By David Lieberman, USA TODAY

NEW YORK — You don’t need a pan and a stream in California to join the next gold rush. A video camera, computer and high-speed Internet connection will do.

A vast array of professional and semiprofessional producers are starting to use those tools to create ad-friendly entertainment and news videos expressly for the Web. The goal is to dramatically change people’s video-viewing habits — and cash in on a potentially enormous business opportunity.

“It’s like the early days of cable,” says former Viacom executive Herb Scannell, now CEO of Internet video investment and support firm Next New Networks. “We’re inventing new business models, new talent and new programming models.”

Internet users already can find countless fresh choices in the middle ground between reruns of slick network TV programming, such as the shows on Hulu.com, and amateur clips such as the kind popularized by YouTube.

Popular genres for original Web productions include dramatic series (Lonelygirl15and Prom Queen), topical comedy (BarelyPolitical.com, 236.com and comic Will Ferrell’s Funny Or Die), news analysis (TalkingPointsMemo) and specialized interests (for example, ThreadBanger offers the latest about sewing and knitting).

Producers have powerful incentive to test the market: Ad spending for Internet videos will rise 455% by 2011 to $4.3 billion, says research firm eMarketer.

“It’s growing faster than any other advertising category,” says George Kliavkoff, NBC Universal’s chief digital officer. “There’s just a sea change.” That’s one reason his company and other major TV network owners are starting to dip their toes into original Web production. Over the past few weeks:

•Disney (DIS) formed its first Web-only production house, Stage 9, which forged a deal with Toyota to sponsor its first made-for-Web series, the sitcom Squeegees.

Disney’s ESPN also said it will dramatically step up its Internet-only sports programming.

•NBC (GE) created its first network for original online video. Visitors can get an in-depth look at new cars from clips produced by DriverTV; NBC paid $6 million for a 35% stake in the firm.

•And CBS, (CBS) which defined mainstream news in the radio and TV eras, launched MobLogic.tv, a website with daily clips that it says provides “a reality check on mainstream news, (Internet) 2.0 style.”

The modest size of these investments reflects the companies’ uncertainty about where they fit in.

“The challenge we have with this space is: How do you market these original Web shows so that they become something people want to see and not something that they just come across?” says Albert Cheng, executive vice president for digital media at the Disney-ABC Television Group. “We are experimenting.”

Independent entrepreneurs

While the giants dabble, independent entrepreneurs are taking advantage of the freedom the Internet offers to reach millions of people without having to go through gatekeepers such as TV networks and cable operators. They don’t even need powerful allies to help raise cash, sell ads, get online and market. New-generation studios including Worldwide Biggies, Black20 and 60Frames are eagerly seeking deals to support promising talent.

Most salivate at the prospect of creating a hit entertainment series — a string of episodes that typically run 10 minutes apiece or less — similar to Lonelygirl15, KateModern and Prom Queen.

It’s relatively easy to make a profit: They employ little-known actors, simple camera shots and few, if any, special effects. “The cost is just hundreds of dollars a minute,” Scannell says. “If you’re getting $10 (for every 1,000 viewers that see an ad), and you have 1 million views, then you’re break-even. If you get $20, then you’re in the black.”

Those that work closely with sponsors can do much better than that. For example, LG15 Studios cut a deal with Neutrogena that made the cosmetics and cleanser company and its products key elements in the story line for Lonelygirl15

“We were thrilled that there’s this medium that’s interactive, and if you can get creative and good writers and good brands and put all these pieces together, then you can do something that engages the audience and allows us to do this as our day job, which is insane right now,” says Greg Goodfried, co-creator and executive producer.

Their most recent production, KateModern, showed that the concept was no fluke.

“It just finished with 26 million views, and it was sold in sponsorship ahead of time,” says Quincy Smith, president of CBS Interactive. “Do it once, and it’s interesting. Do it twice, and now you’re starting to see something evolve.”

There’s a lot of activity as well in non-fiction Web video, especially from newspaper and magazine companies grappling with slowing ad sales. “Video is a central component to the future of these industries because they have to grow their business somewhere, and right now, online video is the most valuable real estate in the media industry,” says Jeremy Allaire, CEO of Brightcove, an Internet video services firm.

National newspapers including USA TODAY, The New York Times, The Wall Street Journal and Financial Times, as well as regional publications such as The Houston Chronicle and The Gainesville Sun tap journalists for video reports, interviews and analysis. So do magazines, including Entertainment Weekly, Billboard, Better Homes and Gardens and Rolling Stone.

Beginning with the recent Super Tuesday presidential primaries, Newsweek — in partnership with corporate siblings The Washington Post and Slate.com — stepped up the competition by enlisting editors and analysts for live, CNN-like, Web-exclusive campaign coverage and commentary.

‘There’s a business there’

“It was sold to Dodge in three days,” says TV news veteran Tammy Haddad, executive producer of the coverage. “There’s a business there, and a very minor amount of money was spent. All of the reporters were already in place.”

Although many Web productions are profitable, producers say the big payoff will come in a few years as audiences and advertisers become more comfortable watching video online.

People collectively spent 959 million minutes a day watching Internet shows and clips in January, research firm ComScore says.

While that sounds impressive, Leichtman Research Group President Bruce Leichtman notes, “People still spend more time watching Extreme Makeover and Moment of Truth combined (on days when the shows air) than they do with all online video.”

That’s changing, though, especially among the young adult viewers craved by advertisers. About 42% of 18- to 34-year-olds watch Web videos at least weekly, up from 28% in 2007, Leichtman found in a recent survey.

The vast majority of the viewing time goes to user-generated videos and network TV fare, including clips people lift from news and comedy shows.

But those markets present challenges for advertisers.

They can’t effectively buy spots in advance on user-generated material, because “You can’t really tell what clips are going to be hot next,” says PodShow CEO Ron Bloom, whose firm aggregates Web videos to facilitate ad sales. “And it’s typically pornographic, stolen or stupid.”

Meanwhile, the major broadcast and cable networks may not have enough openings for ads on their rerun TV shows. “If you’re trying to spend $1 million on an online buy, you have to reach tens of millions of people,” says Jayant Kadambi, CEO of YuMe, a broadband video ad sales firm. “You just can’t do that on NBC.com.”

To keep ad dollars from flowing elsewhere, the major networks are busily creating Web attractions, including original videos.

For the most part, though, their productions have been designed to enhance viewer interest in popular TV shows. For example ABC’s Lost: Missing Pieces, CBS’ Big Brother House Calls, Fox’s Prison Break Visitation and NBC’s Heroes 360.

“It’s a good way to continue to have a relationship with these fans” and advertisers, Cheng says.

That also was a safe thing to do before the recent strike by Hollywood screenwriters was resolved. A key issue in the dispute was how much writers would be paid for work that appears online.

Now that there’s a contract, conversations about digital initiatives “have exploded,” says Vivi Zigler, executive vice president at NBC Digital Entertainment and New Media. “It’s a matter of ’should we,’ not ‘could we.’ That’s important.”

Disney took the boldest step in late February by creating Stage 9 Digital Media. But the new media studio still dreams about seeing one of its series on TV.

“We call that the holy grail,” says Barry Jossen, general manager of Stage 9. “The new media business, from the sponsors’ point of view, is definitely experimental. So the kinds of commitments they are making are modest. It’s a break-even business.”

He’s undaunted by NBC’s experience in February — during the writers’ strike — when it became the first major TV network to air an entertainment show originally made for the Web. Although the series Quarterlife was a hit on the Internet, NBC moved it to cable channel Bravo after the first episode attracted a mere 3.1 million viewers.

“Just because their one and only shot didn’t work out as pristinely as they would have hoped or dreamed doesn’t mean that’s the only opportunity like that,” Jossen says. “We have to keep trying.”

Cutting deals

While Disney focuses on producing its own Web videos, CBS and NBC are buying and investing in independent producers.

CBS has led the way here cutting deals with firms including high school sports site MaxPreps, business-satire-oriented Wallstrip, celebrity news provider Dotspotter and Joost, which offers a hodgepodge of new and old videos.

That’s one reason the smart money is betting that the networks eventually will control the biggest mines when gold rush fever finally subsides.

“The theory of the Internet is that you can get anything you want,” says investor Richard Wolpert. “But you still have to be exposed to the fact that it exists. That is still a very valuable asset. It feels like this is the year when everything is happening. But on a historic perspective, it’s a 20-year process, and we’re in the middle of it now.”

Source: http://www.usatoday.com/tech/techinvestor/industry/2008-04-03-web-video-advertising_N.htm

LOS ANGELES - CBS Corp. executives took an unusual risk last fall before its series debut of “Big Bang Theory” — it offered the entire episode online despite the chance it would sap viewership for the TV premiere.

The show, about two geeky physicists and their beautiful female neighbor, got 90,000 views on CBS.com and other Web sites over a week, followed by a better-than-expected 9.5 million for the Sept. 24 on-air premiere.

“The thought was purely to try to find new eyeballs in a medium that generally appeals to younger demographics, and then drive them to put butts in seats to watch on their beautiful plasma-screen TV when the series takes off,” said Quincy Smith, president of CBS Interactive. “It was fairly radical, and we’re happy with how it came out.”

Looking to tap new revenue through online ads, attract new viewers and keep loyal fans, broadcast networks are making bigger, riskier bets on Internet delivery of their shows. The challenge is to grow viewership online without cannibalizing traditional ratings and DVD sales while making more money on programming seen on the Web.

But online audiences are still limited, a stumbling block that’s expected to be a hot topic at the National Association of Broadcasters’ annual gathering, which starts Monday in Las Vegas.

According to comScore Media Metrix, ABC.com led the network pack with 8.5 million unique visitors over its entire lineup of shows for the whole month of February, followed by NBC.com with 7.9 million. By comparison, a single episode of CBS’s “CSI” recently took in more than 20 million TV viewers in one night.

Still, there are signs that the online experimentation will pay off.

Networks now charge more per thousand viewers online than they do over the airwaves, where the average for a primetime show is about $25. Analysts put the online rate anywhere from $35 to $50 per thousand, though there are millions more potential traditional TV viewers.

Advertisers pay more online because there is a better accounting of how many viewers see the ads and an extra benefit that an impulse to purchase can be acted on with the click of a mouse.

“For an advertiser, you’re getting a clear performance result,” said Bob Davis, a Web investor and former CEO of search engine Lycos. “No matter what the click-through (rate) they get, it’s infinitely larger than the click-through they get on TV. The click-through they get on TV is zero.”

ABC, which streams “Lost” and “Desperate Housewives” on its ABC.com site after airing on TV, is aiming to tweak its formula to make its online ads as lucrative as its TV ones.

“In order for us to drive the number up to what we get on broadcast, we have to do one of two things. We have to either increase the number of ads that you currently see on ABC.com or figure out different ways to generate value for advertisers,” said Albert Cheng, executive vice president of digital media for the Disney-ABC Television Group.

“We are not at parity yet with broadcast, but the goal and everything that we are doing is to drive toward parity,” he said.

The CBS experiment with “Big Bang Theory” was so successful that the network repeated the online-preview formula with two other shows, “Dexter” in February and “The Tudors,” on the CBS-owned pay cable channel, Showtime, in March.

ABC, a subsidiary of The Walt Disney Co., expects to explore the effectiveness of localized advertising in test markets in the next several months, because its media player can detect the location of the online viewer, Cheng said.

Technology companies also are working to style ads that will be more interactive, leading to higher sales — such as making products that appear in shows clickable — or targeting viewers based on what kinds of content they have seen recently.

“Ultimately, where the Internet will really become a powerful source of revenue is that all forms of advertising will work in a highly targeted way,” said Steve Mitgang, chief executive of Veoh, a Web site that streams ad-supported shows. For TV shows at least, ad-supported free viewing online has proved more profitable than fee-based video downloads on services like Apple Inc.’s iTunes, said George Kliavkoff, chief digital officer of NBC Universal.

NBC Universal, a unit of General Electric Co., stopped supplying its hit TV shows to iTunes last year. Instead, it teamed up with News Corp. to launch hulu.com, a Web site that went public last month and streams shows like “Battlestar Galactica” and “The Office” for free with ads.

The NBC Universal-News partnership, as well as CBS, are testing a “ubiquitous” approach, making their content available across dozens of Internet partner sites, including YouTube, rather than drawing viewers to a single destination.

It’s not clear which model of delivery will prevail. None of the networks disclose how much ad revenue they collect from online show streams, but all have made major investments in what is a growing business.

“We’re sort of in the first inning of how some of these digital platforms will develop,” said Kliavkoff. “We still don’t know what the winning business model will be at the end.”
 
Source: http://news.yahoo.com/s/ap/20080412/ap_on_hi_te/networks_online

Here are 10 common mistakes made by web entrepreneurs… not me of course…

1) People are Lazy - Don’t assume people will have an interest in your product like you do. They won’t. They’ll look at it for 5 seconds, and i.

2) Being Too scattered - Well said. How many mash-ups do you regularly check in? Do one thing, do it as if no one can do it - this is the key. If you try to combine many things (Digg + Delicious + StumbleUpon + YouTube), you are bound to fail.

3) Lack of Sustained Execution - It is closely related to the cold-start problem. This is like launching a rocket in to the Space - you need tremendous energy to push against the gravity, once it crosses the atmospheric limits, it will free flow. Unless, you battle out the initial years, new web services hardly survive.

4) Pointing the Finger when Missteps Happen - Admit mistakes and take responsibilities. Mistakes can be corrected and reworked towards a great success. Move on.

5) Not Appointing a Full-time Community Manager - I am not surprised to know Flickr developers frequently interacted with the users (added comments on photos) to listen to their suggestions on improving Flickr. I have seen at humblevoice as well - where in I am being treated like a VIP.

6) Not Building Archived Knowledge - There will be always new users and they will be asking the same questions over and over. You can have a simple FAQ list. But, the smart thing to do is to provide the answering powers to the users themselves. Develop a support community / forums for helping your users.

7) An Over-Focus on Social Value - I agree with this because, I would use a social web application for what it can do to me. Flickr helps me to organize my photos, Orkut helps me to keep n touch with my friends and StumbleUpon provides interesting sites to view. I have a personal satisfaction attached to each of these websites as well - Flickr helps to boost my pride on how good my photos are and Orkut proves my social network (how many friends have you got?). If you can’t satisfy a personal need, do not build a social application.

and I would add few more to the list.

8) Addressing a future need - Flickr founders saw the rise of digital cameras and realised people would need an online application to organize the digital photos. YouTube founders realised there should be a way to share ‘home made videos’ to the world. What is the future need? Rise of SmartPhone. People will be on the move - what they would be interested in? Can you serve them?

9) Buy your first users - It may seem unethical, but to avoid the cold-start problem, you need to do it. Buy or hire users who would pretend to be the users of your new Internet application. They would ‘actively use’ your web application, demonstrate the new users what you can accomplish with it. 

10) Reward the Top users - Either by directly listing the “Top Users” as Digg did it or just listing the “Top Things” as Flickr and YouTube. But, reward your users with some pride so they can show it off to their friends, brag about their accomplishments (with your application) in their blogs. 

http://sequoiacap.com/ideas/

Writing A
Business Plan

We like business plans that present a lot of information in as few words as possible. The following format, within 15-20 slides, is all that’s needed:

Company Purpose

• Define the company/business in a single declarative sentence.

Problem

• Describe the pain of the customer (or the customer’s customer).
• Outline how the customer addresses the issue today.

Solution

• Demonstrate your company’s value proposition to make the customer’s life better.
• Show where your product physically sits.
• Provide use cases.

Why Now

• Set-up the historical evolution of your category.
• Define recent trends that make your solution possible.

Market Size

• Identify/profile the customer you cater to.
• Calculate the TAM (top down), SAM (bottoms up) and SOM.

Competition

• List competitors
• List competitive advantages

Product

• Product line-up (form factor, functionality, features, architecture, intellectual property).
• Development roadmap.

Business Model

• Revenue model
• Pricing
• Average account size and/or lifetime value
• Sales & distribution model
• Customer/pipeline list

Team

• Founders & Management
• Board of Directors/Board of Advisors

Financials

• P&L
• Balance sheet
• Cash flow
• Cap table
• The deal

 http://sequoiacap.com/ideas/

Elements of Sustainable Companies
Start-ups with these characteristics often foretells the success of a business and the likelihood of it becoming a sustainable, enduring company. We like to partner with companies that have:

Clarity of Purpose
Summarize the company’s business on the back of a business card.

Large Markets
Address existing markets poised for rapid growth or change. A market on the path to a $1B potential allows for error and time for real margins to develop.

Rich Customers
Target customers who will move fast and pay a premium for a unique offering.

Focus
Customers will only buy a simple product with a singular value proposition.

Pain Killers
Pick the one thing that is of burning importance to the customer then delight them with a compelling solution.

Think Differently
Constantly challenge conventional wisdom. Take the contrarian route. Create novel solutions. Outwit the competition.

Team DNA
A company’s DNA is set in the first 90 days. All team members are the smartest or most clever in their domain. “A” level founders attract an “A” level team.

Agility
Stealth and speed will usually help beat-out large companies.

Frugality
Focus spending on what’s critical. Spend only on the priorities and maximize profitability.

Inferno
Start with only a little money. It forces discipline and focus. A huge market with customers yearning for a product developed by great engineers requires very little firepower.

Ron Hornbakers Keyword Tool:

http://ronhornbaker.com/keyword-suggestion-tool/?q=spa&mkt=US