Money, webcasts, podcasts: A few facts and a few thoughts

So in the field of Post – just how viable is online videos, webcasts, vblogs and iTV? Anyone can be famous on the internet (starwars kid, Mentos guys, Free hug guy, etc) but a completely different issue to make money on the net.

Just who is making money, how much and exactly how? And – should I really think about giving up my day job ?

If you listened to last week’s fxphd podcast (fxphdod) or the fxguide podcast you’ll know that we have decided to post the odd reflection on the industry here in our Quick Takes section. This is not a policy shift, we remain focused on post. It is just us following our original rule of thumb “if it is of interest to us, – it might be of interest to you”.
Click the Read More to read about the state of online post from a commercial point of view. (no cat videos – no baby videos allowed)

It is easy to be a star on the net, it is even easier to loose money. While google pulls huge revenue and even more interest, we turn our attention to the smaller area of our own industry.

Most people when presented with a new medium – apply the lessons of the old media and promote old ‘copied’ approaches rather than new ones. This is the case with video podcasting and video on the net. Perhaps the most prevailing approach is to think of this as TV on demand or ‘my tv when I want it how I want it’. But while companies such as Rev 3 focus on producing a TV network style model – but via the internet. The question needs to be asked: is the net a place we go primarily for entertainment, or for information?

Clearly while we love dogs on skateboards as much as the next guy, but watching them may not be the primary benefit of the internet, and certainly not a great business model. Google themselves are still working out how to make YouTube profitable, and it is the most successful video site in the history of the net.

Advertising

Most people assume that the way to make a site or video pay is advertising, yet the information on what can be achieved varies from reports of ever increasing Billions moving to online and the reality of only minor revenue for any but the biggest players.

So how does it actually breakdown? Google Adsense is the best known and perhaps most widely used model. You need around 350 ad clicks to make $100, and to get those 350 ad clicks you need about 52,200 page views a month. (Assumption: click through of 0.6%).

Now if you have a break through web site like Strobist.com you can crack 1.6 million page views a month, and about 200,000 unique visitors a month, and this according to USA Today (22-04-08). The founder of Strobist David Hobby set the site up to just share with friends, now it is much more. He’s taking a one-year leave of absence from his job as a staff photographer at The Sun in Baltimore.
“So far, he’s making more money than at The Sun. He won’t say how much, only that revenue is more than six figures, all from photographic-supply advertisers. His overhead is zero”. Strobist is hosted for free by Google. But unless you have a break out hit, or a site that has been around for a long time and thus build up a loyal following, such as fxguide which has built since 1999 to do about 1.2 million pages, the biggest challenge for someone starting is to attract enough people to generate sufficient page views to generate sufficient funds from google.

The vast majority of web sites are lucky to break five digit income yet alone six.

So what about all these numbers that are tossed around about the billions in online advertising spent every month ? Zac Zavos in Digital Media points out that in some countries such as Australia the top six online companies (PBL, Google, Sensis, Fairfax and News ltd) receive about 90% of all traffic. While major sites like YouTube generate millions of hits, few do, and even with the traffic of YouTube, download costs can cripple an operation when it comes to making money from online video. fxguide and fxphd itself downloads nearly 9 terrabytes a month now, and we add new servers every 6 weeks it seems.

So if it is tough to make money – how do online networks do it ?

According to techcrunch.com online video network Revision3 raised $8 million second round of financing, in June 2007. According to a source quoted in the story this brought their total capital raised to $9 million. Tech Crunch’s understanding is that Greylock Partners led the round. Greylock was also the primary investor in Revision3’s $1 million first round of financing. News startup Digg, which shares founders Kevin Rose and Jay Adelson with Revision3, also raised money twice from Greylock.
It may be that Rev 3 is being groomed to be sold to a major – and that would certainly be a very profitable strategy based on recent general net valuations, such as Facebook. It is unknown how much revenue Rev3 makes from advertising but it has a relatively large staff and even farms actual production work out to other external companies. It seems their primary model for revenue is just advertising and product placement. Rev 3 has recently teamed up with Blip.tv to syndicate all of its shows. That includes Diggnation and Tekzilla ( that recently signed internet star Veronica Belmont). Rev 3 use techniques such as overlay ads and inserts as well as advertising on their web site. While Rev 3 hosts Diggnation it is not the same company as Digg.com which is a separate company to Rev 3.
In a separate article, techcrunch states that “Blip.tv has done a good job of finding and highlighting the best original Web video shows, including Wallstrip, Alive in Baghdad, Rocketboom, and (back in the day) The Show with Ze Frank. So Revison3 will be in good company. Blip.tv sells advertising against the videos and splits the revenues with the producers, so it is incremental revenue for Revsion3”. Revision3 usually shares ad revenue 50-50 with its distributors. The network sells on a sponsorship basis and via CPM, with CPMs ranging from $50 to $80, according to Daisy Whitney @ TVWeek.com. This is a good CPM (price per thousand), many others are looking at $17 to $35 for video, with much less for banner ads (see below).

Rev3 currently does 4 million month views with a 1/4 being Diggnation alone. They aim to try and break 10 million by year’s end, as part of this strategy they used their second round funding to launch new shows. Whitney, a noted source on iTV, also states that, “Revision3 completed construction of a $500,000 high-definition studio at its headquarters” the new studio is part of their new 4,000-square-foot facility.

So who is listening?

Emarketer estimates from its research tha the split demographically of the new media podcasting/netcasting audience is 51% male 49% female, most (24%) are 25 -34. In 2007 the audience size was about 18.5 million in the US of which 6.5 million ‘active’ podcast listeners – ie they downloaded one or more a week.
Similarly, Alloy Media + Marketing found that only 5% of US college students downloaded podcasts on a daily basis, compared with 83% who used e-mail, 54% who used social networks and 40% who engaged in IM’ing every day. To put these results into perspective, even avid podcasters did not necessarily download podcasts on a daily basis.

One thing most people agree on new media needs to be a combination of media, audio, video and written word, if you want to make money – other than running at a loss and then selling out to Google/Microsoft/Yahoo. (!)

At NAB 2008 Philip Hodgetts, President, Intelligent Assistance, Inc gave a paper on making money in this particular industry called: Making a Living off Your Podcasting. The session was advertised and promoted with the line ” Learn the secret to the success of the Digital Production BuZZ, which stayed in the black for several years before being sold to a new owner”. Hodgetts spoke to fxguide recently about that talk, and his perception of the ways to make money from ‘brodcasting’ online, or “monetarize”.

Hodgetts first point was that it is not easy to make money directly. While he is no longer directly involved, until recently he earned “a respectable middle class income from the Digital Production BuZZ. While the show was popular for a niche – it only attracted some 3000 downloads a week, and it was the 50,000 to 80,000 news letters or tips and tricks emails that also sustained the program.
Prior to the Digital Production BuZZ (the Buzz) he produced the dvGuys which was down to under 1000 downloads when it morphed into the Buzz. For this income Hodgetts says they put in about 20 hours a week in working on the podcast, the site and the newsletter. The revenue they had was from the former CMP media (vfxpro.com mother company) which was then sold to New Bay media. New Bay – according to their web site publishes “NewBay publishes and produces over 40 publications and show dailies, 50 websites, 30 daily and weekly E-Newsletters, 3 expos and over 50 custom publishing efforts annually”. While the Buzz site, and podcast are very active, it is unknown how many of there other properties ‘current’. The once proud vfxpro.com is now a cheap RSS feed argregator, with little if any original content.

The problem Hodgetts identified with the New Bay model was that the Buzz was reliant on their patronage, while the site and podcast worked for Hodgetts, he is the first to admit that it “was all dependant on if New Bay liked us”. While new media points to the promise of corporate independance, Hodgetts says some new media companies are now beholden to a new “gate keeper” the funding advertising aggregator. The podcast itself had some advertising from companies such as Automatic Duck – but most of the real returns were linked to the news letter and news feeds.

But this is to take nothing away from the Buzz which is a profitable workable business model, still other sites use the technique of placing non revenue earning ads on their sites, as a honey pot to attract other advertisers or just appear to be cashflow positive while actually just being a labour of love. Such sites of which at least one prominent ‘Post” industry web sites fall squarely – actually make almost no real revenue. There is nothing wrong with this, but it has been argued that this lowers the CPM (cost per Thousand) actually achieved by commercial sites.

Some sites make money in post by promoting DVDs, and even books. CG society has a very healthy business from its traditional publishing work.

Social networking and user generated content are the ‘hot topics’ for some web 2.0 companies but this is a very very hard way to make money.

Chris Anderson points out that display ads on MySpace were going for a rock bottom $0.13 CPM (price per thousand views). While The AdSense ads he gets on his The Long Tail site generate an average “effective CPM” (CPM after Google’s cut, which can be as much as 50%) of $3.60. Before Google’s cut, that’s as high as $7.00. “Even with a more generous scenario–$0.50 on MySpace and $5.00 on a focused site–the difference is still a factor of ten” he comments on his site www.thelongtail.com.

So how do you make money ?

Some sites do make money, Rocketboom in 2006 made $210,000. While by contrast the YouTube sitcom “Break A leg” had two million downloads made in 18 months only $2,500. Some people point to sites that pay for content such as Revver. The theory is good, you make video for them and they pay you. In Sept 07, Revver announced it had paid $1 million in revenue splits (50/50 with video creators after paying 20% off the top for video distributors ). This implies total revenue of $2-2.5 million. Yet the biggest payout was to the Mentos Coke guys of only $50,000 and the average payout is just $40. Not a lot to sustain professional production.

Philip Hodgetts would suggest the models are primarily
a) Advertising
b) Subscription
c) IPTV
d) Pay on demand
e) Pay for download (itunes)

But the problem with wanting to charge for content is that economic theory states over time the price of something will trend to the incremental cost of a unit. As the incremental cost of digital content is notionally zero, people such as Chris Anderson argue this leads to the economics of Free.

Hodgetts outlined his nine primary income options when working the model of “free”:

1. Charge for immediacy : content is $ now, but free later
2. Personalized content: special versions for individuals or their companies
3. Interpretation : The content is free but the detailed analysis is charged for.
4. Authentic – people will pay for the real deal – the actual – such as ‘directors versions’ when they have already seen the normal version
5. Accessibility – people will pay a premium for convenience (who hasn’t paid a lot of airport internet access)
6. Format – an ipod version directly downloaded.
7. Patronage – people support some sites, TWIT gets user donations
8. Findability – sometimes being featured on itunes front page can be pivotal.
9. Free but promotes something that isnt. The Will it Blend site promotes blenders.

What does it take to make a podcast work ?

There are no absolutes on what makes something connect with an audience. But clearly some thing can be learnt from those who have successfully done it. Universally the opinion centers around connecting with your audience, but consistency can be almost as important.
Most people know promote mulitple media formats, podcasting, netcasting, written – with forums, blogs and even twitter feeds. Scott Bourne made a vast fortune on being first with net radio and after he recently counted that he had done 263 podcasts, he posted this list on his site :

Keys lessons : from /www.onlinemediatips.com

1) You can’t please everyone, nor should you try.

2) Ignore the comments that rip you apart, as well as the ones where you’re adored as a hero. The truth lies in the middle.

3) The audience has extremely high, even unrealistically high expectations. Decide early on if you want to deal with that.

4) Nothing can do more for your shows than a great mic and a good attitude.

5) Podcast only about subjects you love. Anything else is a waste of time.

6) Sponsors will pay anything you ask them to (within reason) if you can get them to buy into the idea that they’re not purchasing downloads, they’re purchasing access to YOUR audience.

7) As tempting as it may be, avoid politics unless yours is a political show.

8) Podcasting is hard work if you do it well. If you think it’s going to be easy – think again.

9) You can indeed make a living at podcasting if you know how to sell and budget at least half of each day to making sales calls.

10) Getting highly-ranked in iTunes will do more to grow your audience, attract national press attention and attract sponsors than anything else you can do.

In the end the net is changing rapidly, and yet even with the success of the Apple TV and itunes, the model for making serious money is not obvious. As for fxguide. We just appreciate you letting us do this now for almost ten years and making us one of the success stories.

Note: Philip Hodgetts can also be found via www.theassistanteditor.com

Disclaimer:
fxguide LLC, and fxphd pty ltd are independently owned professional companies employing staff and both cashflow positive and modestly profitable. We have no financial interest in any of the companies mentioned in this story.