Yahoo’s Video Monetization

In June 2006, Yahoo! Video was launched to promote online video sharing. The service allows visitors to search online video clips produced by partners as well as independent content providers. Yahoo shows video content from associate sites including Discovery Communications, CBS News, Buena Vista Pictures and VH1. Yahoo also has exclusive rights to show clips of popular TV programs.

ComScore data released for March 2007 ranks Yahoo second in terms of online video. The report estimated 434 million videos streamed from Yahoo constituting 6.2% of the total number of downloaded videos.

On September 27, 2006, Yahoo enhanced its online video service by acquiring Jumpcut, a six month old San Francisco based company. Jumpcut technology gives users the option of remixing videos.

More recently in April 2007, Yahoo signed a multiyear partnership with Viacom, one of the biggest online entertainment company. Google falling out with Viacom over copyright infringement seems to have worked in Yahoo’s interest, which is now the exclusive provider of sponsored search on all of Viacom’s 33 broadband sites.

The latest in Yahoo’s coup is a deal with Comcast (Nasdaq: CMCSA) announced on April 30, 2007. As part of the agreement, Yahoo gains exclusive ad placement rights to Comcast.net, the country’s largest cable TV company with more than 23 million subscribers.

Comcast has the capability to monitor quality of content its customers receive. This will ensure streaming of almost DVD quality videos from Yahoo to Comcast subscribers. Consequently, Yahoo stands to gain tremendously from this Internet-to-TV association when compared to the substandard quality of videos from other online sources.

Yahoo’s recently launched project Panama, the new refined model for ad placement, is eventually scheduled to present video ads too.

Further working in Yahoo’s favor is increased spending on online advertising believed to go up by 19% from 2006 to 2007. According to eMarketer, companies are slated to spend approximately $19.5 billion in 2007 on Internet video ads. Yahoo may take a big pie of the estimated online ad spending. For all that Terry Semel is blamed for, he has been very good at cutting deals with Old Media companies like Viacom and Comcast, and this may well turn out to be a sustainable competitive advantage, as the online video monetization battle heats up.