Did Video Startups Not Get the Memo on the Economy?
With the global economy in tatters, what are entrepreneurs to do? Stop believing in themselves? Never! Still, we at NewTeeVee are amazed by the unwavering flow of company launches that find their way into our in-boxes. Especially in light of the utter instability of the media industry, why are so many people jumping into the online video biz now?
In recent days I've chatted with newly launched startups Clipgarden, a portal for paid training videos; Gawkk, a video feed reader; and Hitviews, a studio that matches brands and Web stars. Meanwhile, this week my colleague Chris Albrecht profiled the launches of ZDONK, an online film financing community, and First on Mars, a premium video content aggregator.
So let's look at those five companies that all happened to poke their heads up in the middle of this nuclear winter. Interestingly, all five are execution plays rather than original ideas or breakthrough technology:
Clipgarden: undisclosed angel funding, five employees, based in San Luis Obispo, Calif.
Gawkk: "six figures" of funding from another project of the founder, two employees, based in New York.
Hitviews: about $2 million in funding from private investors including Bob Weinstein, 10 employees, based in New York.
ZDONK: $1 million in funding from private investors, three employees, based in New York but moving to Los Angeles.
First on Mars: undisclosed private funding, 12 employees, based in San Francisco.
When I asked Hitviews CEO Walter Sabo what his funding situation was, the first words out of his mouth were, "Better than Lehman Brothers." Maybe it's a cheap shot, but it's true. We're not talking about huge companies or huge risks here; in fact, at this point it's not even clear we're talking about huge opportunities.
With the glut of recently launched how-to video sites weighing on my mind, I asked Clipgarden founder Chris Barbir if he and his co-conspirators thought of themselves as crazy. "We don't," he said. "We think if there is a solid enough value proposition it will work." And everybody's got a good reason (or perhaps just good spin) about how leaner times will actually help them. Barbir's version was to contend that content creators will be attracted to his site to earn micropayments, while potential customers looking for training videos will be happier to pay 50¢ to $3 for a short clip rather than shelling out for a whole DVD or class.
And it's true that even as market forecasts fall across the board, the only thing that's getting cut with regards to online video is the growth rate, never the actual projected amount of revenue. eMarketer is forecasting that the U.S. online video ad spending growth rate will fall to 45% in 2009 from 81% in 2008. But in hard numbers, you're still looking at revenue of $850 million in 2009, a nice jump from $587 million in 2008. Gawkk founder Gary Culliss' take? "Internet usage continued to increase during the last downturn."
But c'mon, it's not like there are any healthy acquirers for these guys, given that nearly all the large companies in the space are busy laying off staff. The startups will have to endure for quite a while before anyone will help haul them up to the next level. So, in truth, some of them would probably be better off pulling out of the game now before they lose any more skin. But that wouldn't be the entrepreneur's way, now would it?
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