Introduction to Monetizing Online Videos Generate revenue from online videos through pay-per-view, subscription, and advertisements As more websites adopt video as a medium to interact with their users, more people are pondering the question of how to generate more revenue from video. There are many different models publishers are adopting to profit from video content. This paper will discuss 3 of them pay-per-view, subscription-based services, and advertisement supported content. Pay-per-View Similar to pay-per-view on cable TV, pay-per-view with online video provides publishers a way to sell one video to a user. There are two ways to implement this model download and streaming. Have compelling previews for content. Much like watching movie trailers in the theatre, you want to know what the show is about before you pay your admission Pay-per-Download Some publishers will choose to sell their videos as downloads. In this case a user can pay a fee for the video and then will receive a link to download a copy of the file itself. Pay-per-download works particularly well with content that the user may want to transfer to other devices like an ipod, video player, mobile phone, or another computer. This option also allows the user to access the content without being connected to the Internet. Once the user pays for the download, they own that file and can do with it what they please.* * Optionally DRM protection can be added to the file, and that can help mitigate and control future usage. Pay-per-Stream Pay-per-stream allows viewers to pay a fee to have access and view a video stream. This model is often used for live events however it is not limited to live events and can also be used with pre-recorded on-demand content. Typically, in this case once the stream has been completely viewed the user is unable to watch it again without paying another fee. Some publishers may allow the user to watch the stream again for a specified time limit essentially renting the content much like people rent movies today. Page 1
One of the advantages of pay-per-stream models is that it will prevent users from being able to share their content with others once the file has been viewed they will no longer have access. Here are some tips for Pay-Per models: Have compelling previews for content. Much like watching movie trailers in the theatre, you want to know what the show is about before you pay your admission. Provide users a way to know what they are paying for so they are comfortable enough to make the purchase. Charge a fair price. If you want users to continue to come back and make repeat purchases make sure you are charging a price that is aligned with the user s expectations.* * Pricing may vary depending on the content itself and quality of the video. One of the main benefits of subscription models is that it allows publishers to have a constant revenue stream from subscribers Subscriptions Another way publishers are monetizing video is by offering a subscriptionbased service. In this model the publisher offers users a selection of videos and charges a monthly (this could be yearly or seasonal) rate for access to those videos. This is similar to how cable television works today; viewers pay a monthly fee for unfettered access to all the programming cable has to offer. Subscriptions work well for publishers with content that users like to watch repeatedly (for example sports training sessions such as a yoga class, children s shows, or educational lessons), or for publishers that have new content appearing regularly (such as original series), or really large libraries of videos (such as movie subscriptions services like Netflix). One of the main benefits of subscription models is that it allows publishers to have a constant revenue stream from subscribers throughout the duration of their subscription agreement. It is more predictable than the per-purchase model since it provides monthly recurring revenue. Consumers find subscriptions to be advantageous because they can access a greater selection of content then purchasing each piece individually. Many also find such a model advantageous because they often include unlimited use of the videos (so they can watch a video many times without incurring additional costs). Using the subscription model can also help increase brand loyalty and stickiness to the website. Since subscribers will likely return repeatedly to the site, publishers have an ideal opportunity to build a positive relationship that may translate to the subscriber recommending the brand to others, or purchasing additional products. Page 2
Here are some tips for subscription-based services: Give users the ability to see what they are going to get. Some sites have found it compelling to offer teasers of content either in the form of short previews or a selection of full-length content in limited video quality to entice new users to purchase a subscription of the fuller and richer content. You can also do this by offering a trial of the service, such as one week free. Set up subscriptions to auto-renew. This provides a hassle free way for current subscribers to continue to access the publishers content and gives the publisher a more predictable stream of recurring revenue. Part of the reason advertising as a source of revenue is so popular is that there is no cost to either the publisher or the viewer; the cost is fully burdened by the advertiser Continue to refresh content. If a user is paying for a monthly access to a service it is important that content will continue to be updated and refreshed. Otherwise subscribers may become Advertising One of the most predominant and easy ways of monetizing content is through advertising. Ad supported content is commonplace throughout websites offering video. Part of the reason advertising as a source of revenue is so popular is that there is no cost to either the publisher or the viewer; the cost is fully burdened by the advertiser. Much like website advertisements, such as banner ads or text ads, there are multiple types of ads that can be used in conjunction with video. The two most popular ad units are: in-stream ads (such as pre-roll or mid-roll video ads) and overlay ads. Both of the ads are typically priced in CPMs, which stands for Cost Per Thousand impressions. In-stream Ads An in-stream ad is typically a video, but there are also versions that are static images, or even little flash applications like small game or interactive content. When in-stream ads are displayed the player controls are usually disabled forcing the viewer to watch the complete advertisement before being allowed to view the rest of the video. Most in-stream ads tend to have higher impression rates than overlays, but they are more obtrusive to the user experience and cannot be used as frequently during the length of the video. Diagram 1: A sample instream advertisement. Notice that the ad consumes the entire video screen and that most of the player controls are disabled. Page 3
Overlay ads will appear during the video playback so that the video content is not interrupted Overlay Ads Overlay ads are a small banner or frame that is typically placed on the top or bottom part of the video and will contain an advertisement comprised of text and sometimes images (see screenshot below). These ads will appear during the video playback so that the video content is not interrupted. The ads will stay on the screen for a predetermined amount of time (typically around 5-10 seconds but this varies) and the user can click on them if they so choose. Overlay ads can be used frequently throughout the video, and because they don t disrupt viewing of the content many viewers prefer this less intrusive type of advertisement versus in-stream ads. Tips for Ad Supported Content Here are some tips for ad supported content: Diagram 2: A sample overlay advertisement. Notice that the ad itself only takes up a portion of the viewing screen and part of the video is still viewable. Higher quality content earns more money. Having niche content or high quality content will be more attractive to most advertisers and will typically garner higher CPM rates. User generated content, for example, can be very hit and miss and tends to be more difficult to monetize. Higher quality tends to generate higher revenue for two reasons: people tend to be more engaged and consume more of the content, and because advertisers prefer more targeted content and as a result are willing to pay a higher CPM rate. Use multiple Ad Networks to fill inventory. While some publishers may choose to sell their own inventory to advertisers, there are others that leverage Ad Networks*. By using multiple Ad Networks, a content publisher is able to maximize the amount of their inventory that is filled with an advertisement (so whenever there is an opportunity to run an ad, there is one available). There are lots of tools that allow publishers to utilize multiple ad sources, and many even give the ability to choose the priority for placement. Mix ad types. Publishers are not limited to use exclusively in-stream or overlays ad within a given video. Both ad types can be used on the same piece of content. By using multiple ad types within a particular piece of content a publisher will be able to maximize their revenue. * An Ad Network often sells ads, or aggregates other ad sources and will display those ads across their network of publishers. This allows them to place advertisements across many different content providers and make their money by taking a share of the revenue from those advertisements. Page 4
Conclusion Video is becoming more prevalent on the web with new online video platforms it has become easier and affordable for content owners to bring video content to their viewers via the Internet. And with the success of sites like YouTube and Hulu.com, there is a lot of reason to believe this trend will continue. Publishers have a whole host of options on how to add video content to their site to attract new viewers, raise engagement and increase revenue. This document provides some examples of different monetization options, but it is just the beginning. As you think about your web site, or video content, figure out what solution will work best for you (and for many it may be a combination of several of these options) and your users and adapt accordingly. To learn more about Limelight Networks and how we can help you with your online video strategy, visit our website at www.llnw.com or contact us directly at (800) 261-3295. 2011 Limelight Networks, Inc. All rights reserved. Limelight Networks is a registered trademark of Limelight Networks, Inc. Other products and company names may be trademarks of their respective companies. All services are subject to change or discontinuance without notice. Feb 2011 Page 5