Saturday, February 13, 2010

Veoh Enters the Deadpool, Leaves Blood in the Water

The news that the troubled online video sharing site Veoh has filed for Chapter 7 bankruptcy to liquidate the business, doesn't come as a surprise to the many who had predicted its demise. Is it a sign of what's to come within the online video space in 2010? Commentary and analysis abound within the blogosphere on what made this promising startup fail, and how it burned through $70 million in venture funds. Founded in 2004, the San Diego, California-based company was an early entrant into the Internet television space and was once considered to be direct competitor with YouTube. Veoh launched an early beta of its distribution technology in late 2005 as "an open platform for content publishers of all sizes and sophistication who want to reach tomorrow's television audience" and had had big name financial backers like former Disney chairman Michael Eisner, Shelter Capital Partners, Spark Capital, Goldman Sachs, Adobe Systems, Intel Capital and Time Warner Investments. The site had 28 million users a month but was far from being a top online video content site, compared to Google's 135.8 million unique viewers who watched more than 13 billion videos on YouTube during the month of December 2009, according to comScore.

But as CEO Dmitry Shapiro said in a recent blog post, the lawsuit filed by Universal Music Group (UMG) for alleged copyright infringement, led in part to their demise along with the challenges of the broader macro-economic climate. While being a pioneer in the online video space, he admitted,
"Unfortunately, great vision, a passionate team, tens of millions of users, millions in revenues and victory in court were not enough."
Dan Rayburn pointed to a lack of focus and execution that led in part to Veoh's downfall. While the company had vision, it tried to be everything to everyone changing its business model many times and was unable to sustain a viable business.

According to Dan:
"Veoh never really executed a clear and concise business plan on what they were going to offer, what problem their platform would solve, or what the business model of the company was going to be. While all companies need to adapt their focus to try and stay in step with how the market evolves, Veoh always struggled to define who they were and what they were doing in the market"
At NewTeeVee, Ryan Lawler noted that despite raising ample funding and having solid search and recommendation technology, there were a number of reasons for what went wrong at Veoh. A few of the reason were, raising too much money, getting too big too fast, no strategic focus, requiring a client download, and turning its back its users.

Robert Sandie, co-founder and President of Viddler, wrote a thoughtful post outlining what
Viddler has built a sustainable business where others have failed. A few points he share were echoed by many other about keeping the business small and and eye on the bottom line, not raising too much money, keeping a strategic focus and optimizing the service.

Ben Homer wrote on Online Video Watch about Veoh's achievements:
"Veoh’s greatest contribution to online video space was its preemptive lawsuit against Universal Music Group later joined by DivX. At the time, few in the industry had the resources (or the balls) to take on an established media company. The successful outcome – the court upheld the company’s protection from lawsuit under the DMCA – meant it was far less likely for any other future lawsuit by an established rights holder against an online service provider – and there have been few similar suits since. Had these companies not been willing to put themselves fully into this fight the landscape of the industry would likely look very different today."

Mark Hall, founder and CEO of Vodpod didn't seem to think that Veoh's demise is particularly illustrative of any trend or a forecast of things to come.

In a guest post on NewTeeVee, Hall said:
"While it’s sad to see a site like Veoh come to an end, I don’t think it’s particularly illustrative of any trend or a forecast of anything to come. The storm clouds I see, and worry about, include a more fractured video environment due to HTML5 and lack of uniform support by the browsers for a single, standardized video codec; Apple’s intransigence on Flash on the iPhone and iPad, with the result that most of the video available today on the web is and will continue to be broken on those devices; and the lack of any clear path technically, right now, to replicate what is done with Flash video for both advertising and video sharing."
Like Joost, Maven Networks, The Feedroom*, and a long list of other promising and well-funded online video startups, Veoh joins The Deadpool and has left blood in the water, $70 Million to be exact. Veoh's story is an important lesson for any online video startup. Vision matched with a viable business plan, filling a market niche, execution and timing, product focus and listening to your customers are key ingredients to success.

*Update 2/13/10 9:26 PM: While the Feedroom is not officially in the The Deadpool, and was actually acquired by KIT Digital for $10 million in 10/09, the brand was retired in 12/09 after a successful consolidation and integration of the IP and resources. The company was a pioneer in the space and raised close to $70 million in funding over the course of 10 years, and met an untimely demise, which I think earns it an honorary place in The Deadpool.