Jeremy Allaire, who was behind the success of Flash as CTO of Macromedia, started Brightcove five years ago to offer media companies an online video publishing platform. While YouTube was a consumer play, Brightcove focused on a business-to-business model by targeting publishers. After some layoffs in December of last year, the company turned profitable this year, launched a Brightcove Alliance to share technology and know-how with its clients and partnered with Boxee to play online video on TV. The company hasn’t taken additional capital since raising $59 million in a third round of financing in 2007.
VentureBeat: A number of your media clients are facing deep structural problems and have seen their valuations fall dramatically in the last year. How has that changed the nature of the deals you’re making and your strategy in general?
Jeremy Allaire: All the major publications have cost pressures. They’re trying to analyze everything they do, divide it by 1,000 [impressions], and are trying to squeeze out a profit in anyway that they can.
But even in this environment where people are focused on costs, they’re still allocating an increasing share of their resources toward the online space. We’ve also designed our system to be self-service from the application itself to ad operations. People can launch in a few hours or in less than a day. For large-scale video projects that require more customization, it can take several months.
We don’t disclose our margins, but they are very good. They’re at the highest levels of comparable public companies. Plus, we’re at a tipping point where we’re going to see very significant growth and broad adoption of video that’s going to challenge its traditional use cases. We’ve historically leaned toward medium to large publishers and we have a mid-market offering that costs about $500 a month.
VB: How would you say your revenue breaks down at the moment?
JA: This year, more than 50 percent of our new business is coming from marketers. That’s companies like General Motors, who want to use videos throughout their websites to enhance how they are marketing to consumers. There are also government agencies, non-profits and educational institutions. It is also highly distributed. Twenty-three percent of revenue comes from international markets, and we’ve really only started there.
When Brightcove began, we started with this concept of video ubiquity. We focused on media publishers because we saw immediate, large-scale opportunities, an existing revenue model and a real focus on time to deliver. We thought they would be a first mover and it would be a good way to pressure test our technologies. These other opportunities have only emerged in the last 12 to 18 months.
VB: You started at the same time as YouTube but took a very different strategy in focusing on the high-end, professional market. Since then, you’ve turned profitable this year, while they are still conceivably losing money on 1 billion views a day. What are your thoughts on their strategy?
JA: I think they’re going to crack the code. From a consumer point of view, they completely dominate mindshare in the space. After last fall, they took on new leadership and they’re more disciplined. They’ve taken a little more of a focus on premium media and they’re getting through the stigma that they’re not safe for marketers.
VB: What about the rumor that Google was in talks to buy you for $500 to 700 million?
JA: I don’t comment on rumors or speculation. We think there’s room for a strong, independent global online video company.
VB: So when’s the IPO?
JA: [Laughs] I can’t comment on speculation. We’re impressed with the financial market recovery though. There are also a lot of alternatives to the IPO market for privately-held companies these days. And a lot of costs to being a public company.
VB: Nielsen statistics recently showed that Facebook is becoming more of a force in online video viewing, with 23 million uniques last month. How do you see them influencing the space?
JA: They’re addressing a very different use case. They’re more of a threat to YouTube in the personal media-sharing use case. Many consumers would rather have a personal collection of content in an environment where they can control who sees it. For us, there’s a lot of broadcasters and media publishers who are leveraging their Facebook presence with integrated apps. They’re embedding the Brightcove media player so it’s good for us.
VB: How do you see online video ads changing in the next three to five years? Will we continue to see pre-roll and interstitial ads or more aggressive overlays like YouTube introduced this year?
JA: When you look at online video advertising, marketers are just trying to re-use what worked offline. I think we’re going to see more hybrid video ads that offer experiences and ask users to engage. When ABC launched their catch-up TV services on ABC.com, they started introducing a really compelling format that used Flash to take-over the entire player environment with a rich, engaging and interactive marketing experience. In that kind of model, it is invitational, and the creative opportunities are pretty limitless. However, for media buyers, this is going to involve a lot more custom creative work, so it’s hard for such a format to gain scale.
Right now, pre-roll ads are so prevalent. You can measure it. There are no new assets required to produce them. But we think that as more hybrid experiences catch on, it will lead to standardization and economies of scale.
VB: What are the biggest questions you’re asking yourself about online video at the moment?
JA: There’s a big question as to whether meaningful, over-the-top distribution opportunities in video will emerge. What I mean by that is people are getting access to live, high quality, on-demand video without being dependent on traditional cable, satellite or telecom companies. There’s also convergence. There’s a sufficient volume of premium content coming online and speeds are high enough for HD streaming video. Media buyers are changing their behavior.
So the question is whether these new consumer products from Cisco, Microsoft and Apple that people are turning to instead of satellite and cable will be easily and openly connected to the Internet. Will they be as open as the web? And if that happens, there will be a huge amount of activity that gets funneled toward these outlets.
A second question for me is about measurement. Display and search marketing are incredibly measurement driven. Will there be the same kinds of metrics for video — statistics that show whether video increases conversions, drives greater customer retention and loyalty, and by how much? We need to see the same rigor and science of measurement in digital video that we’ve seen from other areas of digital marketing.