Larry Kless' Weblog: September 2012

I caught up with Sean Knapp, Co-founder and CTO of Ooyala, earlier this year at OTTCON 2012 to talk about some of the latest trends in multi-screen video delivery, monetization and personalized video experiences. Knapp was there to speak on the executive panel discussion, "Over-the-Top TV 2.0 – Developing the Next Generation of Innovative Connected Media Experiences."

According to Knapp, a lot of questions are being asked as the growth in online video explodes across the web and devices, in particular, how do we make online video more monetizable and more of a revenue stream? How do we solve this problem of the old adage of, analog dollars to digital pennies and now, justifiably digital dimes, and how do we make that digital dollars?

Video has to be more of a personalized experience

Five years ago online video consumption was only 1% of video viewing, and today that's grown to 9%. That brings with it, some very serious implications, as Knapp notes, "We're no longer in an experimental phase, we're in a viable revenue stream phase. But we're also in a potential cannibalization phase."

Knapp says, video has to be more of a personalized experience for each consumer and each piece of content on each device. Whether it's a mobile phone, tablet, set-top box or PC – they all provide an opportunity to engage the consumer in very different ways that ultimately will build a much stronger one-to-one relationship with every consumer.

"This has huge potential for the market, but it does require a shift in mindset from broadcast, which is a one to many – to personalization, which is a one-to-one dialogue with each and every consumer."

Online Video is still only a small percent of the market, but it's growing...

If you go by hours of content consumed, YouTube is 2.7% of all video viewed online based on statistics from earlier in the year. According to comScore's most recent comScore Video Metrix, an all-time high of 188 million U.S. Internet users watched 37.7 billion online content videos in August 2012, while video ad views totaled 9.5 billion. The notable findings showed that 87.3% of the U.S. Internet audience viewed online video, and video ads accounted for 20.1% of all videos viewed and 1.4% of all minutes spent viewing video online.

While the growth of online video viewing has seen a hockey stick trajectory over the last few years, Knapp notes that it serves as a really good reminder.

He says, "In the online world, we often times get caught up in this whole notion of revolutionary technologies and revolutionizing industries. We could go check Merriam-Webster, but I'm pretty sure "revolutionary technology" requires more than 2.7% of the market share."

That's not to underscore the impact that YouTube has had for the industry, and he acknowledges that it's been an incredible catalyst for the market and has accelerated huge massive growth and consumer adoption.

"But I think it serves as a very good reminder that we have a very long way to go, and that we're in very early innings. What is happening now in online video is that we're moving away form the early adopters, from the user-generated content and simpler business models, and we're actually taking that large body of content that you and I and every consumer has watched for decades, and we're helping that transition to screens. That's the great opportunity here. It takes a different approach and harder product and technology to build to do it, but that's really the promise of online video."

Also, with the growing adoption of OTT services, like Netflix, which boasts 27 million streaming members in the United States, Canada, Latin America, the United Kingdom and Ireland, it's clear that we're quickly moving into the next generation of connected media experiences.

Will all video be available over IP in the next few years?

During his OTTCON panel discussion, Knapp and his fellow panelist were asked their opinion of Anthony Wood's prediction that in four years time, all video will be available over IP.

Knapp says, "It depends on the definition. WIll all content be available over IP in four years? Yes, I think so. Because in four years I think we'll have solved a large number of these monetization problems. Will all content consumption be over IP? Absolutely not. I think we can expect in the next four years that we'll move from approximately 9% in the U.S. to a little bit internationally, to breaking through the 50% barrier in four years. I think it will be a significant turning point, obviously, but again it's very much dependent on availability of content on devices and the appropriate revenue models for that content."

Knapp believes that it will be a long time before all content consumption shifts to IP. But the primary need today is the availability of content, in new packages or bundles and through different monetization models.

What are Ooyala's customers asking for now and in the future?

Knapp says that along this evolutionary path the needs of the market are evolving as well. Three or four years ago, the needs of the market were largely around content management. Today, the needs have evolved to the second phase, he calls reach. Even though, content publishers can extend their reach across all connected devices, there's still a lot of fragmentation in the "10 foot" experience, and these problems are hard to solve. How do you create an engaging experience for consumers while keeping the performance fast and tightly integrated with your monetization model?

Knapp says that it's all about optimizing the experience for the consumer. Different customers have arrived at this set of needs sooner than others, and ultimately, two years from now all anybody is going to care about is the third phase, which is monetization.

"The reach problems will largely have been solved to some varying success. But the primary focus will be on monetization. How do I ultimately monetize my content better? The trick isn't, how do I show more ads or how do I just increase the CPMs of my current ads? That's absolutely part of the picture, but there's a lot more to it than that."

Knapp says it's more about using your analytics wisely to help you decide, how many ads should I show and where? And for each and every consumer, how do I change that? Some consumers respond differently to pre-rolls than overlays. It all depends on where they're at in their consumption cycle, and what state of mind the consumer is in.

"We're recommending content, and trying different pieces of content, and if we're in this exploratory phase, we should actually monetize less aggressively. Whereas, if we're in the recurring consumption phase, we should actually monetize more aggressively. And this is where the big opportunity is, that a few customers are starting to get to, but we will see this as the dominant need in the next two years."

Knapp says Ooyala designed its platform with studios, media companies and brands in mind, which has helped it attract big customers, including ESPN, Miramax, Bloomberg, Yahoo! Japan, Victoria’s Secret, Telegraph Media Group, The North Face, Rolling Stone, Dell, and many more on a global scale.

Where is Ooyala going and where will it be in four years?

As CTO and President of Technology, Knapp oversees Ooyala's technology and product roadmap. He notes that since its inception, Ooyala's focus has always been on how do they help their customers make more money. Not just in the short term, by showing more ads, but in the long term through better user experiences.

Ooyala is well known in the market for their analytics, their approach to data and monetization, and Knapp notes,

"We will continue to make major investments around monetization. It is the fastest growing and largest component of our R&D expenses. We all see this as a key component, not to just grow Ooyala's business but to growing the overall industry."

Just this past June, Ooyala announced that it had raised $35 million in new capital to drive standardization of its platform for online video streaming, monetization and discovery.

Where is content going and how will it change?

Knapp says that if we look at the introduction of online video, we're largely seeing the consumption of similar forms of content, and now we're simply seeing a transitioning of screens. Content producers are creating new forms of the same content, like the print industry had done when it when digital. We're staring to see major consumer brands like Victoria Secret, Dell and REI advertise through branded entertainment or tightly integrated into long-form content.

"We're seeing budgets shift as a result, while at the same time we're seeing premium content you and I consume everyday simply move to these same distribution channels. So it is the introduction of new content, but largely it's the same form."

The only caveat, he says, is that we're seeing mobile devices more clip based. ESPN as an example is repackaging it's popular television program, Sports Center, as clips and they're monetizing it incredibly well on mobile devices and on the PC.

"Similar types of content," says Knapp, "just different distribution strategies now fit to the devices."

About Sean Knapp

Sean Knapp is a co-founder of Ooyala. As CTO and President of Technology, he oversees all engineering and helps define and execute Ooyala's product strategies. Before founding Ooyala, Sean worked at Google, where he developed and launched iGoogle, the company's popular, customizable home page. He also was a tech lead for Google's legendary Web Search team, helping that team increase Google revenues by $1B. Sean has both B.S. and M.S. degrees in Computer Science from Stanford University. He is a member of Ooyala's board of directors. Follow @seanknapp on Twitter

About Ooyala

Ooyala delivers personalized video experiences across all screens. It is the leader in online video management, publishing, analytics and monetization. Ooyala’s integrated suite of technologies and services give content owners the power to expand audiences through deep insights that drive increased viewer engagement and revenue from video. Companies using Ooyala technology include ESPN, Pac-12 Enterprises, Miramax, Bloomberg, Victoria’s Secret, Telegraph Media Group, Tennis Australia, The North Face, Rolling Stone, Dell, Sephora and Yahoo! Japan. Headquartered in Mountain View, California, Ooyala has offices in Los Angeles, New York City, London, Sydney and Guadalajara, Mexico; and the company works with premier reseller and technology partners throughout the Americas, Europe, Africa, Japan and the Asia-Pacific region. Follow @ooyala on Twitter

Larry Kless' Weblog

Sunday, September 30, 2012

OTTCONversations: Sean Knapp, Ooyala - Developing the Next Generation of Connected Media Experiences