Deal Radar 2008: VideoEgg

VideoEgg is a web based publishing service that allows users to format and publish video content from any device onto the web. Three Yale students?Matt Sanchez, Kevin Sladek and David Lerman? started VideoEgg in 2005 to build an easier way to edit, post and share videos online. The three had won a Yale sponsored contest for their idea of amateur video competitions to generate promotional videos for nonprofit organizations. VideoEgg came into existence when they had problems moving their video online. They decided to simplify things for others.

VideoEgg made the entire process of uploading videos a breeze. It started off as a white label host and powered videos on sites like hi5, Bebo, Tagged and Dogster. The company then took to becoming a media advertising network. Their ad network, Eggnetwork, allowed advertisers to buy slots across the network that includes AOL Video, Current TV, Bebo, Dogster etc. In August 2007, Eggnetwork roped in Facebook. In each case, 60% of the revenue goes to the Application owners.

The Eggnetwork provided three types of ads:

First, The Ad Ticker, which while a video is playing, slides in at the bottom of the frame. When the user clicks on it, the video gets paused and the ad is shown in the player. The user can return to the video once he exits from the ad.

Second, The End Cap, gives the user the power to decide what ad he wants to see. The ads are displayed at the end of the video and the user can either view the ad or continue watching popular videos.

The last option is the Post Roll Package, where the ad is played at the bottom of the player while a clip is being played. The clip is followed by a static image and a 15-30 second video ad.

Videoegg has been working quite swiftly and has already raised nearly $34 million of venture funding. It raised $400,000 in the Series A from First Round Capital in 2005. In 2006, it raised $3.5 million from August Capital and First Round Capital. They further raised $12 million in Series C with Maverson leading the round in September 2006. In 2007, they raised another 3 million, as part of an extended Series C from WPP. In September 2007, VideoEgg raised $15 million in Series D with Focus Ventures leading the round, and all other investors participated.

In February 2008, VideoEgg’s announced a change in business plans and unveiled the AdFrame Brand Response Network. Under this, an advertiser would be charged only when they have interacted with the ad as opposed to the traditional method of charging advertisers a cost per thousand impressions. Advertisers will be charged only if someone launches the ad and stays with it for a second or two. This is to weed out the people who are actually interacting with the ad from those who would have launched the ad inadvertently. According to this report on Techcrunch, VideoEgg’s CMO Troy Young expects that the CPM charged would be anywhere from $2.5 to more than $10 because the engagement rates vary between .5% to 9% as compared to the $10 CPM charged under the traditional model.

In March 2008, VideoEgg announced that it would be withdrawing its video hosting services from May 31st. It also allowed the users to download all their content before they discontinue their service. They admitted that they wished to concentrate solely on video advertising and monetization. They have about 25 full time sales people selling ads. But just how effective is the new model is something that remains to be seen and something that most advertisers will be following closely.

Like many other facets of new media, Video Advertising seems to be going through its own growing pains. So far, I would say the industry is still in an experimentation state.

And VideoEgg, thus far, is a $34 Million experiment.

This segment is a part in the series : Deal Radar 2008