Pattern Recognition, by Ian Sigalow

The Future of Video

Introduction

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Ian Sigalow

<p>Ian is a co-founder and partner at Greycroft Partners in New York City. He has been a venture capitalist since 2001.</p>


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The Future of Video

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longtailI am very proud to announce Greycroft’s recent funding of Longtail Video.  Longtail owns the JW Player, which is the world’s most popular video player, and the company is a key part of our overall thesis in the online video space.

According to Comscore, there were approximately 40bn online video views in the US last month.  13bn of those views were on YouTube.  Hulu, Facebook, VEVO, Yahoo, and the rest of the major media sites accounted for another 4bn or so.  And the remaining 23bn views – 58% of the entire online video audience – were scattered across millions of websites, forming the proverbial long tail.

The long tail is even more important than these stats suggest.  First off, while the long tail represents 58% of the video views, it represents nearly 70% of the time spent watching online video.  Facebook and Youtube have large audiences, but the average video on these sites is just over 3 minutes long.  In the long tail, the average view clocks in at 7.6 minutes, the longest duration of any market segment.  Second, the long tail is growing at a much faster rate than the rest of the market.  Viewership in the long tail is up over 33% since September 2011, compared to overall flat market growth according to Comscore.

As the company’s name suggests, Longtail Video is very strong in the tail-end of the market.  The JW Player is used by millions of websites, accounting for over 3bn video views every month.  By our count, somewhere between 7% and 8% of all video watched in the United States is shown on the JW Player.  We were impressed that a 20 person start-up company could command such significant market share, particularly in an industry with well-funded companies like Brightcove and Ooyala.  And even more impressive is the rate of growth.  Millions of people come to the Longtail Video website every month just to download the company’s software, and as a result the JW Player has nearly doubled its market share in the last year.

While the scale of the JW Player captured our attention, it is also important to understand where the video market is heading.  This may surprise you, but over the last year YouTube has declined in both unique viewers (-7%) and videos watched (-30%).  Where YouTube shines is the amount of time spent on site, which is up in spite of declining traffic. This is the result of YouTube’s efforts to reign in content quality, as well as the emergence of content companies like Maker Studios, that have amassed millions of passionate followers on the YouTube platform.  Over time YouTube is becoming more like a cable operator, with dedicated content supported by the YouTube sales team.  There is an opportunity for other companies to follow in YouTube’s footsteps because the network effects on YouTube are not strong enough to consolidate the world’s video traffic to a single domain.

Our thesis is that the JW Player will be the platform of choice for the next generation of online video sites, just as it was for YouTube when they first launched.  The team at Longtail Video today is working hard on four things: 1.) simplifying its technology to the point where anyone can use it, 2.) pricing the service at a comparable level to web hosting, not the six-figure deals required by Brightcove, 3.) building the best cross platform video experience in market, and 4.) enabling advertising for users who want an ad-supported product.  The last point is important because the value of advertising inventory increases with scale, creating a major competitive advantage of the JW Player.  Over time we believe this combination will provide an unbeatable value proposition for the vast majority of the market.

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Ian Sigalow

http://sigalow.com

<p>Ian is a co-founder and partner at Greycroft Partners in New York City. He has been a venture capitalist since 2001.</p>

Comments
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    AUTHOR AlexBea1

    Posted on 5:38 pm January 10, 2013.
    Reply

    JW looks clean and seems to favor the the developers…(long term growth strategy?)  It seems like the WordPress plugin will keep a steady inflow of users coming in.  Do you find that the WordPress users who have installed JW are making the step to monetize their sites?

  • user

    AUTHOR AlexBea1

    Posted on 5:39 pm January 10, 2013.
    Reply

    JW looks clean and seems to favor the developers…(long term growth strategy?)  It seems like the WordPress plugin will keep a steady inflow of users coming in as well.  Do you find that the WordPress users who have installed JW are making the step to monetize their sites?

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