Sunday, February 28, 2010

CEO Conversations: Ron Yekutiel, Kaltura - Part 4, Kaltura's Business Model

In part four of my CEO Conversation, Ron Yekutiel talks about Kaltura's business model. With the conversations so far, Kaltura's offerings and market position may have sounded more like a kumbaya for open source video – but Kaltura does have successful revenue streams from from both licensing their video SaaS platform and from professional services. According to the most recent customer data, over 48,000 web sites are powered by Kaltura's open source platform. In their most recent announcement last week, Kaltura will be partnering with nacamar, one of the leading streaming and media hosting providers in Germany, to offer Kaltura's video management solution to broadcasters, publishers, content providers, multimedia agencies, enterprises and educational institutions in Germany, Austria, Switzerland and Luxembourg.

video platformvideo managementvideo solutionsvideo player

Larry Kless: So far, you've talked about all these free tools, but what is Kaltura's business model? How does Kaltura make its money?

Ron Yekutiel: Like I said before, there's no dissonance between doing good and doing well, and whilst it's an open source model – it's a distribution strategy, it's a development strategy, it's a philosophical strategy but it doesn't take away from Kaltura's ability to make money, and make money in a good way. The way we been doing so, we've been growing and we've been doing tremendously well by way of our economic situation is by selling:

A) Support and maintenance packages on top of the free community edition. So if you'd like to get Kaltura support and to ensure that you get debugged versions, the most advanced versions going forward, etc. you could join us and pay, that's number one. If you recall I mentioned the build vs. buy conundrum, by dropping the price to zero and getting it for free you definitely free up a lot of funds, you can come back and pay a part of it and say, "I want to ensure that I continue to have that freedom, flexibility control etc. and pay Kaltura to enable that." We didn't invent this model, it's been tremendously successful, like I said companies like a Red Hat, or like MySQL that have created significant business models out of that.

The second is professional development, professional support. Some companies come to us and asked Kaltura to develop stuff and we're definitely happy to so on their behalf. But that's only one half of the story. The second half is a classics SaaS model, and the truth is, until today 35,000 of the sites have connected to our SaaS offering.

Not just to the open source which we've just released the back end of which, it and in future turns out that 80% of our customers have expressed an interest to actually come and receive digital services from Kaltura – and the reason is that whilst you offer them complete freedom from vendor lock in and control and everything else, often they want to keep that is a real option, but still execute those several things from the sole vendor and it's always best to do with that single shop environment, the company that you've used the platform of because they tend to be the most expert in the field and for sure in the Kaltura standpoint, we're also the fastest growing therefore we have the largest amount of sites, economies of scale associated with that, the largest network for SEO purposes etc. etc., so there's all these reasons – and what are these SaaS packages?

Again – streaming, hosting, content delivery aggregation, advertising, syndication, search engine optimization – all these different things. So, the second half of what I said earlier around the classical open source model are companies coming back to Kaltura to say, "I will pay you this monthly package. We'll do that for a two-year or one-year contract", and this is how much they're going to pay based on gigabytes etc. etc. And whilst we offer they are the lowest price in market aligned with our open source strategy and philosophy of commoditizing the market in enabling the most amount of value for the least amount, we are still making wonderful money over there at the same time that we provide tremendous value and the best value to our customers. So we have a little but of both, and let's remember that we have these two things in a huge installed base of opportunity, it is not any more limited to the media and entertainment, and it's now getting into these new verticals that I have just mentioned.

So Kaltura has the makings of a billion-dollar company. Not different than other successful open source companies across very successful verticals, and since video is such a huge play – it's going to become part of just about everything on the web – there is that placeholder for an open source company to take a significant lion's share of the industry. For the reasons I mentioned, and to make make significant revenues out of both support and recurring digital services out of which.

This concludes this installment of CEO Conversations with Ron Yekutiel, see Part One here, Part Two here and Part Three here. My thanks to Ron Yekutiel for taking the time to speak with me, and thanks to Lisa Bennett for all the background material and information on Kaltura.

Thanks as well to Nathan Steiner at PLYmedia Inc. for the help with the free automatic transcriptions of this series of videos.