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Business Impact

Making Money from Online Video

How will Revver and other revenue-sharing video websites address the challenges ahead?

Revenue sharing is old hat in the business world; companies routinely collaborate and divvy up the profits. By comparison, revenue sharing online is relatively new. It is also profoundly different because anybody who uses a computer can be directly connected to a company that splits profits with them. Websites such as Revver, Flixya, Metacafe, and Atom Entertainment have all capitalized on this model by seeking out homemade video from amateur producers. But despite the groundswell of enthusiasm, these sites face an uncertain economic future.

Amateur video producers shoot video, edit, and submit it to one of these websites, which generally make money through advertising. (Some ads are played immediately before or after the main clip, while others appear on the surrounding Web page.) Payments to producers are modest–around $4 per thousand views or $1 per click or per view. Most videos get less than a thousand views. The profits are generally small, but the possibility of creating the rare true “hit” with one million or more views keeps producers coming back.

Angela Gyetvan, vice president of marketing and content, says that Revver’s ease of use, combined with its being first to market, has led to a “phenomenal” response from video producers over the past year. “All of a sudden, they are able to derive compensation and exposure for their creativity in a way that wasn’t available before,” she says. Revver was first to introduce a revenue-sharing model for videos when it was founded in 2005, making it an elder in the young industry. The company makes most of its money from still images displayed after the video plays, although it just introduced video commercials that run before the clip and are reminiscent of traditional television ads.

Revver prides itself on openness and places no restrictions on whom it will pay for content, outside of banning copyrighted or obscene content. By contrast, Metacafe and even video website giant YouTube only offer revenue sharing to a small percentage of the most popular producers.

In addition to being open to all types of producers, Revver, Flixya, and Atom Entertainment also facilitate content sharing, one of the cornerstones of Web 2.0 culture. They do this by providing tools to embed videos in other websites, such as MySpace. So while a video may appear anywhere on the Internet, it is still branded and monetized by the hosting website. Using these tools, the best of these videos are virally propagated by enthusiastic fans, and the advertising dollars keep rolling in.

Panda Smash, based in Los Angeles, is an example of a video production group that profits from the medium’s propensity to be virally propagated by fans with humorous and irreverent skits. The company’s most popular production was a real-life version of the game “Mario Kart,” in which actors mimic the Nintendo mainstay by racing around in go-carts. Panda Smash cofounder Sam Greenspan reported that this video was uploaded to a variety of websites, such as Funnyordie. Greenspan and his colleagues were thrilled with the video’s popularity but soon realized that not only were they not seeing any income, but they were losing money because they were paying to host the video. In response, they moved most of their videos to the website Revver.

Greenspan and his team view Revver as the perfect platform for their operation because, in addition to earning a constant trickle of income from revenue sharing, they don’t have to pay for Web hosting. Another bonus is a boosted image. “We really wanted to avoid being ‘YouTube guys,’” Greenspan says, because Panda Smash’s employees see the website as synonymous with amateurish and low-quality content. As professionals, their primary purpose is to attract leads to other gigs in the film and entertainment industries.

The move to Revver seems to have paid off. The latest Panda Smash video, a parody of a first date that lampoons the styles of various online video sites, received well over half a million views in the first week. Using Revver, fans embedded Panda Smash’s video into their own Web pages, so the company earned a tidy profit. For Greenspan, this “proved that Revver will work,” in spite of some of the company’s other short films being rejected by the website for being too risqué.

Business professionals, on the other hand, are more pessimistic about the long-term possibilities of revenue sharing. They cite obstacles including low profits, poor quality-control standards, and technological challenges. Advertisers may be reluctant to place their ad online if it might appear alongside a video of a guy lighting his farts on fire. Additionally, there is currently no viable way to quickly and accurately identify the source of duplicate or copyrighted videos. Consequently, advertising rates for this new entertainment medium lag behind those for television and radio.

Companies such as Revver are fighting these problems with people power: they’re having an employee view each submitted video before it’s put online. This is a costly and time-intensive process that YouTube and other non-revenue-sharing video sites prefer to skip, but some see it as essential to keeping advertising rates and video quality as high as possible.

Revver’s Gyetvan defends the seemingly antiquated practice of individual content review. “We will never rely on a fully automated process … partially because the automation isn’t 100 percent, and I’m not convinced it ever would be,” she says. Despite the slow speed, personalized approval allows Revver to better connect content with the right kind of advertisers in order to earn the highest payout. “We actually really like some of the benefits of having human review applied to content,” Gyetvan says.

Gyetvan feels that the marketplace for online video will shortly experience an evolution, leading to standards in advertising and compensation programs. “The audience is arriving now, so it’s just a matter of time before it feels like a mature and well-populated market. We’re pretty assured of that fact at this point.”

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