Microsoft kicks the tires on Revver

A week after a test version of Microsoft's video site, Soapbox, went live, the company sized up at least one potential acquisition target, sources say. Last month, executives from MSN toured the Los Angeles headquarters of video-sharing site Revver, according to multiple sources. Rob Bennett, MSN's general manager of Entertainment and Video services, confirmed that a meeting occurred but declined to discuss specifics.

"MSN was there looking to see whether any of Revver's technology or staff could be rolled into Soapbox," said one source familiar with the talks between the companies.

In addition to Microsoft, sources said that DivX, the compression technology maker that operates a video-sharing site called Stage6, has also taken a look at Revver. What these companies find attractive is Revver's ability to embed ads into video files and track when the ads are watched, say industry insiders. DivX executives declined to comment.

An acquisition isn't imminent, according to one source close to the deal who said that "Microsoft doesn't appear to be interested at this point."

But the talks between Microsoft and Revver reveal two things: Microsoft is busy trying to get a handle on video sharing, while beleaguered Revver is busy getting a handle on its future.

Known for being among the first to share advertising revenue with video makers and once considered by some to be a potential YouTube challenger, Revver has fallen out of the top 20 most visited video-sharing sites. In December, Revver experienced a shakeup in its leadership ranks when its chief technology officer, two of its three co-founders, and a high-profile executive--hired away from a top Hollywood talent agency seven months before--left the company.

Of course, one of the biggest contributors to Revver's troubles is YouTube, which has seized control of the user-generated sector. Nearly half of all fans of user-submitted content do their viewing at YouTube. Josh Martin, a Yankee Group analyst, said that Revver is in a position familiar to many YouTube competitors.

"Revver had better be thinking about one of two things," Martin said. "They either better find an exit strategy or a business model that makes money."

Revver declined to comment about meetings with other companies, but CEO and co-founder Steven Starr did issue a statement.

"Revver is not for sale," he said. "We believe we are in the right place at the right time with the right technology, and we continue to focus on enhancing the Revver service and forging new distribution deals."

Sharing the wealth
Less than a year ago, Revver's management eagerly pursued what it thought was a winning business plan. The privately held company tried to lure both the Web's most talented amateur videographers and Hollywood studios with the same offer: if they posted videos at Revver, the company would cut them in on the ad revenue generated by their clips.

Dangling dollars drew some well-known amateurs, including the performance artists who created the popular clip known as "The Diet Coke & Mentos Experiments." Then others began to doll out cash, including Metacafe and Break.com. More recently, YouTube said that it might soon compensate video makers. Revver lost some of what made it stand out from competitors, say analysts.

When it came to convincing large entertainment companies to sign up, most of them flat out rejected Revver's offer, according to a source close to the company. Studio executives told Revver that they weren't interested in any plan that compensated amateurs on the same scale with professional filmmakers.

"The marketplace told Revver, 'If you think we're going to offer our premium content on the same basis with videos shot at a frat party, you're out of your mind,'" said the source

Hollywood wanted different compensation levels for professionals and amateurs. It never happened and less than a year later, Revver's plan to pursue partnerships with the studios has been mothballed, according to multiple sources.

If Revver is struggling a year after the video sharing became a smash with the public, Microsoft is just now getting into the game.

At this early stage of the site's development, Microsoft's Soapbox looks much like most video-sharing sites. Visitors upload videos to share with the Web. One of Soapbox's niftier features, which YouTube lacks, is the ability of users to watch videos while searching for other clips.

But if Microsoft is getting to the game a bit late, MSN's Bennett is quick to point out that Microsoft isn't a start-up. He said the company already has established relationships with advertisers and entertainment. Most importantly, he said, Microsoft has the traffic to compete with YouTube.

"(MSN) has 12 times the audience of YouTube," Bennett said. "We have an audience and we know that audience."

In what could be seen as a dig at YouTube's past difficulty at turning traffic into revenue, Bennett said: "The reality is we've been monetizing streaming video since 2004. There are thousands of ways we can monetize Soapbox across the MSN sites."

Finally, Bennett said Microsoft doesn't worry about competitors who hold early leads. The company plans to add features and improvements to Soapbox over time, which the company has plenty of, Bennett said.

"We have the ability to invest a little bit longer term and that means we can figure what's best for users over the long haul," Bennett said.