Searching for Profit in Online TV and Video; ON ADVERTISING & MARKETING

The Evening Standard (London, England), November 22, 2010 | Go to article overview

Searching for Profit in Online TV and Video; ON ADVERTISING & MARKETING


Byline: Gideon Spanier

HERE is a paradox: Television is still the most powerful advertising medium, so why has it struggled to generate significant revenue online and on mobile? Even the mighty Google does not find it easy to break even with YouTube while Britain's biggest commercial broadcaster ITV, with juggernaut hits such as X Factor, has seen the number of monthly video views on its website fall 6% this year.

The answer has to be that online video hasn't yet had the breakthrough moment that mobile enjoyed with Apple iPhone, when the consumer experience finally matched the hype.

Suranga Chandratillake, boss of video search engine Blinkx, which makes its money through advertising, is betting that tipping point for online video will occur when our TV sets become fully internet enabled. Ad agencies' thinking is beginning to change, he says, as they realise the breakthrough, when consumers embrace online TV, could finally happen soon -- and fast.

As a British chief executive who is based in San Francisco but whose company is listed on AIM in London, Chandratillake has a unique perspective. Unlike some who complain that the UK lags behind Silicon Valley, he is surprisingly upbeat. "London is an increasingly interesting place to be," he says, pointing to innovations such as The Times internet paywall and YouView, the collaboration between the BBC, BT, ITV, Channel 4 and others, which will see consumers have TV set-top boxes linked into the web next year. "The UK is seen as a market that is very similar to the US, where companies are worried about their ultimate fortunes, and you can conduct a true test here."

Chandratillake's point is that the UK online market is large and mature enough to see whether a new product or strategy can work. In the case of Blinkx, he says: "We have discovered that the UK and the US are the only two markets where you can make significant money in video advertising at the moment." France, Germany and Italy are "just not that advanced yet" because broadband penetration is lower and consumers are less clued-up.

This two-speed approach to digital extends to the ad industry itself. "Ad agencies in the UK are much more aggressively adopting video advertising than continental Europe," he says. "A lot of companies, especially European companies, tend to do their buying for video advertising through London."

Blinkx itself makes money in two ways from advertising. About 30% of revenue comes from consumers visiting its own website and the other 70% from Blinkx using its search technology to power video sites as varied as ITV.com, YouTube and BBC iPlayer (Blinkx takes a share of ad revenue or, in the case of the BBC, a fee). While technology matters, he says: "We are a media business. Our sales people are media people."

Chandratillake's company, which he founded in 2004 as a spin-off from technology giant Autonomy and floated in 2007, has just reported a maiden profit of $2 million ([pounds sterling]1. …

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