After months of drama and debate over the future of On2, the company announced late yesterday that shareholders have agreed to the $130M+ merger with Google. With the deal expected to close this week, it won’t be long before things should start to get interesting. While we’ve all spent the last few months debating, wondering and guessing what Google plans to do with On2, with the deal now done, pretty soon we’re going to find out.

For all the talk and speculation that someone other than Google would be interested in buying On2, clearly that was not the case. The same holds true for the speculation by some that a company like Microsoft would step in last minute to prevent the sale or that another bidder would come in if shareholders rejected the Google deal. In the end, with On2’s revenue growth stalled and the company running short on cash, they really didn’t have many options in the market. While plenty of On2 shareholders I spoke to last night are still mad at the deal and didn’t vote in favor of it, the deal will be a good one for On2’s technology which will now get a new home at Google.

While Google did get the majority of votes to get the deal done, I still don’t think the majority of shareholders were in favor of it. What I should have said was that the vote required to approve the merger was the affirmative vote of a majority of On2’s outstanding shares and not a majority of the shares voting. But at this point, none of that really matters and On2’s technology will now move on to bigger and better things. What exactly we don’t know, but I suspect we’ll all find out very shortly.

This morning, after failing to raise an additional round of funding, Open Box Technologies announced they were putting the company up for sale on eBay with a starting price of $500,000. Included in the auction is their SesameVault video platform which does have some value, but not at the price they are looking for. Even if the starting price is matched, that won't meet the company's reserve price which is not being disclosed.

Last year, I used the SesameVault platform and gave it a quick run-through and while it did have a lot of nice features and seemed to work fairly well, it was very limited in its functionality. That's not to say that it would not be worth something to someone, but considering the company has raised $2.5M to date in funding and has a reserve price of over half a million dollars, I think they are simply being unrealistic in how much money they think they can get back.

While the company wont say how much revenue they have unless you sign an NDA, they did say they have over 100 paying customers. With SesameVault's pricing starting at $49 a month, even if all of their customers take their "most popular plan" at $199 a month, we're only talking about $20k a month in revenue or roughly $250,000 a year. That's not a lot of revenue. And when companies like this get bought, it's not uncommon for 50% of their customers to immediately leave, which means you really can't count on the revenue as one of the reasons for buying the company. While the company said that they, "don't imagine many will jump ship; more likely one of our competitors will try and poach them," if a competitor poaches them, that means they did jump ship. So no one is going to acquire the company for the revenue since it's anything but guaranteed.

When I asked the company more details on why a private sale to a CDN didn't take place, they did say that, "two potential CDNs contacted us in Q409 regarding an exclusive relationship (not necessarily an immediate acquisition).  The interest expressed by these companies combined with the difficulties we were experiencing on the fundraising front played a large part in our decision to sell." While I would image there are some CDNs that would be interested in the company, at the price they are asking, it simply won't sell. If they were to put a price on the SesameVault platform and technology and it was realistic, I think they could sell it pretty fast. But considering their starting price is already so high and does not even meet their reserve, all based on revenue that can't be guaranteed, I don't see the company even getting sold at this price.

Anyone who has read my blog before knows that I think YouTube gets way too much credit in the industry that they don't deserve. While I don't disagree that YouTube deserves credit for creating a platform that has allowed any regular Joe to upload and share video at no cost to the individual, that's all YouTube has done. Sure, that platform has had a big impact on the lives of a lot of people, but each time YouTube has a birthday, or delivers another billion streams, Chad Hurley wants to try to convince us of why YouTube should get all the credit, for everything in the industry.

In his latest post on YouTube's blog, talking about YouTube's fifth birthday, Chad makes all kinds of references to YouTube's "innovation", "experience" and how they provide the "revenue models", "tools" and just about anything else a content owner needs to succeed. The problem with this thinking is that YouTube didn't contribute to the technology of the industry at all. They haven't created any codecs, new delivery protocols, created any industry standards or even lead the pack by adding new functionality. While Chad talks about all of YouTube's "innovation" lets not forget that they don't even support streaming, don't support live, only recently starting supporting HD, have a cap on the size of file that can be uploaded and have plenty of other limitations of their service. Show me one feature of YouTube that they lead the market with or is something the rest of the industry has adopted.

And do I even need to mention how YouTube's platform was essentially allowing others to steal content and re-broadcast it on the web without any kind of control? For all the talk of YouTube's "innovation", how is it that it took a lawsuit for them to actually do something to address the issue? Shouldn't they have seen that coming? And what about Chad's assertion that YouTube's goal is, "To set the standard in online video delivery"? We all know they aren't doing that. No one thinks of YouTube for the quality of their videos, they think of the platform as a free and easy way to get content online and that's the problem.

As the industry debates when YouTube will become profitable, one thing needs to be kept in perspective. Without YouTube being sold to Google, it would be out of business. The only reason YouTube is even around in the market to have the chance to turn a profit is because Google has deep pockets and is willing to lose a lot of money on a long-term bet. But YouTube is not the one making that possible, Google is. So if anyone really deserves the credit, it's Google for allowing YouTube to burn some of their cash and giving them a shot. Google is giving YouTube the time to be successful and if and when it turns a profit, it will be as a result of Google's cash and not because of YouTube's "innovation". As an industry, why do so many people continue to heap praise on companies that can't turn a profit, let alone after five years?

I don't know what the percentage is, but the overwhelming number of content owners on YouTube will NEVER make money. YouTube delivers over a billion videos a day but only monetizes a billion videos a week. That means they are only generating revenue from about 14% of all the content streamed on the site. While that number, or one close to it, might be enough for them to make money, it clearly goes to show that the average content owner on YouTube will never see a dime. And to me, that's ok. YouTube was started as a simple way for people to share videos and that's it. The problem is that Chad says that, "Five years into it, we're as committed as ever to the core beliefs and principles that guided YouTube's creation." But that's not the case anymore since the company has had to try every business model in the book to try and survive and make money. Remember YouTube for the enterprise? 

Three years ago, in an article on Forbes, Chad once again sang YouTube's praises and told us how YouTube was going to allow all this new talent to be discovered via the web and make everyone a lot of money. Clearly that has not happened. While many are quick to point out that YouTube still dominates Hulu in terms of traffic numbers, Hulu is monetizing almost 100% of their content. So would you rather have less traffic that is all monetizable or lots of traffic that you can't make any money from? Why does YouTube get so much credit just because they have a lot of eyeballs? Back in 1999 and 2000 the portal space was all about eyeballs. The value and stock price of TheGlobe.com, Yahoo.com and many others were all based on how many eyeballs they had. How well that that work out for them when it came time to actually being able to generate revenue from those eyeballs?

YouTube is no different than many other sites like Veoh except for the fact that YouTube is still around only because they are owned by Google. Without that, YouTube would not exist in the market. They could not afford to. I have no problem with YouTube getting the credit for what they have done, but they get far too much credit for what they haven't done and for technology that they have not developed, created or lead the market with. Think I'm wrong? I'd love to see in the comments section what "innovations" you think YouTube has brought to the market.

Related YouTube Posts:

– Why Can't YouTube's Player Auto-Detect When A User Should Get HD Quality?

– We Should Care About YouTube's Core Business, Not Their Market Share

– YouTube Launches "Video Speed Dashboard", But The Results Don't Tell You Anything

– Google's New Business Video Offering Not A True Enterprise Product

– YouTube's Bandwidth Bill Is NOT Zero, I Expect More From A Wired.com Story

– YouTube's Live Event As Overhyped As The Company

While it’s never good to see any company go under, one can’t at all be surprised to see Veoh Networks finally go out of business after burning through more than $70M in funding. While they were not the first and definitely won’t be the last company that will have to shut their doors this year, Veoh should act as another example to the industry that focus and execution are more important than vision.

From day one, Veoh never really executed a clear and concise business plan on what they were going to offer, what problem their platform would solve, or what the business model of the company was going to be. While all companies need to adapt their focus to try and stay in step with how the market evolves, Veoh always struggled to define who they were and what they were doing in the market. Their business model changed so many times and their platform shifted focus so often that even in the short-term, no one really knew what Veoh offered. Whenever you would ask people what Veoh did, you’d always get different answers, even from those who were in the online video industry.

The problem was that Veoh simply lacked focus. It’s hard to do anything well and focus on it when you’re trying to be everything to everybody. Veoh was a video platform, a content syndicator, a TV guide of content, a recommendation engine, an ad delivery platform and a software company that was pushing users to download Veoh’s own proprietary video player. That’s simply trying to do too much. If Veoh’s content was niche, maybe they could have pulled it off with the right focus, but when your business model is based purely on advertising, you can’t keep your content niche since you need as much traffic as possible.

In a blog post talking about the company closing down, Veoh’s CEO Dmitry Shapiro said the company was on a run rate of $1M a month in revenue. To put that in perspective, Veoh was delivering 240M video streams a month to 28M unique users and earning less than $1M a month with that traffic. Those are numbers that simply can’t add up to a successful business no matter how you slice it.

While some want to say how much vision Veoh had and talk about it being a sad day for them, it’s not. No company can raise $70M in funding and expect to have a viable, sustainable business unless that have a clear and focused business model of how to generate sales. Veoh never had that. To me, the nail in Veoh’s coffin came when they had to raise a third round of funding. Before the third round, Veoh had already raised about $15M. If you can’t make a business like the one they were aiming for work with 15M, then another 25M is not going to help. And when you burn through that $25M in less than a year and have to raise another $30M only 10 months later, you’re already done.

Things have to be kept in perspective. Veoh took $70M. If you take that much money you have to wonder to yourself how you are ever going to show value to your investors when you know there is no way your revenue is ever going to come close to the level of money that you raised.

No doubt, there were some really smart and visionary technical folks working at Veoh. But the problem we have seen time and again is that most technology people can’t take that technology and turn it into an offering in the market that makes money. Everyone seems to want to talk about the best platform, features and bells and whistles but then can’t explain how they will use the technology to make money. Veoh is a good reminder that it takes a lot more than just Vision to be able to turn technology into a product/platform that people are willing to pay for and generates enough revenue to actually turn a profit.

The drawing is now closed. Thanks to the generous folks at Wowza, I'm giving away to one lucky reader of my blog a Wowza Media Server 2 perpetual license which retails for $995. Wowza's media server has support for multi-protocol and multi-client streaming including a complete interactive Flash media streaming feature set, live and on-demand HTTP streaming for the iPhone, live RTSP streaming with QuickTime, live and on-demand smooth streaming for Silverlight  and whole host of other features. Winner: Jason R. from Seattle, WA.

To enter the drawing, just leave one comment on this post with a valid
email address and I'll pick one lucky winner at random on March 1st. Big thanks to Wowza for the freebie.

Earlier today, YouTube launched a new "YouTube video speed dashboard" saying their goal is, "to give you insight into what your YouTube speed looks like compared to the YouTube speed of users in other regions and different ISPs." While that sounds like a nice idea, the results don't actually tell you anything in terms of your "YouTube video speed" or the quality of the video you are viewing. Since the results are not based on the data from an actual stream, YouTube's video speed dashboard is nothing more than a speed test that every other ISP has, which gives you no data on the actual performance of any video being delivered. It simply tells you the size of the pipe available.

YouTube's new speed dashboard says I am at 9.33Mbps, yet myself, and others, still get a lot of video buffering. There is no problem on my end with my ISP, the problem lies with how Google delivers video. As anyone knows, there are many factors that go into the buffering issue and while the last mile is one issue, it's not the only one. So who cares if YouTube sees that I have a 9.33Mbps connection if the 500Kbps video stream they are sending me isn't working. It's not just about the size of the pipe that matters.

Google says that "A higher YouTube video speed translates to a better and faster experience", but their new speed dashboard does not provide any real-time data or analysis of what the "experience" actually is. On YouTube's blog announcing the new dashboard they ask, "So, what can you do with all of this new data about your video speed?" The answer is easy, nothing. It's completely useless for telling a consumer anything about the video experience they are getting from YouTube.

– Why Can't YouTube's Player Auto-Detect When A User Should Get HD Quality?

– We Should Care About YouTube's Core Business, Not Their Market Share

– YouTube's Biz Blog Goes On Offensive, Says Industry Comments Are "Myths"

With a major snow storm about to hit the Northeast, many folks like myself are probably using the web to check out the latest forecast on Weather.com. The site is a treasure trove for anyone who really wants to check out the storm from all angles and there are already dozens of storm related videos available. As a result, I've checked out close to ten videos and each time, the site delivered me the same thirty second pre-roll add from pajamagram.com.

For content owners like Weather.com and others, examples like this highlight one of the many major problems with online video advertising. If a site like Weather.com that produces professional content, has a well known brand and has a large reach can't sell enough ad inventory, how can content owners ever expect to make any money online? Making matters worse, a site like Weather.com has a HUGE advantage over other sites in that they already know my zip code and could be delivering me ads that are tailored to my area. But that's not happening either.

While this is a problem that the online video space has been suffering from for years, why hasn't it gotten any better? Why isn't there more inventory and targeting taking place? What's the hold up? Every time I bring up this issue many who work in the online video ad platform space keep saying that they are already doing targeting or that their platforms support targeting, but clearly it's not taking place with content owners. I always ask for examples of sites that are doing this but don't get any. Makes you wonder if all these ad platforms can really deliver targeted, personalized ads.

While I do think ad platforms can determine what ads you have already seen and deliver you a different one, the fact this is not happening on Weather.com or CNN.com shows that even with the technology, the inventory is not there. For all the talk of how online video advertising is going to help content owners monetize their content, it's not happening on a major scale and won't until the user experience is much, much better.

Simply saying we need more inventory and better targeting to make online video advertising successful is not something people don't already know. I'm not making some profound statement that others have not though of. But in the past three years or so, I can't think of anything regarding on the online video advertising space that has gotten better. What's improved? Maybe the size of the ad window, but the quality of the ads is pretty poor, targeting is not there, the inventory is limited and the industry still has absolutely no video ad standards. I can't think of one aspect of the business that has improved the user experience in the past few years. Can you?