In a recent TechCrunch post Eric Shonfeld raises questions about how exactly YouTube’s market dominance will or will not translate into a lucrative business model. According to comscore, 37 percent of all videos watched on the Internet are viewed on YouTube and the site attracts about half of the online video audience.

If you look at YouTube’s numbers, one thing is clear: It completely dominates online video.

And Forbes estimates that YouTube will make $200 million in revenues this year, and $350 million next year.

Shonfeld contends that while this seems impressive, when we take into account eMarketer’s estimate that online video advertising will reach $1.35 billion this year, YouTube’s share of video advertising dollars comes out to only 15 percent (less than half of its share of videos watched).

What is the meaning behind this gap?

YouTube has built increasingly indisputable market dominance while under Google, where there has been little need to focus on maximizing revenues. The gap in YouTube’s share of videos watched and the site’s share of advertising revenue illustrates that growth in video ad dollars isn’t being driven by user generated content. And that is unlikely to change dramatically in the near future. Professional content—delivered to users interactively, with a focus on an engaging, “lean forward” user experience—will deliver the kind of high value impressions advertisers are used to buying offline. The real dollar value creation related to online video will come from professional content moving online in a way that meets consumer needs in terms of discovery, sharing, commenting and engagement.

In a recent ars technical post “How Viacom can sink the pirates”, Anders Bylund argues that content producers are tackling the problem of content distribution, ownership and control from the wrong angle. While at the Seoul Digital Forum 2008, Sumner Redstone—who controls the twin media giants Viacom and CBS—came down hard on YouTube, calling the site out for piracy and demanding that ISPs and web sites take greater action to police content. Bylund challenges Redstone’s call to action asking:

Is it really fair to ask the service providers to beat piracy on behalf of the content producers?

According to Bylund, the best way to “subjugate these rebels” is “with the tools of free enterprise.” Content owners are increasingly aware that they need to create their own new, controlled distribution channels online. To overcome piracy content producers need a superior business model that takes into consideration how consumers choose where to view online videos; they consider price, quality and convenience. While content owners can’t beat the YouTube “price” for content, their video sites should play up the quality of the videos they showcase—a distinct advantage over YouTube. As for convenience, the new distribution channels should aim to provide a complete consumer experience; if a site offers premium content with state-of-the-art browsing and search capabilities, odds are users will remain engaged.

That is once you get them to your site. If your clip shows up first as a YouTube video in a Google search result, you still risk loosing brand control and consumer attention. The user may finish viewing your clip then move on to more of your content—or perhaps skateboarding dog videos—within YouTube. In order to fully compete, content owners must factor in the “convenience” of search. Video SEO is the key to driving site traffic because it enhances the discoverability of video content across the major search engines, where many consumers navigate the Web. And when quality content is more discoverable, content owners can set the terms of content consumption through ad models and brand management on their own sites. This way, everybody wins—content owners, viewers, and advertisers alike. And YouTube? Well, it will always be my pick for skateboarding dog videos.

Three reports came out last week from Radar Networks, StumbleUpon, and ClipBlast offering what Search Insider blogger David Berkowitz calls, “more clues on how search and discovery are converging and diverging.”

“Web video is asking to be discovered” according to the ClipBlast! survey, which reports that for online video, traditional search techniques fall behind “discovery” methods popular on the social Web.

In the survey ClipBlast! asked 1,000 online consumers how they get to video on the Internet. 530 expressed a preference while 470 did not. Among the 530 respondents who had a definite opinion, “discovery” is the primary mode by which they find video online (28 percent), followed closely by recommendations from friends (27 percent). About 22 percent rely on search engines and roughly 10 percent get video from people they know only online – through social networks and the like. Relatively smaller percentages receive video from unsolicited email and RSS feeds, to which they have subscribed (5 percent, respectively).

StumbleUpon is a site that lets users discover, vote on, and share new sites through the use of a toolbar. The number of “stumbled upon” links has climbed steadily in the last two years. In the first quarter of 2008, the number of stumbles reached 974 million, 160% more than Q1 2007’s 375 million. StumbleUpon recently reached its five billionth stumble.

Eric Shonfeld of TechCrunch explains that while many people think of StumbleUpon as a “socially powered discovery engine,” rather than a new kind of search engine, he sees the site as evidence that personal discovery and search are colliding. And StumbleUpon founder Garrett Camp agrees:

Personalized search is just getting started. I think personalized crawling will start too. Crawlers now are trying to create the biggest map of the web, but implicit filtering and intelligent agents—that is where search and discovery will meet.

Nova Spivack, CEO and founder of Radar Networks, says that as we move from Web 2.0 (2000-2010) to Web 3.0 and beyond and the volume of data keeps climbing, the productivity of search will decline.

But with respect to video, these surveys and predictions may be off the mark because by and large video search isn’t very good yet. Given the paucity of robust, reliable video search online, it is hard to conclusively argue that because users aren’t searching for video in great volumes yet, they don’t want to discover videos via search.

Search and discovery will inevitably evolve as the volume of content increases online. With online video, there will necessarily be a strong connection between search and discovery; publishers will use automated discovery in an attempt to hold consumer attention, while users will want the control and specificity of search for navigating between and within online videos. The true evolution will be a user experience that allows the seamless transition between search and discovery—but until video search consistently provides the same level and quality of results as text-based search, users will continue to “prefer” discovering video because frankly, they don’t really have a choice.

Net radio ads are on their way to becoming “premium inventory”, as they follow the growth and evolution of online search engines and the search ads that have rocketed to fame (and fortune) in recent years. That’s the prediction TargetSpot CEO Doug Perlson lays out in the Forbes article, “The Coming Online Radio Ad Boom.” Perlson maintains that Internet radio advertising — with its visual/audible elements, geo-targeting capabilities, growing audience, immediate feedback, and low cost — could very well follow the search inventory ad trajectory to become the next big thing in Internet monetization. That said, driving online radio consumption will be a key component to helping propel online radio towards Perlson’s predicted advertising boom.

Advertisers want the assurance of a growing, targetable listener base. As such, Radio companies will need to keep established listeners coming back for fresh, quality content while simultaneously driving new traffic to expand their online audience. Online radio currently has more than 80 million listeners in the U.S. and trends point to continued growth. According to a J.P. Morgan survey, Internet radio’s listener base has grown 27% annually since 2000. Consumers are spending increasingly more time on the Web in search of premium content, and radio broadcast content repurposed for online listening is clearly in demand.

“Internet radio advertising offers a unique ability to cut through the noise and deliver a message that is both literally and figuratively heard. It’s a high-impact medium that has only recently opened up to the advertising masses through advanced technology solutions.”

Perlson believes that if we look to “the history of the monetization of the Internet, the direction in which online radio must go is clear”; online radio must be positioned to highlight: its association with major media companies and trusted brands, the premium nature of its content, and the high-impact of the audio medium. Yet there is a major distinction between the search advertising success story Perlson says Internet radio advertising is set to emulate. And that difference is text.

Search ads successfully took off creating a “search economy” in which the primary currency is text; thus far this has proven somewhat problematic for media companies. To play the game radio companies need to drive traffic through the search engines as listeners want an easy way to search and access radio programming online. However most of the value of online radio content is trapped inside of the clip, out of view of the large search engines. Plugging radio into the online search economy via text is a great way to solve this currency problem, propelling Internet radio into the search economy at full throttle and bringing the coming boom within more certain reach.

Here in the United States, television has—we hope only temporarily—lost its spark. Back in November, the Writer’s Guild of America went on strike after it was unable to reach an agreement with The Alliance of Motion Pictures and Television Producers. No new shows are being written meaning that many television programs are in danger of going “dark”—some are there already. I know I am certainly getting tired of re-runs and I was already sick of reality shows. How soon will we start signing up for more Netflix deliveries and tuning in online for our primetime entertainment? Pushing advertising dollars online, whether in the form of video or display ads, could provide advertisers with a new user base as they look for ways to reach consumers and tap into the $7 billion online video search and advertising market.

But successful online advertising takes more than a conversion of 30 second TV spots repurposed and redirected onto the Web. This week Burst Media, an online advertising network, released a survey that reiterated the growth in online video viewing across demographics while also highlighting low consumer acceptance of video ads. Numerous studies have charted the growth in video viewing online and research increasingly evinces consumer hesitation about viewing online video ads.

Ads, by their very nature, are disruptive. The good news from the Burst survey is that about 53.6 percent of online video viewers recall seeing in-stream - either pre-, mid-, or post-roll - ads attached to some form of web programming. Unfortunately, more than three-quarters (78.4 percent) of respondents said in-stream ads are intrusive and fully one-half (50.4 percent) say these ads disrupt their Internet experience.

The bad and the worse: the Burst survey found that one-half (50.7%) of respondents stop watching an online video once they encounter an in-stream advertisement. Ominously, 15.3% of respondents report they immediately leave the website once they encounter an in-stream advertisement in an online video. And in-stream advertising does not always make a lasting impression. In fact, two-thirds (69.1%) of survey respondents say they pay about the same or less attention to in-stream video advertisements than they do to standard creative units on the same page.

The Burst study should force advertisers, agencies and publishers to take notice as it juxtaposes the growing consumption of online video with the dissatisfaction consumers feel when content is interrupted by streaming ads.

“Online video is clearly in demand by web viewers,” said Jarvis Coffin, CEO of Burst Media.

“However, marketers need to tread carefully with online video advertising. It’s pretty clear from our research that most online video consumers are not yet willing to sit through advertising to get the content they seek. For online video advertising to be truly effective, advertisers must approach it with a consumer’s mindset, and recognize that what might be right for one segment could fail with another.”

The time for online video ads is now; video ads that respect and target consumer preferences so that users are willing and even eager to view them. Whatever the outcome of the writer’s strike, online video is winning an increasingly central role in consumer engagement with media. Content producers and media companies must make their video content more discoverable and accessible to consumers if they hope to capitalize on this trend. In doing so, they will make the shows and clips more valuable to advertisers, perhaps enticing those advertising budgets away from stalled television series and into the online realm.

The buzz around online video has recently grown to a dull roar in the realm of business and finance. CNBC and The New York Times have said that they will begin contributing financial articles and video to their Web sites and Bloomberg News recently launched CEO Spotlight, a new Web video series of CEO interviews produced in Bloomberg bureaus around the world. This is Bloomberg’s first step towards bringing a vast amount of business news video clips to the public Internet. Bloomberg creates a huge amount of video content across the globe—in multiple languages—and that content is already distributed live, 24 hours a day on cable, satellite and the Internet. So what is changing? Bloomberg News is shifting gears from traditional broadcast efforts bringing quality, Web-purposed video to the forefront. At the core of Bloomberg’s strategy—and the strategy of other business and finance content producers—is the conversion of traditional, linear programming into easily consumable, searchable online video clips.

CNNMoney.com is another site making a major push into online video. As one of the most popular online destinations for financial news, last month CNNMoney had more than 7 million unique visitors, according to Nielsen Online. The site launched a broadband initiative this past Tuesday and will soon go from producing one or two original videos each day to creating about 30 broadcast-quality Web videos daily. CNNMoney’s newly designed homepage includes an embedded video player, allowing users to view video content while they follow breaking business news and streaming financial data online. Executives and editors anticipate the site’s new emphasis on original, fresh business and financial news clips will better serve users and attract lucrative online advertising.

Touting that “The future of business television is online,” CNNMoney.com Editor Chris Peacock explains,

“The audience for business and finance information migrated online very quickly…They’re at their desks. They’re an at-work audience. We have a footprint to reach more people through our distribution than I think the classic cable networks can.”

CNNMoney.com hopes their online video focus will take on financial TV networks such as CNBC and the Fox Business Network. Online video may trump TV during the business day when CNNMoney’s target demographic is at their computers and short video snippets appeal more than long form content, but how much should people worry about competition between TV and the Web for viewers and advertisers? Allen Wastler, the managing editor of CNBC.com argues that the “holy grail” of the industry is finding a complementary relationship between the Internet and TV that best serves the audience/Internet user.

Yet both Bloomberg and CNNMoney’s new video strategies come in the midst of upheaval in the media and advertising industries. While a complementary relationship between TV and the Web may be the ideal, in the current reality companies are focusing on attracting viewers to their content and subsequently gaining a greater share of potential advertising revenue. As Jonathan Shar, CNNMoney.com’s general manager declared,

“The ultimate goal is to start competing with television for those [advertising] budgets.”

While the goals may differ—“We’re not pretending that we’re trying to re-create a television channel here,” CNNMoney’s new executive producer for video, Caleb Silver, explains—media companies all want to guarantee advertising budgets factor their sites, stations, and content in heavily. With so much attention on growing online populations and user interaction with Web video, it appears the challenge will be for TV to hold onto ad dollars. Online video, however eager the business audience may be to consume it, faces distinct obstacles to monetization; content needs to be fresh, engaging, discoverable and easily navigated in order to increase views and prove valuable to advertisers.

Happy New Year!

Undeniably, 2007 was an exciting year for digital media. As we enter 2008, we continue to witness the explosive growth of the next phase of the Internet’s lifecycle – multimedia.

In 2007 YouTube—then later in the year Google by association—stood as the archetype for a new age of user-generated content and viral videos. The number of people engaging with video online soared and virtual communities of every shape and size attracted users and investors as social networking established prominence as an online activity. Presidential candidates, their supporters and detractors jumped on this trend having realized the potential of such networks and social sites to spread their messages, videos, and sway voters—particularly younger constituents. As multimedia content flooded the Internet so too did the advertising dollars, pushing Newspapers and other traditional media to reexamine and reshape their own online presence.

At the end of 2007, users spent forty-five percent of their time online consuming content, and 77 percent of unique users consumed online video.

The revenue opportunities for multimedia online are currently red hot—video advertising is predicted to increase from $700 million in 2007 to $4 billion by 2011, according to eMarketer—as companies continue to look for powerful ways to impact the growing online population. Thus far however, major media companies have struggled to turn their video assets into large revenue streams online. The online “video value chain” will continue to take shape in 2008 as more companies bring creative solutions to questions of content production, delivery, discovery and consumption. This year will bring even greater innovation to the Internet video space as content producers and consumers negotiate the evolving sphere of online multimedia.

Clearly MySpace has been in the news and on people’s minds this year. To provide a snapshot of what people were truly looking to find over the past year, Ask.com unveiled a top 10 list of 2007’s most popular search terms. MySpace garnered the #1 spot, while no other social networking service made the top 10. But in the rapidly developing world of Web 2.0, there is no time for sitting on one’s laurels.

MySpace’s new program Transmissions launched last Tuesday. It will offer exclusive video content from recording artists—hoping to capitalize on the site’s prominence as a promotional platform for music artists and labels. Transmissions will also sell audio tracks, videos of private recording sessions and clips of question and answer sessions with artists. MySpace plans to archive this content and make it available on-demand through MySpace Transmissions and on MySpaceTV.

In spite of their immense popularity, social networking sites such as MySpace and Facebook are still searching for successful ways to turn this prominence into revenue. And the music industry needs any solution it can find to its digital conundrum, wherein everyone wants to get their music online but nobody seems to want to pay for it. Josh Brooks, MySpace vice president of programming and content, said Transmissions represents the first in a series of new revenue models for music that the company plans to introduce. Brooks cited opportunities in the video and mobile arenas for potential expansion by MySpace explaining:

I think a lot of musicians are looking for new ways to forge ahead in the digital space.

Social networking sites provide a way for the ailing music industry to tap into the booming world of online video, bringing popular online music consumption into the legal realm and alluring the music industry with the possibility of profit. The visibility artists gain within social networking communities—and, if they play their cards right, the viral spread of their work—create a buzz across the Web, optimizing their product. In an Internet age ruled by Google, or at the very least by search, such visibility is essential.

In light of this, there may be two possible success stories for Transmissions. For the music industry, triumph will relate directly to people buying artist videos. Individual artists however, may find their happy ending in the site’s potential to raise awareness, spread their music, and ultimately optimize each artist’s brand through an increase in online video content and its visibility.

The Chinese user-generated video site Youku.com (their name even sounds like YouTube!) closed Series C investment of US $25 million on November 19, according to Youku president Victor Koo. The company will use the $25 million to improve video service standards, expand the company’s sales and marketing efforts and increase research and development. While this announcement from Youku demonstrates that online video may be yet another market in China where Google finds some tough competition, the same questions remain for Youku as for YouTube—how can content producers make sure their videos are seen and how can all that seeing translate into profit?

In China, video-sharing sites like Youku face major barriers. Along with higher infrastructure costs associated with video storage, the Chinese government scrutinizes online video as harshly as it does TV programs. However with some strategic partnerships—such as a deal with Baidu, China’s most popular search engine—Youku has gained an early lead on other video sites since its launch last December. This already popular service claims “videos are broadcast more than 70 million times a day.”

With 77 percent of Internet users acknowledging that they have consumed online video and forty-five percent of user’s time online spent consuming content, it is no wonder Youku found firm financial backing. And China now has the fastest-growing online population worldwide. Second only to the U.S., China’s 160 million Web users represent the second-largest global market. A leading monetization model has yet to surface on either side of the Pacific however, with various ad formats vying for primacy but no single form taking the clear lead.

As we move into 2008, media companies will likely continue their ambivalent relationship with 3rd party distribution sites such as YouTube and Youku. Content producers will face similar frustrations, as they too look to spur consumption to levels meaningful enough to build sizeable revenue online. Connecting users to content—and finding the value in that connection—will be more important than ever as this market continues to grow and more and more multimedia floods the Web.

It’s that season again, when the weather cools dramatically and along with the heavier coats we suddenly need to bring out the tissue boxes and up our daily does of vitamin C to try to escape catching a cold.

But where some home made chicken soup and a trip to the family doctor were once the obvious answers once the germs finally caught up to you, the Web now plays an increasing role in people’s health management. A recent article on sfgate.com emphasizes how many health-focused websites have begun modeling themselves after YouTube and social-networking sites such as MySpace. This appears to be part of a larger effort to connect patients with each other and help them navigate the overwhelming amounts of medical information available online. From WebMD to various niche support group sites, Internet users have a wealth of medical information available to them and a growing number of people are integrating Web search and health communities into their online experience.

New Web 2.0 Elements

Larger players such as Yahoo host online patient communities, as do health-information sites like WebMD. But the Web 2.0 generation of social networking and specialized health search engines offers patients new tools. From user-generated video, to blogs and health podcasts, to wikis and social networking sites, the ways we can use the Web for health related research and support are expanding rapidly.

Social networking health sites

These sites are among a new wave of social networking services available for patients to share experiences and learn more about their health conditions:

NursesRateDoctors.com: With the motto, “Spread the word; improve the care,” this site recruits nurses to give their candid assessment of doctors so that patients can have better information and make choices to get quality care.

DailyStrength.org: Gives patients and caregivers a place to join a support community, write a journal, share videos, and send virtual support with “hugs” and “flowers.”

ReliefInSite.com: Helps patients record and track their pain and medications and share it with their doctors, nurses, pain specialists, therapists, friends and family members.

OrganizedWisdom.com: The goal of this site is “to provide the best search service in the world for health by hand-crafting search results that physicians and consumers will recommend to their family and friends.” OrganizedWisdom aligns doctor-reviewed and user-generated health content to help people make decisions regarding treatment and care.

PatientsLikeMe.com: A platform for collecting and sharing real world, outcome-based patient data. The creators are working to establish data-sharing partnerships with doctors, pharmaceutical and medical device companies, research organizations, and non-profits. This site offers people battling devastating diseases the ability to discuss and track in great detail the treatment options other patients in their disease group are trying.

ICYou.com: Defines itself as a site dedicated to making it simple for anyone to find, upload, watch and share healthcare videos worldwide. Dubbed the YouTube of health care, ICYou.com allows patients to share their stories through online video clips. The site, which is expected to formally launch late this year or early next, already has about 1,500 posted videos.

Online Video Advertising Opportunity

While using the Web for health research is hardly a new phenomenon, health-related content is becoming increasingly vast and varied as a growing number of people decide to share their own experiences online through health communities, blogs and online video. A Google search for health videos evidences this trend toward online video libraries and user—or patient—testimonials. And advertisers want to be where the video is on the Web.

How to Advertise with Integrity

There is an opportunity here, albeit one rife with challenges. Advertising from the pharmaceutical industry, medical-device manufacturer and health insurers seems a natural revenue stream for these online health communities, but anyone who has ever been subjected to the big pharmaceutical TV ads might realize the potential tension in such a partnership. To successfully take advantage of this market, medical industry advertisers need to get their messages and targeting spot on. As founders of the health-focused Web communities have noted, medical ads often cause patients to question the validity of a site’s information. Health sites and their potential advertisers have an incredible chance to build revenue as more consumers look the Web for health information and support. The question is whether sites will be able to maintain their credibility with the users—who value the conversational, Web 2.0 experience—while letting in the ads that bring health industry dollars.