A Guide To Online Video Monetization Options

1Executive Summary

The online video world is young, ambitious and full of people ready to take on some financial risk to engage with it. However, that doesn’t mean they won’t want their money back. What are the different paths they might take towards defraying their costs — and maybe even making a profit? We take a look below.

In-Video Advertising

What Works: It’s simple to implement. Just go through the YouTube partnership process or partner with a distribution site like Blip.tv or Koldcast. You’ll be enrolled in a deal that gives you a share of the money made based on pre-roll, post-roll and text advertising.

The Potential: Revenue from ad partnerships aren’t necessarily enough to fund entire productions, but it is reliable if you can build the audience. Ryan Higa, whose Nigahiga YouTube channel was the No. 1 Most Subscribed Channel in 2009, told Liz Gannes at NewTeeVee Live that his YouTube earnings were “better than a part-time job.” And Blip.tv recently posted that they sent out “hundreds of thousands of dollars” for their first quarter payouts, with a 30 percent increase in shows receiving checks for more than $1,000.

The Catch: You won’t immediately rake in the dough, as revenue-sharing deals are based on views — which means that if you have trouble building an audience, you’ll also have trouble making back your initial investment. Not all rev share deals are created equal and thus it’s important to read your contract over. Also, depending on the kind of deal you make, you could end up losing a sixth of your potential audience thanks to people clicking away during a pre-roll.

Take A Multi-Platformed Approach

What Works: The case study for this approach is “The Bannen Way.” An independent project scooped up by Sony, it was produced as an independent film with a budget of approximately $1 million, and distributed for free for a short time on Crackle.com as a web series. The show racked up 8.4 million views in its first six weeks on the site (with pre-roll advertising) before all but the first two episodes were taken offline; the show is now currently available for rent or download as a feature film on Amazon VOD, and a DVD release is forthcoming. That’s three different markets for their content and three different opportunities for generating revenue, all because the product works both as a series and as a feature film.

The Potential: Multiple platforms means multiple opportunities to make back one’s money, including proven means of generating revenue like DVD sales, and thus it’s a great fit for projects that require larger budgets and might be able to attract some star power from better-known actors. Being able to operate both as a series and as a feature film opens up possibilities like cable licensing as well.

The Catch: On a creative level, it’s important to be careful of structure — it’s a thin line between a web series that’s a serial narrative and a web series that’s just a chopped-up feature. Also, this approach can often require a lot of cash up front, which might also require giving up the rights to your project in perpetuity.

Product Placement and Sponsorship

What Works: Popular and respected web series like “The Guild” and “Easy to Assemble” exist because of brands like Sprint and IKEA, which keep their productions funded and their crews paid. While relationships between individual shows and their sponsors are wildly varied, if you can find a brand who’s engaged with your vision and has the cash to spare on it then the entire production process is bound to be a lot more smooth.

The Potential: Sponsors bring deep pockets that often cover the entire production budget and promotional support, which means that creators aren’t just minimizing risk — they’re making a living making web video.

The Catch: Well, hopefully you’re not a damn-the-man type, because congratulations — now you’re working for him. Some sponsors are easier to work with than others, but corporations as a rule verge on the cautious side, and more likely than not you’re bound to make a number of compromises on your personal vision.

Also, it’s important to consider where you are in the production process before taking this approach: shooting a web series with the intention of bringing a sponsor on board after-the-fact can be a gamble. The web series “Trenches,” for example, was produced by Stage 9 in 2007, but for a number of reasons wasn’t released until this February. One of the complications was that while Stage 9 and director Shane Felux would have loved to engage a sponsor with the series, finding a good fit for an advertiser was hard given that the show a) had already been completed and b) took place in outer space and on an alien planet, where even an advertiser logo would have seemed grossly out of place. The show remained homeless until Sony’s Crackle picked it up for distribution.

Rental Programs and Micropayments

What Works: This option isn’t strictly for the web series creator — the target of programs like YouTube’s rental program, Amazon’s VOD program and sites like Indieflix is more the independent filmmaker who wants to self-distribute his or her film online. But it still presents an interesting option for those who feel that their content is worth a few bucks a view.

The Potential: This is a new and relatively unproven concept so far — just as one example, YouTube’s rental program has yet to perform monetarily.

The Catch: In the web’s culture of free, the concept of paying for content is seen in some corners as on par with Satan-worshiping. In addition, the options available might not guarantee much: The YouTube rental program, for example, does not specify in its contract what percentage of the profit you’ll receive from rentals. That has the potential to change in the near future — Dynamo Player, a new player currently in beta, was designed to simplify the process of soliciting micropayments from audiences with an in-player Paypal system.

Fan Donations and Kickstarter Programs

What Works: Relying on the kindness of strangers? It really can work. The classic example of this is “The Guild,” which might not have secured its Microsoft-and-Sprint-funded second season without fans donating money to complete the first season. And sites like Kickstarter.com formalize the process of soliciting donations and setting up reward programs for those who might donate.

The Potential: One recent success story is the indie comedy series “Remember When,” which used Kickstarter to raise the $2,000 it needed to complete post-production on its first three episodes — and is now fielding offers from distributors and producers for the remaining seven. Not all of these campaigns are successful, but for a web series that has a large support network and just needs a little extra help, it can be the perfect solution.

The Catch: People have to like you. Scratch that. People have to LOVE you. And if your fans are donating five bucks a head, there have to be a lot of them. This is not a strategy for anyone right out of the gate, or anyone who’s still struggling to build an audience. And if your fans don’t feel properly thanked for their contributions, you’ll lose their support — keeping them happy has to be your priority.

Right now, there’s no perfect solution, but plenty of options and approaches. The key is picking one that fits the project — and your budget.

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21 Comments Subscribers to comment
  1. Paul Sweeting Thursday, May 6, 2010

    Rohith–I think that the more apps-based approach to media/content distribution on mobile platforms will create new monetization opportunities for publishers. Because the app developer is not dependent on third-party UI they’ll better be able to control the total advertising environment around their content which is likely to lead to more click-throughs and thus more revenue.

    Significantly, Apple’s new iAd platform allows for the insertion of in-app ads that can run within the app, so clicking on an ad doesn’t dump the user out of the app and into a browser, limiting the risk Liz referred to that users might not come back to be presented with other ads. Again, that’s likely to increase click-throughs and eventually CPMs.

    Also, of course, some of the big media/broadcast companies are planning or attempting to erect subscription walls around their mobile apps. If they’re successful, I think you’ll see them, over time, begin to pare back the amount of free web-based content they make available.

  2. Liz Shannon Miller Thursday, May 6, 2010

    Hey, Om! Pretty much every player in this space uses some variation of these elements — for example, to answer your question, Rev3 uses a combination of sponsorship and in-video advertising for its content.

    For shows with small audiences, it’s important to build up the base without shoving sponsors down viewers’ throats or requesting micropayments. In-video advertising is a good fit.

  3. And what about the monetization opportunities for Media/Broadcasting companies on the Mobile devices? We saw Bloomberg, BBC News, etc. support the iPad platform on launch. There’s no live video yet (or video of their past programs). What might be monetization opportunities for such media/content/broadcasting companies?

    1. Liz Shannon Miller rohith Thursday, May 6, 2010

      That’s a great point, thanks for the comment! The answer is probably some of the same above techniques, combined with the opportunities that come with mobile — which deserves its own entire post.

  4. Liz how does this pertain to the more niche outlets such as Revision3 or even our own internal video efforts. What are the best tools for monetization for such sites/shows with small audiences.

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