobile to go well beyond the pay-per-use iTunes model, especially if it can also bring in advertising. Meanwhile, by having its own device and operating system, Google is optimizing the YouTube mobile experience. As this YouTube blog post points out, the Nexus One is an improved way to search, view and upload YouTube videos. With YouTube enjoying such benefits not just on Nexus One, but on all Android phones, YouTube becomes an even more valuable partner for premium content providers looking to generate mobile usage.

Google and Apple will be jousting for years to come in the mobile space. The opportunities for growth for both companies are sizable. I fully expect that video is a going to be an increasingly important part of the battle.

What do you think? Post a comment now.

Happy New Year. If you're just back from a holiday vacation and have been partially or totally off the grid for the last week or two, here are 7 video-oriented items you may have missed:

1. Time Warner Cable and News Corp fight over fees, then settle - Two behemoths of the cable and broadcast TV ecosystem spatted publicly during the holidays over the size of "retransmission consent" fees that News Corp (owner of the Fox Broadcast Network and cable channels like Fox News) wanted TWC (the 2nd largest U.S. cable operator) to pay to carry its 14 local stations. While a last minute deal averted the channels going dark, broadcasters' interest in dipping into cable's monthly subscription revenues will only intensify as audience fragmentation accelerates and ad revenues are pressured.

For my part I wish Fox and other broadcasters were as focused on building new and profitable digital delivery models for their programs as they were on trying to redistribute cable's revenues. Even as Rupert Murdoch continues advocating the paid content model, the freely-available Hulu is seeing its traffic skyrocket (see below). But if Hulu's viewership isn't incrementally profitable, then all that growth is pointless. Urgency is mounting too; in '10 convergence devices that bridge broadband to the TV are going to get a lot of attention. In the wake of their adoption, consumers are going to want Hulu on their TVs. If Hulu doesn't allow this it will be marginalized. But if it does without first solidifying its business model, it could hurt broadcasters further.

2. Hulu has a big traffic year, but no further information provided on its business model - Hulu's CEO Jason Kilar pulled back the curtain a bit on the company's strong progress in 2009, citing 95% growth in monthly users, to 43 million, 307% growth in monthly streams, to 924 million (both as measured by comScore) and a doubling of available content, to 14,000 hours. While noting that its advertisers increased from 166 to 408 during the year, with respect to performance, Jason only said that "we are extremely excited about atypically strong results we have been able to drive for our marketing partners."

Though Hulu is under no obligation to disclose details of its business model, I think it would dramatically increase the company's credibility if it shared some metrics about how its lighter ad load model is working (e.g. improved awareness, click throughs, leads, conversions, etc.). Per the 1st item above, as Hulu grows, a lot of people have a lot at stake in understanding what effect it may have on broadcast economics. In addition, as I pointed out recently, it is important to understand whether Hulu thinks it may have already saturated its U.S. audience. After a jump in Q1 '09 from 24.6 million to 41.6 million users, traffic actually dipped below 40 million until October. What does Hulu do from here to gain significantly more users?

3. Cable networks' primetime audience is nearly double broadcasters' - Punctuating the ascendancy of cable over broadcast, this Multichannel News article pointed out that in 2009, ad-supported cable networks as a group captured 60.7% of primetime audience vs. 32% for the 4 broadcast networks. That's a major change from 2000 when the broadcasters had a 46.8% share vs. cable's 41.2%. Cable increased its share every single year of the last decade, powered by its innovative original programming. NBCU's USA Network in particular has become the real standout performer, winning its second consecutive ratings crown, with 3.2 million average primetime viewers, up 14% vs. 2008.

The surging popularity of cable programming is a crucial barrier to consumers cutting the cord on cable. Since cable networks are highly invested in the monthly multichannel subscription model, they are unlikely to disrupt themselves by offering their best shows to others under substantially different terms than how they're offered today. So to the extent cable programs are either unavailable to over-the-top alternatives or offered less attractively (e.g. less choice, higher cost, delayed availability), little cord-cutting can be expected. And if TV Everywhere achieves its online access goals, the cable ecosystem will only be further strengthened.

4. YouTube is working to drive higher viewership - Amidst the turmoil in the traditional ecosystem and Hulu's growth, YouTube, the 800 pound gorilla of the online video world, is working hard to deepen the site's viewership. As this insightful NYTimes article explains, a team of YouTube developers is analyzing viewing patterns and tweaking its recommendation practices to encourage more usage. YouTube says time on the site has increased by 50% in the last year, and comScore reports that the average number of clips viewed per user per month jumped to 83 in October, up from 53 a year earlier. Still, as comScore also reports, duration of an average session has yet to crack 4 minutes, meaning video snacking on YouTube is still the norm. YouTube's moves must be watched closely in '10.

5. Showtime's "Weeds" available online before on DVD - This WSJ article (reg req'd) pointed out that Lionsgate, producer of Showtime's hit "Weeds" series is offering episodes online before they're available on DVD. By putting the digital "window" ahead of DVD's, Lionsgate is further pressuring DVD's appeal. We've seen periodic experimentation in this regard, and I anticipate more to come, especially as the universe of convergence devices expands and consumers can watch on their TVs instead of just their computers. Until a tipping point occurs though, "Weeds" like initiatives will be the exception, not the rule.

6. Netflix goes shopping in Hollywood - And speaking of reversing distribution windows, this Bloomberg Businessweek piece was the latest to highlight Netflix's efforts to woo studios into giving it more recent releases. Netflix has of course made huge progress with its Watch Instantly streaming feature, but its appeal to heaviest users will slow at some point unless it can dramatically expand its current slate of 17K titles available online. Hollywood is understandably wary of Netflix given all the variables in play and a desire to avoid Netflix becoming master of Hollywood's post-DVD, digital future. Whether Netflix will spend heavily to obtain better rights is a major question.

7. Get ready for Google's Nexus One and Apple's "iSlate" - Unless you've really been off the grid, you're probably aware by now that two very significant mobile product releases are coming this month. Tomorrow (likely) Google will unveil the Nexus One, its own smartphone, powered by its Android 2.1 operating system. The Nexus One will be "unlocked," meaning it can operate on multiple providers using GSM networks. The device will further fuel the mobile Internet, and mobile video consumption along with it. Separately, Apple is widely rumored to introduce its tablet computer later in the month, which many believe will be called the "iSlate." The tablet market is completely virgin territory, and while it's early to make predictions, I believe Apple could have most of the ingredients needed to make the product another big hit. The prospect of watching high-quality video on a thin, light, user-friendly device is extremely compelling.

Mobile video advertising is showing strength, benefiting from consumer adoption of the "mobile Internet," strong growth in video-capable smartphones and improving availability of high-quality content for mobile devices.

I gained further insight on the mobile video ad opportunity in a conversation yesterday with Ujjal Kohli, the CEO of Rhythm New Media, a firm focused on mobilizing and monetizing TV programming that has raised $27 million to date from a group of blue-chip of investors. Later this week Rhythm will formally unveil "RAMP," the Rhythm Advertising Media Platform, a mobile video ad network targeted to brands already advertising on TV who now also want to have a mobile presence.

Ujjal makes a strong case that mobile video is an ideal environment for brand building, and that it addresses many of the challenges that TV advertising itself is facing (clutter, distraction, fragmentation, inadequate frequency/targeting/measurability). Ujjal believes that the nature of mobile video consumption, with its relatively short duration, focused user sessions gives brands a renewed opportunity to engage their target audiences with hard-to-skip messages, not only in the prime-time window, but throughout the day as well.

Rhythm has been helping stoke the market for high-quality mobile video content by building video apps for clients like Discovery, E! Entertainment, TMZ, TV.com, Family Guy and others. App building has been a means to an end for the Rhythm, which is primarily focused developing its mobile video ad network. In Q4 the company has sold and run 20+ campaigns, for brands like MasterCard, Nikon, Toyota, Marriott, Anheuser-Busch and others. These are almost always 15 second spots repurposed from TV campaigns which is no surprise, as the mobile market is not yet big enough to warrant custom creative.

Ujjal explained that a key Rhythm differentiator is that its ads allow interactivity, or the ability for the user to click on an ad's call to action, as is common online. Rhythm has devised a way to incorporate interactivity in ads shown against videos viewed on iPhones, where the use of QuickTime doesn't enable linking. Ujjal said that click-through rates for its "interactive pre-roll" unit fall in the 2%-6% range, while a "full page" ad unit used for mobile photo viewing, (e.g. slide shows on TMZ.com) generate click-throughs up to 11%. Ujjal would not specify what volume of ads Rhythm is serving, except to say it's in the millions/month and that the CPMs are higher than in online video or TV itself.

I've been very bullish on mobile video for some time now, as I believe it is following a similar growth pattern as online video. The macro-trends supporting mobile video's growth are impressive: Nielsen believes that in Q4 '09, 40% of all phones sold will be smartphones and that by 2011 they'll be majority. By then Nielsen forecasts 90 million a month will be watching mobile video. According to its Q3 '09 A2/M2 report, almost 16 million are now watching mobile video/month, up 53% since Q3 '08. They are watching an average of 3 hours, 15 minutes/month. While this is inexplicably down a bit from a year ago, it's worth noting that the heaviest users, to nobody's surprise are age 12-17 (7 hours, 13 minutes) and 18-24 (4 hours, 20 minutes). As these segments age they'll no doubt carry along their mobile video expectations.

Another dynamic sure to have a positive impact on mobile video consumption is the intensifying competitive battle between carriers and between smartphone manufacturers themselves. The recent AT&T-Verizon ad war about their 3G availability is a glimpse of how these companies will use network capacity (key to a positive video experience) as a competitive lever. On the handset side, there is hyper activity: Motorola's Droid is off to a respectable start, a bevy of Google's Android-based smartphones are due in 2010, and, complicating things further, Google plans to release its own "unlocked" (i.e. carrier neutral) Nexus One smartphone next year. While the iPhone opened the smartphone floodgates, many others are now rushing to get a piece of the action.

The biggest uncertainty impacting mobile video's growth is the wireless networks' ability to keep up . All the snazzy smartphones in the world won't matter if users can't get 3G or better access to watch quality video. But, if broadband is any guide, wireless carriers will build out capacity to meet demand, driving up data plan subscriptions and their own ARPU. Broadband also illustrates that as the necessary building blocks fall into place, content providers will be motivated to take part, providing consumers with ever more choices. While it's still early days, taken together it looks as if big things lie ahead for mobile video and for those like Rhythm who can help monetize it.

What do you think? Post a comment now.

Vevo, the much-heralded "Hulu for the music industry" venture backed by Universal Music Group, Sony BMG, Abu Dhabi Music Company and Google/YouTube (and with video provided by EMI as well) officially launched late last night. I've been browsing around the site this morning and my first reaction is that it's a decent start, but has a long way to go if it is to fulfill its lofty mission.

Conceptually, I like the idea behind Vevo. The music industry, which has suffered multiple blows over the last 10 years, is getting together to create a destination site where music videos are distributed legally, with a coherent ad strategy. YouTube's participation means that videos that have been watched in the labels' YouTube channels can be branded Vevo, giving the new site tons of visibility, and helping migrate traffic over time.

From a design standpoint, the Vevo site has a similar feel to Hulu: large, wide-screen images on the home page promoting certain videos/artists, thumbnails below, of top videos, playlists and artists, quick links to most popular today, and search/navigation. A nav bar at the bottom of the screen invites users to easily create new playlists by adding up to 75 videos with one click. Videos are embeddable and shareable, and there are quick links to buy the music at Amazon and iTunes. The site was periodically very slow to load and occasionally even gave me a server error page. I don't know how much of this to ascribe day 1 hiccups that will be worked out over time or really poor capacity planning.

Less clear to me is how Vevo distinguishes itself from a user experience standpoint from YouTube itself. This has been a question that's nagged at me since the Vevo concept was first unveiled - how do the partners plan to make 1+1=3? The partners have made references to being indifferent to whether users watch at Vevo.com or YouTube, presumably because there would be similar advertising on both with similar splits. Yet, my experience going back and forth between the sites, albeit very limited, reveals lots of inconsistencies and a lot of promotional leverage left untapped.

Focusing on U2, one of my personal favorites, I found only about a dozen of the band's music videos on Vevo. Switching over to YouTube, I found many more tracks, such as "Beautiful Day," "I Still Haven't Found What I'm Looking For" and "Where the Streets Have No Name," all in the Universal Music Group's channel. All of the videos were monetized: the first was preceded by a 15 second pre-roll ad for Chevy Malibu and the latter two carried an overlay ad to "Play Free Games" which was accompanied by a companion ad in the right column (the overlay was incredibly distracting, but that's another story). None of the videos had any Vevo branding whatsoever. It's also worth noting that even the UMG channel in YouTube has no Vevo branding or promotion.

Conversely, a search in YouTube for "All Because of You," a video that is available on Vevo, loads in YouTube with full Vevo branding. Above the video window are options to "Watch with Lyrics," "View Artist Profile," and "Create a Playlist." Clicking on any of these carries you over to the Vevo site. However, none of these actions are well-executed. "Watch with Lyrics" restarts the video, whereas a much slicker implementation would resume playing on Vevo from the point of drop-off. "View Artist Profile" simply displays a list other videos available, without any real artist profile information offered (background, upcoming concerts, etc.). And "Create a Playlist" just brings you to Vevo's home page, without any prompts for what to do next if indeed you want to actually want to create a playlist.

Elsewhere, the Vevo team hasn't even bothered to update its blog to officially announce the site's launch (it still says "Launching Tonight!" at the top). That's a missed opportunity, especially considering there was a splashy launch party in NYC last night (attendees ranging from Google's Eric Schmidt to Rhianna, Bono and Mariah Carey) and pictures and video from that event would have been a big drawing card. Come on - where's the Vevo PR team here?

How much of this should be forgiven to it being early days of Vevo's launch is a subjective call. From my vantage point though, I think the Vevo team could have done a lot more to think through and execute on the user experience. Back in November '07, when I looked at Hulu in its private beta, I gave it a solid B+. The Hulu team had clearly obsessed about each and every detail of the site - and have continued to do so. Hulu's user experience isn't perfect, but it has set the bar very high for those seeking to emulate it. For now Vevo probably rates around a C; much work is still ahead.