Wednesday, December 17, 2008

The Holy Grail

Media companies exist for one, single reason. To monetize audiences.

Building a successful Internet TV service (or, indeed, any media property) is totally contingent on this.

As we move into tough times the key to success is to figure out how to build an audience and how to make sure that this audience generates more revenues than the costs associated with the service.

So, let's look at this in more detail.

First of all, the audience building.

The reality is that audiences cost. You can do all the intelligent things, but building a substantial  audience is tough. Some of the key techniques include:

  • Build on top of an existing web presence
  • Leveraging an existing presence in the market, e.g. magazines or TV programmes
  • Social networking - seeding and enabling a network to develop and promote the channel
  • Keyword advertising - basically buying keywords on Google or other lesser networks
  • Real world promotions
Now, the costs:
  • Content needs to be free, self produced or subsidised (e.g. through revenue share)
  • Bandwidth and other variable costs need to kept to a minimum
  • Audience acquisition costs need to be covered by the potential revenues (it's what used to be called advertising, but is far more likely to be money spent with Google these days)
  • Your platform needs to be affordable, but need also to enable you to make money (YouTube is great, but you can't really make money from it at the moment)
Now, let's look at the revenues:

  • Sponsorship - essentially running your channel as a shop window for a brand is a strong concept; even in these difficult times, advertisers are looking for ways to make their marketing bucks work harder and online TV offers a low cost, high impact medium.
  • Instream advertising - is an option, but finding this advertising is tough; after all these years very few companies offer a turnkey solution; in fact, you're much better off trying to raise ad or sponsorship dollars directly from the bands in your market segment.
  • Display and keyword advertising - if you have a sufficiently targeted and valuable audience you can make money from just display ads around your video.
  • Ecommerce - the forgotten model for monetizing internet TV; video is a highly persuasive model that can generate serious revenues; even if you can't set up your own ecommerce operations, consider affiliate schemes run by Amazon, eBay and specialist websites.
  • Subscription and PPV - if your content is good - or rare enough - people will pay, but don't bet your company on this unless you really do have premium content.
  • Then there are many other options - video overlays, competitions, gambling, charging for live events and so on...
So, the Internet TV success formula is a rather simple one:
  1. Build an audience
  2. Monetize the audience
  3. Control costs
  4. Make a profit

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