YouTube rivals look for answers

The Internet video market is hot, but if your company's name isn't YouTube, it isn't such an easy place to do business.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Greg Sandoval
5 min read
For months, analysts have predicted a shakeout in the much-hyped video-sharing sector, a business made famous by YouTube.

It increasingly looks like they were right.

Revver, a Los Angeles video-sharing company noted for being among the first to share advertising revenue with videographers, announced last month that two of the company's three co-founders and an undisclosed number of "support staff" were no longer with the company. Among those who left were Rob Maigret, Revver's chief technology officer, and David Tenzer, the head of media partnerships.

Industry insiders say Revver and other smaller video-sharing sites are in turmoil because of the sheer domination of their nascent market by YouTube. Named recently by Time magazine as "Invention of the Year," YouTube, which was acquired by Google last year, has so taken control of the video-sharing market that many rivals now are switching business models to avoid going head-to-head with the YouTube juggernaut, shaking up their executive ranks, or selling out.

"I think we can all acknowledge that YouTube has won the big prize," Thomas McInerney, the former CEO of Guba, said in an interview with CNET News.com two weeks ago.

Maigret and Luckett
Credit: Brett Williams
Former Revver CTO Rob Maigret (left)
and Revver co-founder Oliver Luckett,
who left the company last month.

Headquartered in San Bruno, Calif., YouTube's traffic grew from a few thousand to 30 million visitors in a year. The company's success is based largely on having a video player that didn't require any software downloads and by providing users with an easy way to upload clips. Another important factor was the decision by YouTube executives not to prescreen videos before they were posted--a controversial policy that allowed people to share snippets from popular TV shows, music videos and movies without the copyright holder's permission.

Said Revver co-founder Oliver Luckett in an interview Thursday: "YouTube has won round one. It has absorbed everything."

A Revver spokeswoman said Maigret and Tenzer have "transitioned to consulting positions." But Tenzer's departure was particularly startling to some observers. He was wooed away from the Creative Artists Agency, one of Hollywood's most powerful talent agencies, only seven months ago. In his nearly 25 years at CAA, Tenzer earned a reputation for packaging major entertainment deals and was brought to Revver to help the start-up form partnerships with Hollywood studios.

video market share

Tenzer declined to be interviewed. Maigret has left to collaborate with Luckett, who left Revver for a video project. Luckett said Revver, founded in 2004, is healthy and that he believes the company will succeed. He declined to give specifics on why he walked away.

"Let's just say I see a different opportunity," he said last week.

Sources close to Revver say it will now focus on improving the core businesses: video sharing and ad distribution, and is less concerned with big studio deals.

San Francisco-based Guba saw three executives leave the company last month, including CEO McInerney. Guba has recently hired banker Blake Warner of Thomas Weisel Partners to help find a buyer, according to a report in the blog GigaOm.

Operations at both Guba and Revver continue unimpeded by the upheaval, say sources within the companies. But the competitive landscape, which features more than 200 start-ups with few that have reported a profit, is sure to see more shakeups in the coming year, said Josh Martin, an analyst at Yankee Group Research.

"I'd be very surprised if some of these companies don't go out of business this year," Martin said. "Too many of (them) are distributing the same kind of content."

Rob Maigret
Credit: April Arellanes
Rob Maigret
Former Revver CTO

Throughout YouTube's meteoric rise, none of its competitors has mounted a serious challenge. A check of Alexa.com, an Internet tracking system, shows that YouTube is now one of the Internet's top 10 most trafficked sites on the Web, while none of the company's top competitors has cracked the top 100.

According to Hitwise, another traffic-measuring company, YouTube was the No.1 most visited video-sharing site in December, with 45.9 percent of all visits by U.S. Web users. Revver was 27th with 0.08 percent of visits, and Guba came in 32nd with 0.05 percent.

Google paid $1.65 billion in October to acquire YouTube, and some thought that would fire interest in at least some of the video-sharing site's competitors. Yet the market hasn't seen another blockbuster deal since. McInerney offered a bleak assessment of the situation when he said the "billion-dollar opportunity" has come and gone.

YouTube may be the only video-sharing player to have earned a profit, said two executives who have seen the company's financial books. YouTube, the sources said, recorded a relatively narrow profit in at least one of its recent quarters.

"We're all still experimenting with how we're going to make money," said Veoh Networks CEO Dmitry Shapiro. "We know we can make money through advertising. We don't know whether we can do that by serving an ad with every video or every other video or whether the ads will be served before a user watches the video or after...The only thing we know for sure is that we will make money."

Oliver Luckett
Credit: April Arellanes
Oliver Luckett
Revver co-founder

Others have responded to YouTube's success in recent weeks by overhauling Web sites or revamping business models.

Veoh, whose investors include Time Warner and former Disney Chairman Michael Eisner, recently announced that it has begun helping videographers charge for videos. The company also said it can post a video to any of the top video-sharing sites, including YouTube, saving a consumer time and effort.

YouTube's competitors may recognize the company's tight grip on the sector, but say they don't necessarily think the company can hold it for long. Luckett, for example, predicted that YouTube's legal troubles with copyright violations, when people post unauthorized video clips to the site, are likely to plague Google.

A YouTube representative declined to comment for this story.

So if video-sharing companies are no longer following in YouTube's footsteps, in which direction do they plan to go?

Luckett and Maigret plan to continue working in online video but aren't ready to discuss details. They do say they learned one crucial lesson from YouTube: The public wants professionally crafted video made available on the Internet. Clips from TV shows such as NBC's "Saturday Night Live" and other copyright material are to a certain extent responsible for YouTube's popularity, Luckett asserts. Eventually the TV and movie producers will want greater control. Helping them do this is what Luckett says he plans to do in the future.

"Among the public, there will be a flight to quality," Luckett said. "The amateur-made stuff found on these (user-generated) sites is the same content found on 'America's Funniest Home Videos.' It was one of the most syndicated shows of all time. It's a fabulously funny show, but it's not an industry. Hollywood studios own the content people want. They should be dictating the business models."