It has been almost a month since I wrote my last TechLife column in Financial Express, but I am back this week. In this week’s column I take a look at the complex world of video ad networks, which appears to be a global trend and Indian investors have also jumped into the bandwagon.  Just this month alone a couple of India-based VCs invested a significant amount of money in two video ad networks: Jivox and Ozone Media. How big is the market, what are the challenges and above all how do you make money are some of the questions that I tried to answer in this short piece.

Here is the link to the article. 

Has The Time For Video Ad Network Arrived?

Consider this. According to Comscore, an Internet research marketing company, in April 2008 about 11 billion videos were consumed in the USA and out of that about 38 percent was from Google properties (read YouTube mostly). Contrast this number to the one from June 2008 when about 94 million videos were consumed in the USA. People love watching videos. The story is almost similar in the UK. According to UK’s Guardian about 3.5 billion video clips were consumed in March 2008 and 50 percent of it was from YouTube. It gets a bit complicated when you consider India because of the complex way in which people use the Internet and then there is the cybercafé aspect. It would be safe to say that video consumption is on an upward trend in India too.

YouTube in many ways made it simple for users to upload their video clips and since then many startups and companies have tried to emulate YouTube’s success. While YouTube has been wildly successful, it is still struggling to monetize and come up with a viable revenue model. Now, if there is content there has got to be ways to monetize it via advertising and the fact that YouTube is still struggling with its strategy has not deterred venture capitalists and investors from pouring in money into video ad networks either in the US, India or other countries.

Recently there were two significant investments in the video ad network space in India. The first is Helion Venture Partners and Opus Capital invested $10.7 million in Jivox, a Silicon Valley startup with operations in India. The second is IDG Ventures India’s investment of an undisclosed sum of money into Ozone Media, which is a video ad network startup. Here in the US there are a whole bunch of companies that have been in this space for a while and received significant amounts of money from investors. They include BrightRoll, YuMe, Tremor, Meevio and others.

What intrigued me was the recent flurry of investments in the video ad network space in India and I turned to Diaz Nesamoney who heads Jivox. I met with him in his Silicon Valley office to find out about his startup and how different they are compared to other video ad network companies. Diaz is very bullish about video ad network opportunities in India. “Video is a format that until now has not been available to Indian advertisers so we see an opportunity to be the market leader for online video advertising.”

Here is how Jivox is different from others points out Diaz. Jivox is just not a video ad network he says. They help their customers create the video advertisement and thereby eliminate the need to hire expensive videographers and editors to create video advertisement. Instead they provide their customers with a template or an easy Do-It-Yourself way to create the video advertisement. And finally they help their customers by placing the advertisement. Another way in which Jivox is differentiating itself is that it is targeting the small business segment, which is where Diaz believes there is a lot of potential for growth and revenue.

What is the difference between Jivox and Google I asked Diaz. His answer: “We provide true self-service for video advertisers to help them create and place video ads online. We work with Google and other ad networks to deliver the ads.” He adds that they already have customers in India like Bharat Matrimony, eBay India and in the USA their customers include PrincessPort, Faultline Brewery, Ciao Bambino Travels and others.

What is clear after talking to Diaz is that there is a huge potential in this space and each startup is addressing the market in a different way and trying to come up with a viable revenue model. The question that comes to mind then is this: How big is the industry? eMarketer estimates that the US market is about a billion dollar today and could be over $10 billion by 2010? How big is the market in India? It is difficult to gauge given the nascent nature of the business, but the market is bound to grow significantly if the broadband issue is addressed in India.

There is no doubt that multimedia is the next wave in the online world but this is a very complex process. Video creation and delivery is just the start of this complex process that involves content management and delivery systems to what kind of format the video should be, or what kind of media player is needed to where should the advertisement be placed? Then comes the question of how do you monetize it? Some analysts point out that it is still too early to say where this is headed given that there is lot of unfinished work in this area like standardization of video format etc. But the good news is that there is progress being made to address of these standardization issues. Recently the US-based Interactive Bureau of Advertising (IAB) outlined its guidelines for digital ad video and best practices.

What is sure though is that the consumption of video clips has seen a significant jump in many countries. Only time will tell how fast the market for video online network will grow and how much revenue it can generate. We have run out of time to address that Pandora box called privacy of the user when it comes to ad networks.

Technorati tags: video ad-networks, video ad-networks in india, jivox, ozone media, diaz nesamoney, heliion venture partners, idg partners india, technology, youtube, india, banglore