GenuineVC David Beisel's Perspective on Digital Change

March 22, 2006

Bernard Moon has a thoughtful article posted today, “Forget the Long Tail! For video, it will be the big and mid-size players that win in the end.” in which he argues that the real winners in the rapidly-changing video landscape will be the large and medium sized players, not the “long tail” of content producers that have been receiving all the blogosphere hype lately. He writes,

“But this isn’t a story of the long tail; the hit makers will get richer. Instead, it’s a story of the wide range of new revenue opportunities that are available to established and mid-size players in this evolving media landscape…. I’m talking about is a middle market in the video and movie industry where sustainable companies can and are being created… Just as the big boys can expect to profit from this changed video landscape, so too can the mid-size production groups that are able to develop content to fill the gap between big Hollywood productions and homemade video.”

His argument rests on his thesis, “In this new digital landscape, it’s not simply about content but rather type of content and how it’s distributed.”

The one important component in this equation which he doesn’t cover in his article, however, is the role of advertisers. The transition towards new digital distribution formats has traditional brand advertisers searching for the right medium to convey their message. This situation creates opportunity for large established who are nimble enough to capitalize on the change, as well as the emerging medium-sized players who can establish credibility. But large brand advertisers are reluctant to associate themselves with long tail user-generated video content, and they are going to be for a long time coming. The problem with this type of content is that you never know what you’re gonna get – and unlike with Forest Gump, that isn’t a good thing for brand advertisers.

But don’t count out user-generated video content just yet. Even Bernard hedges a bit, “Whether in the service of journalism, entertainment, or art, user-generated content is here to stay…” Again, it comes back to advertisers. While big-name brands may shy away from this content type, there are plenty of advertisers who will desire this inventory (albeit, at a lower effective CPM rate). The market of direct response and performance marketers will demand and consequently determining the price of space associated with user-generated video content. Think next-generation punch-the-monkey ads at first transitioning to more “sophisticated” $19.95 knife-sets offers that you see on late night television.

With the increasingly prevalent proliferation of digital video content of all types, I believe that there’s plenty of opportunity to go around. The key is knowing the target, both consumer audience and advertisers.

  • Larry Borsato

    I’m not so sure. In the past few years it has been independent film companies that have driven growth in new genres. Of course these independents have then been bought up by larger companies, but primarily to get access to distribution channels.

    Video now offers a ready made distribution channel, and possibly the best one ever, right to the customer’s PC or iPod. This may open the door for even more independent filmmakers, in even smaller nich markets.

  • Avikk Ghose

    “The market of direct response and performance marketers will demand and consequently determine the price of space associated with user-generated video content.”

    There’s a local advertising aspect as well. In addition to demand by direct response and performance marketers, there’s a sizable market for non-brand advertisers such as regional small and medium-size businesses (SMBs) that allocate their advertising budgets in a local fashion.

    As a point of reference, roughly 50% of the ~$22 billion terrestrial radio advertising market (~$11 billion) is composed of local advertising by regional SMBs. We can also include local advertising spend on newspapers, magazines, cable television, and other media sources, if we wish.

    Accordingly, there’s a substantial opportunity for search engines and advertising networks to develop uncomplicated tools and processes that enable regional SMBs to target video advertising campaigns by location, content, demographics, and other factors.

  • Erik Schwartz

    The real challenge in using advertising to support content in the long tail is the uncertainty of the brand associations you make. Uncertain brand associations can (justifiably) make many advertisers nervous. There is a tier of advertisers that just don’t care, but most major brands that spend large sums to reach consumers are careful about how their brands are presented.

    Network media advertising is based on a level of trust (and the long arm of the FCC) that the network won’t permit inappropriate content through their pipes. If no one vets the material, this trust cannot exist.

    Imagine if a radio station tried to sell sponsorships against individual callers on a call in radio talk show. Do you want your ad to sponsor the call of the hate mongering bigot? Probably not.

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