Internet video is an incredible story. Just take a look at the influence of YouTube, arguably the most successful of all Internet video startups. Google bought YouTube for $1.65B in 2006. It has paid off for Google. But despite this success, other big exits remain limited, despite a huge venture-funded bubble in Internet video firms — which is now morphing into a mobile video bubble.
What happens when you combine Internet video with mobile technology and social networks? Yikes. The VCs apparently can’t control themselves. More than $1.7B has been invested in mobile video plays to date, according to Rutberg & Company, which publishes an influential wireless industry newsletter.
In the latest edition of Rutberg’s newsletter, Managing Director Rajeev Chand points out that growth in mobile video is off the charts. Some estimates say that mobile video volume has doubled since Facebook’s Instragram added video just a few weeks ago. What’s amazing is that Instagram is now accounting for over 30% of the total OTT video, more than Google’s YouTube and Twitter’s Vine, according to analysis by Avvasi. The same firm, a video management firm, says that mobile video viewing is consuming 50% of all mobile video bandwidth.
“Vine and Video on Instagram represent a remarkable breakthrough in the growth of mobile video,” wrote Chand in Rutberg’s Wireless Industry Newsletter, released earlier this month. “Since 2005, venture capitalists have invested $1.7 billion in mobile video startups with limited success to date. The 6- to 15-second formats have significant implications to the media, telecom, and technology industry.”
But like all good VC bubbles, this will end with some champagne for the rare few and a tears for the rest of the bunch. And the story comes with its usual challenge: How do you monetize all that bandwidth-hogging video?
Whether this will be rewarding in aggragate is dubious. Let’s just take a look at the last generation of Internet video: Plain-vanilla video-sharing cites, a genre popularized in the mid-1990s by the likes of YouTube and Vimeo.
There is still an old crop of Internet video players who haven’t yet managed a big exit — Blip (formerly Blip.tv) comes to mind. Scouring the landscape of Internet video deals, let’s highlight the biggest scores so far:
- 2006, Google buying YouTube for $1.65B
- 2006, IACI acquired Vimeo. Valuation is unclear but there were rumors IACI was recently trying to sell it for $200-$300M.
- 2011, France Telecom acquires a 49% stake in DailyMotion, valuating it at about 120M Euros ($150M).
- 2012, Brightcove IPO, raising a total of $55M. Current market cap is $265M.
In 2012, Twitter acquired Vine when it had just three people. Valuation unknown. Both companies are private.
- Let’s be generous and throw in Netflix (NFLX), obviously one of the most successful Internet media technology companies out there. It’s a stretch, because Netflix started as a mail-in movie-rental company, but it has a market capitalization of $14B so that shows you where things can go.
I tried to think of more. But the cupboard is pretty bare – please alert me if I’m missing something! This aren’t huge numbers — really there’s only one deal over $1B — and YouTube still remains the highlight of the Internet video liquidity events, ringing up at $1.65. Let’s remember that the VCs have pumped $1.7 billion into mobile video. Anything over $500M would be considered a huge victory.
What’s clear is that over-the-top (OTT) video is having a big influence on networks, whether you talk about user-generated content or branded content and Netflix. OTT video traffic is eating the Internet — and now specifically, mobile Internet. Perhaps the biggest losers are the mobile operators, who have to fuel the bandwidth for the video frenzy with few monetization schemes baked in.
Mobile video, like Internet video before it, will be a winner-take-all event. There will be dozens of also-rans and disappointed VCs.