Joost: The sequel

NEW YORK--Not so long ago, Web video start-up Joost was looking a lot like the Waterworld of Web 2.0.

"We had a company and a product," the company CEO Mike Volpi said here in an interview at Joost's office, a brightly lit space a few blocks from Union Square that the company moved into several months ago. "It didn't work particularly well. We needed a new company, culturally, product-wise, target market wise."

Volpi now hopes that he can steer Joost's trajectory away from something like one of those big-budget movies that tanks at the box office, and turn it into the equivalent of a runaway DVD hit.

Built by Skype and Kazaa founders Janus Friis and Niklas Zennstrom and originally known under the shady codename "The Venice Project," Joost was buzzed about long before its launch as a potential "YouTube killer." It was pumped full of venture capital from both Silicon Valley firms and entertainment-industry stalwarts (including CBS, which now publishes CNET News) excited about the possibility for an online video hub free of the piracy issues that continue to plague YouTube. At its initial launch, Joost invite codes were traded around the blogosphere like currency.

But after high-profile content partnership announcements from CBS and Viacom, the big-name deals stopped rolling in and the limited selection became a target of criticism. Then, NBC Universal and News Corp. launched their joint venture, Hulu, and achieved a reaction opposite to Joost's--ridiculed and nicknamed "Clown Co." before its launch, the video portal was a surprise hit.

The Joost model--a downloadable peer-to-peer video client--became swiftly outdated as streaming video took off. "In Internet years, that was a long time ago," Volpi said of the company's decision to originally structure its software around a download."A lot of content owners were very concerned about basic Internet security. That was the reality two and a half years ago."

Joost then had to deal with some particularly negative press. Bloggers turned up the vitriol. A feature story in Portfolio magazine described the company's path as going from "from superhero to life support." Joost enjoyed a brief moment back in the spotlight, or at least on the desktops of bored office workers, when it streamed all of the NCAA's "March Madness" tournament games live, but it quickly fell off the radar again.

Volpi, a former high-profile executive at Cisco who was long rumored to be a potential successor to CEO John Chambers, joined the Joost in June 2007, shortly after its commercial launch. The buzz was fading, but the declarations of death hadn't yet set in.

In due time, the start-up ditched its peer-to-peer model altogether and started developing a Web-based version. "Three months after we launched, we got out of beta on the client app," Volpi said. "We shut it down and started developing the Web app."

Joost also quietly slimmed down its employee headcount from nearly 200 employees to just shy of 100. Its lofty international ambitions were trimmed back to focus on the U.S. market. Though Volpi is based in London, Joost's hub is now the 45-employee New York office. They're closer to the media and entertainment industries now, Volpi explained, as well as to the people they need to negotiate with regarding digital rights.

"As a company, internally, we finally turned the corner in the late summer," Volpi said. Now, several months later, he believes it's paying off.

Joost redux
In October, Volpi said, the site pulled in 600,000 unique visitors in the U.S. and 600,000 abroad. In November, that was up to 1.2 million in the U.S. and 1 million elsewhere. That's very small compared to YouTube's 100 million viewers or even Hulu's 23 million, according to the October numbers from traffic firm ComScore, but it shows that Joost indeed still has a pulse. There's enough funding to last "well into next year," Volpi added, and said that he hopes to make Joost profitable late in 2009.

It charges between $10 and $45 for advertising CPMs, not far off from the $25 to $35 reported for Hulu a few months ago.

The new Joost has an iPhone app, something that Hulu doesn't have yet. It also has Facebook Connect built in, as of last Friday, and Tuesday announced a deal with nine new independent music labels to bring more music videos and concert footage to the site. On that note, there's something else: new Joost, unlike the old Joost, has a target demographic. The average user is only 25 or 26 years old, viewers skew about 60 percent male, and advertisements have a clear bent toward the coveted 18 to 34 age bracket. Some of its biggest hits have been music videos and Japanese animation, Volpi said.

But even though things have been looking up, Joost's challenges are far from over. You can't simply scrub away bad press, and the recession will obviously make things even more difficult. There's also the fact that in addition to Hulu and YouTube, it now also faces competition from the likes of Sling.com, MTVMusic.com, and a host of others.

"Like all interesting markets there's a ton of people trying to do the same thing," Volpi said of the glut in online video. "(We're) less focused on the competition and more focused on trying to find the right answer."

So if he had to go back and change things, would he have gotten rid of the buzz? Volpi said he's not sure.

"It's a mixed bag. Being honest, had that hype not existed, I think the whole market would be in a different place," Volpi explained. "In some ways, obviously, it hurt us because it's an enormous challenge living up to those expectations."

"But you can't have your cake and eat it too," he concluded. "You've just got to live with that. That's a consequence we got as a result of the exposure in the early days."

Disclosure: CBS Corp., which publishes CNET News, is an investor in Joost.