May 2009

Monetizing YouTube and the Viral Effect

We used to live in what I will call a Media Dictatorship. A Media Dictatorship is a world where content is created by a few dictators (media companies), and as a result, those few dictators are able to charge a premium to advertisers for access to the eyeballs and ears of the people watching that premium content. This process is called television, radio, print, magazines, and newspapers. Think about the Super Bowl and Super Bowl commercials for a second. One night a year, content providers or dictators (the cable network hosting the Super Bowl) know that they will have an entire country watching their show, and as a result, they are able to charge a fortune to advertisers for a 30 second commercial. According to the Associated Press, a 30 second spot for the 2008 Super Bowl was $2.7M dollars. On this night, everyone knows that millions of eyeballs and ears will be tuned in, and so, advertisers are willing to shell out some big bucks for the opportunity to reach all of those viewers (according to a Nielsen report, there were 97.5M viewers of the 2008 Super Bowl). In this world, the world of a Media Dictatorship, the dictators own the distribution of the content, and therefore they own your attention.

Today we live in a very different world. A world that I will call a Media Democracy. A Media Democracy is a world where content is created by anyone, and as a result, those people are able to charge whatever they would like. However in this world, in this Media Democracy, the people that own the distribution do not force their content on the people (see Google). These distribution owners let the people choose what they watch or listen to and as a result, attention isn’t owned but earned. In order to accrue lots of eyeballs and ears, the content must be compelling and the people must be willing to share. And unless there are lots of eyeballs, it is very difficult for the people to charge advertisers anything at all. Consider that YouTube video that you loved, but only has about 100 views. Although the content may be awesome, 100 views is of little significance to big brand advertisers. Now consider that YouTube video that your friend told you about. The video that you would of never heard of had that friend not said anything to you. Turns out, this video has 100M views. Guess who made money off of this video? No one. There was no $2.7M commercial for 30 seconds. The video itself was only 55 seconds, and yet for 55 seconds, this video had the attention of almost 100M viewers.  This was a mini Super Bowl event that happened organically, grew virally, and was controlled by no one. A true democracy.

Welcome to the new age of the internet. Open, distributed, democratized. More specifically, welcome to YouTube. At any given point in time a video could experience a Super Bowl-like event or what I rather refer to as a Black Swan event.

There has been a lot of talk recently on how to make money from YouTube videos or User Generated Content (UGC) videos, especially after seeing YouTube’s inability to make money off of the recent pop sensation Susan Boyle.

As Simon Cowell might say, this story is utterly disappointing and self-indulgent. But the fact that YouTube and ITV have been unable to monetize the Internet sensation that is Susan Boyle is a rather significant blunder, and highlights some of the archaic ways that business is still done between old and new media. – Mashable, Susan Boyle Video Profits: $0

In the Media Dictatorship, media companies know with good certainty how many viewers they have. In the Media Democracy world, no one knows with any certainty how many viewers there will be. In lies the monetization and advertising dilemma with UGC videos or anything viral online. How do you make money off of videos that MIGHT be huge successes? How could an advertiser possibly know what videos are going to be a hit and go “viral”?

Bottom line: They can’t.

So now what? We know there is a ton of potential in videos that have millions of views, but the question still remains:

In a broad sense: How can advertisers capitalize on media that goes viral?
Solution: Selling dynamic advertising access based on first order traffic derivatives.

In a specific sense: How can advertisers capitalize on viral YouTube videos?
Solution: Selling dynamic advertising in YouTube videos based on the growth rates of video views.

Imagine for a second that an advertiser has the ability to place an advertisement (overlay, video ad, pop up, etc) in a YouTube video at any given point in time during the life of that video. For all intents and purposes, an advertiser can throw an ad in a video, however they want, whenever they want.

  1. Would the advertiser place the ad at the beginning life cycle of the video? Do they try and intuitively gauge how successful the video might be? Would you put up $3M on a video that may or may not be seen by more than 100 people?
  2. Would the advertiser place the ad at the end of the video’s life cycle? After the video has been seen 100M times? Would you put up $3M on a video that may or may not have peaked in popularity?

The answer is no in both examples.

The real solution here is to place that $3M on videos that:

  1. Meet the advertisers target audience (the type of video: comedy, horror, sports, etc)
  2. KEY: Have the highest growth rates for a certain period of time.

By inserting advertisements into videos that are experiencing the highest growth rates, marketers could benefit from the “viral” effect of videos. The $3M would only be spent as the video increases in popularity. The video will no longer be judged based on “top rated” or “most viewed”, but instead, will be judged and purchased by marketers based on “most growth” (The interface might look something like the image below).

Ultimately, if marketers are to capitalize on the “viral” effect they must start to look at the viral aspects of media or videos, and buy them according to their growth or “viral” potential as the growth is happening.


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The Entrepreneurial Snowball Effect

Starting a business is very hard. In a matter of 24 hours your emotions can range from thinking that your business will be the next Google, to thinking how moronic you were for even contemplating the idea in the first place.

In order to start a successful business, I believe you need two components above all else.

1. A Team
Collective knowledge is more powerful than any one individual. But I believe Eric Schmidt puts it best:

“How should you behave? Well, do things in a group. Don’t do things by yourself. Groups are stronger, groups are faster. None of us is as smart as all of us…..” – Eric Schmidt, CEO Google.

2. The Entrepreneurial Snowball Effect
Beyond having a team, you need a group of people that can feed off of each other. People that together, build continual momentum regardless of the challenges by feeding motivation to and from others in the group. If one person starts some momentum, others can build and build upon it until slowly, that once “idea” begins to grow into reality.

From my experiences, most people have great ideas but fail to see the execution through all the way. And the few that do see execution through quickly stop at the sight of any real obstacles (I’ve been guilty of both in the past).

If your lucky enough to find the right team with an entrepreneurial snowball effect, take your idea and just build something.

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Plan Less and Keep an Open Mind


Lately, I’ve been having writer’s block. When I first started writing this blog I intended to update it once a day. Once a day quickly became once every two days, which quickly became a few times a week (if I’m lucky).

And the more I think about it, the more obvious it is to me why we all sometimes have “writers block”, or lack of creativity, ingenuity, or good ideas.

The more we try to plan or over think things, the more complicated they become.

My best ideas have come at the weirdest times, great opportunities came unexpectedly, and some of my most insightful and eye opening conversations happened with strangers. Completely unexpected and out of the blue.

This idea, or notion of “out of the blue”, not only applies to good ideas, but to life and opportunity.

If we plan less, work hard, and keep and open mind, the complicated becomes simple, and those good ideas come out of no where.

“Life is just what happens to you, While your busy making other plans” – John Lennon, Beautiful Boy

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Going through the motions

How can you really expect to be successful if you sit back and simply do what is expected?

I’ve heard on numerous occasions about how getting a certain job, whether enjoyably or not enjoyable, will accelerate chances of success.

People strive so hard to do their best, to get that great job, and yet when they get that job, they can’t help but think how miserable it is.

If we are truly to be successful at anything, we can’t simply go through the motions. We must love what we do. If we are counting down the clock till 5pm, what is the point?

At the end of the day, success comes from hard work and a desire to do well. If we don’t like what we do we will simply do less, strive for less, and just go through the motions.

“Get busy living, or get busy dying”

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The Value of Data (Social Data for Online Advertising)

Data is King. If you don’t believe me, consider this:

  • Rental car companies and insurers are refusing service to people with poor credit scores because data mining tells them that credit scores correlate with a higher likelihood of having an accident.
  • Nowadays when a flight is canceled, airlines will skip over their frequent fliers and give the next open seat to the mine-identified customer whose continued business is most at risk. Instead of following a first-come, first-serve rule, companies will condition their behavior on literally dozens of consumer-specific factors.
  • The “No Child Left Behind” Act, which requires schools to adopt teaching methods supported by rigorous data analysis, is causing teachers to spend up to 45 percent of class time training kids to pass standardized tests. Super Crunching is even shifting some teachers toward class lessons where every word is scripted and statistically vetted.

(An excerpt from Super Crunchers, by Ian Ayers. Great video of him below – bottom of post. Worth a watch.)

The data validates the fact that data is King.

In the world of Online Advertising, marketers, web publishers and technologists alike are beginning to realize that data is hugely valuable. In the past, advertisements were served to websites based on the content of the website. Today, advertisements are served to websites based on data that is informing the ad server to show that advertisement. As a result of this paradigm shift, the digital media community is beginning to realize that media and data are separate commodities. Where you see your advertisement is very different than how or why that advertisement is there in the first place.

Being able to leverage the power of this online data is great — but what does it really mean? Let’s take a look at the type of data that is available for digital marketers.

There are two types of data we should look at.

  1. Singular Data Points
  2. Multi-Variable Data Points

A “Singular Data Point” is a piece of data that is very cut and dry. It is a binary 1 or 0, “yes” or “no.” For example, if I recently went to an e-commerce travel site, configured a flight for 2 people from NYC to LA, and clicked “view price”, then you could make the argument that I am very interested in flying in the near future. The instant I click the “view price” button, a single data point can be obtained classifying me as “someone interested in domestic travel.” This may hold a ton of value for marketers at the bottom of the advertising funnel (see diagram below) who are looking to convert on a very specific type of user for a very specific product, and has been, still is, and will remain extremely valuable. Some examples of “Singular Data Points” include: Purchase Intent or In-Market Data, Age & Gender and Household Income.

These are data points that explicitly and intuitively describe certain consumer attributes. They are more or less declared characteristics or definitions of a consumer.

“Multi-Variable Data Points” however, tell a very different story. Imagine for example that someone, who happens to be female, 24 years old, and makes $40k/year, went to a social network, checked her inbox, wrote on a friends profile page about last night’s TV show, left that site to read and comment on an article about the New York Giants, uploaded a video about comedy, checked the price of a flight from NYC to LA, and finally, viewed another friend’s photo album who happened to have just returned from a trip to LA. What does this social data say about that user? Nothing? Is it completely arbitrary and meaningless? In fact, it’s exactly quite the opposite. Being able to leverage “dozens of consumer-specific factors” in real time gives a marketer the capability of executing and deploying various tactics such as:

  • Influencer outreach strategies
  • Creative optimization for advertising units
  • Deeper visibility into brand engagement opportunities
  • Custom optimization for various and wide ranging back end performance metrics
  • Statistical data analysis and research
  • Comprehensive search strategies
  • Informative and cost effective media buys

Moreover, this social data presents huge opportunities for marketers looking to reach consumers at the top of the advertising funnel, but still has applications toward the bottom of the funnel as well.

Today, there is much debate around the value of social data vs. purchase intent data. How and when it should be used? How much should each cost? How should it be sold?

If we look at social data and purchase intent data as it might be applied in the advertising funnel, it would probably look something like this:


Now let’s consider social data and purchase intent data in terms of value vs. time. If we consider our previous example, we can make the argument that purchase intent data is hugely valuable for a short period of time. If I am looking to book a flight within 2 weeks, that does not necessarily mean I would like to travel a year from now. For a travel related company, that 2 week data point is again, hugely valuable.

Now if we consider our social data example, by demonstrating undeclared and implicit behavior over an extended period of time, we can make the argument that this data has tremendous value indefinitely. If we were to graph social data vs. purchase intent data on a value vs. time graph in today’s environment, the graph might look something like this.


But as companies become even more sophisticated, develop better applications of technologies and data mining, then someone’s day to day behavior might prove even more valuable in the future. This is certainly true when it comes to “creative optimization.” It is the idea that a creative ad unit showed to a consumer will be directly linked to their “social data” and that the consumer GENERATES OR INFLUENCES some form of content, message, conversation, or engagement. “Consumer Creative” – or “Social Creative” is the next leap of value to marketers, and as we evolve in the creative evolution of social media/data, the value vs. time graph will probably look something like this.


At the end of the day, having the ability to make educated decisions using comprehensive data sets is what will differentiate businesses from their competitors. It will give the forward looking organizations a way to stay relevant, efficient, and strong, while other companies continue to use outdated and inefficient methodologies.

And as these technologies evolve, become more sophisticated, and create incremental value for marketers, web publishers and consumers, the “data” companies will have a responsibility to uphold the privacy rights of all parties involved. These safety and privacy measures will become, and are already, inherent features of the technologies, because with the power of data comes the responsibility to collect and use the data in ways that provide appropriate protections for user privacy. Responsible industry members will continue to develop practices and policies that can work for marketers, publishers and consumers in this arena (we are one of those companies).

Nevertheless, if companies and marketers want to make the best decisions possible for their clients, they should consult the data for the answers and throw the guess work away. In our world of digital media, find your exact target audience and save money on wasted impressions or eyeballs. It’s all about the data, as well as harnessing the power of consumer driven information.


Andy Monfried – CEO/Founder of Lotame

Dan Reich – Business Development of Lotame

(This post can also be found at Lotame Learnings and at the personal blog of Andy Monfried)

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