Yahoo Bets on Video

Last week, Yahoo announced that it will be working with Ben Silverman and his new firm Electus to develop original video content.  Notably, this video content will be designed from the get go to appeal to advertisers.

For Yahoo, this is a smart move that demonstrates they are willing to double down on the short-form video programming category.  And with good reason:

  • Video is the fastest growing segment of advertising demand. Many publishers are finding more demand for video than supply, and more importantly, for Yahoo to have a full package to meet advertisers’ needs and secure the best premium campaign opportunities, they’ll need plenty of video inventory.
  • The CPMs are high – although pricing for video ads depends on the format and placing, the average CPM is over 10x that of normal banners.
  • Because premium programmed video is still a relatively immature category, Yahoo (or others) may be able to stake a claim with various short-form video programs.  (The major networks and Hulu are covering their traditional broadcast long-form shows; while YouTube is great the great unwashed of 100,000,000 videos — a small pecentage of which are valuable.  But the middle is open territory.)
  • Yahoo is reporting success with programs like Prime Time in No Time (which Yahoo claims to be the most watched original internet program in history) and Yahoo Sports Minute.  Great to see them build on successful experiments with more.

Yahoo is smart to leave the reservation for a new effort like this:  after all, the key to the success of any new program will be establishing them as destinations with consumers.

If these are just another node in the Yahoo network, promoted from the home page, they will fail to provide any strategic value.  To succeed, Yahoo will need to temporarily ignore the pulls of the various existing Yahoo content properties in order to create a new one with its own audience.

And if freedom is the requirement, what better way to embrace it than to turn to an outside agency, which won’t have any of the overt or subtle pressures that an internal group will.  Plus, it lets Yahoo be more bold and risk-share with a partner, again a plus to advance Yahoo’s strategy.

The big watchout to Yahoo:  they had better do as well appealing to consumers as to advertisers.  To be a financial viable initiative, they’ll not only need the big dollars of brand sponsorships, but to build and sustain an audience.  Otherwise, it will end up looking great in the design and business reviews, but never really getting traction, like Google Video which failed with its premium content while YouTube flourished; and MySpace’s initial efforts to create premium sponsorable content channels in 2007.