Earlier this week, Blip.TV raised an undisclosed amount of venture capital to expand its online television business, which now features more than 37,000 shows. Last month, Blip said it served more than 51 million video views, a 50% increase from a year earlier.
At a time when many online companies are retrenching, Blip.tv plans to expand its sales and advertising teams based, albeit cautiously, based on the belief that ad dollars will flow to online video because it can provide advertisers with better ways to reach targeted audiences and, as important, measure how campaigns are doing. To provide some more insight into Blip’s plans and take on online video and the advertising market, I talked with CEO Mike Hudack.
Given the current economic and capital markets environment was it difficult and/or challenging to raise this round?
You have to prove you have a real business; now more so than ever. We certainly started the process before the current economic climate became the current economic climate. It took us no longer to close than we expected but it didn’t go any faster than we expected.
Bain, in particular, spent so much time working to understand our business, working to understand video, working to understand advertising, and looking at every aspect of our business. They did not invest in the market as a whole. They invested in the company. I think that is extraordinarily important. When an investor invests in a company, the bet is that company will be able to weather whatever storm w ill come. The company is what you know and everything else is variable.
Blip has three sets of constituents. We have content creators, and our goal is to make it possible to be an independent content creator to make a show and make that show successful. We do that by providing services of scale to shows that don’t have scale. We work with 37,000 shows and we have scale. We want to expand the quality of services we offer to content creators and offer new services to make it possible for one or two guys in a garage with great idea, talent and determination to make a show that lasts.
One of the specific things we will be doing there is expanding distribution relationship. We have a theory called total potential audience; the corollary to the theory is it’s impossible to gather that audience in any one place. What you have to do is make sure every show in all of the places necessary to reach audience. Right now, we distribute to 20 different places; and we are expanding the list over the next thee, four, five months.
It offers additional value to show creators, and we are working hard to offer more value to distributors. We bring them 37,000 shows, we will be working hard with distribution partners to point out on a daily basis those things most relative to their audience.
We are also focusing on the value proposition for enterprises. We think we are most certainly in a bear market right now. That will impact marketing spend. I don’t think anyone will argue that point. What we are focused on marketing is moving Web video from experimental to proven category. What you will see from marketing is a flight to safety. You will also see flight to value. Right now, Blip can offer marketers one of them most valued-added, most efficient buys you can make. We can find the demographic and psychographic target profile and reach them at the moment they are most receptive to your message.
What’s your take on the online advertising market? Some people think it’s going to be fine while others believe it will decline. What side of the fence do you sit on?
I sit right on the fence. I think both views are correct. There is definitely going to be a downturn in overall marketing dollars that will affect TV, print and the web, and I don’t think there is any way to escape that.
Certain types of advertising on Web less effective and more valuable than others. The banner market, in particular, will suffer. Advertising vehicles that are measurable will be effective and efficient. I don’t think they will grow as fast they would have otherwise but they will grow. Paid search is one category; paid search is valuable in that is it predicated on purchase intent.
You could see decline in overall paid search revenue despite the fact advertisers like it in a down economy, want to use it and just can’t. Web video will do well. UGC will continue to struggle. I don’t know whether if it ever does well but quality whether it is content from networks or content form independent content creators will do well as long as we move forward.
How can independent content makers compete against the major players such as Hulu, which is owned by NBC?
If you look at the network – CBS, NBC, FOX – the historically they cut an interesting challenge. They have a narrow channel to the consumer, and you have to exploit that channel to the utmost at every single opportunity. It is a high opportunity cost because if you put wrong thing on the channel, you can get a ton of viewers and profits but not as profitable as if you put on something else. It leads to programming that serves the largest audience possible.
NBC, Fox and CBS are not institutions designed to create programming to anything other than the widest possible audience, and this creates an opportunity for the independent content producer. Every moment someone watches something directly to their interests, it is a moment they are not watching the big, massive production on a major network. With 51 million videos viewed in September, we are collectively doing almost much as traffic as combined NBC monster on Hulu.
But isn’t online video a fragmented market?
You have to be very good at packaging and combining shows that are meaningfully related to marketers. You have to do what we call the best of both plays. You get the advantage of sponsoring one or two shows directly, and get access to a broader audience by aggregating a bunch of related shows together. The reality is you are getting something you can’t anywhere else.
What kind of advice can you offer to entrepreneurs looking to operate as efficiently as possible?
The first and most important is look at margins and the cost of goods sold. For every unit you ship, it is making you money and not costing you money? It is the most important thing - independent of the employees that you have and rent. Are you getting closer to profitability with every additional unit and not further away?
Blip has always had a philosophy that you hire when it becomes painful but not before. That is why we are only 17 people right now. Right now, in this climate we will be expanding. We will be hiring more people but doing so cautionary and conservatively. If a company is gross margin positive and been conservative on how they hire, now is a wonderful to expand because everyone else is contracting. It is a great time to grab market share, hiring is easier.
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