Can Online Video Support Its Next Generation?

Hayden Black is nice, funny, quotable and makes two critically acclaimed and modestly popular web shows. He may not have a face for television, but that hasn’t stopped him from becoming the poster boy for a market of online video producers that has a growing crowd of early-stage startups looking to meet its needs.

Black, who has never signed an exclusive deal and whose shows — Goodnight Burbank and Abigail’s Teen Diary — are distributed on some 15 different hosting sites, says he gets pitched at least once a week to try the services of any number of new online video platforms, video converters, video ad networks or analytics providers. But even Black, who is constantly tweaking his game plan in an effort to make it big, can’t be every startup’s best friend; he turns down many more than he accepts. “It would be silly hitching the train to something that has no track record to this point,” he said.

Multiple startups are building on what portals such as YouTube, Revver, Vimeo and Veoh provide to serve people like Black, who are trying to build an audience and a business around online content. These days, that could mean anything from citizen journalism like The Uptake to an online personality like iJustine or a TV network like MTV. Once such potential customers create their content they need to distribute, organize and promote it — things existing tools do, just not particularly well.

Many of the new web video companies are courting Black as a model customer to highlight in their pitch decks (though most don’t actually charge him for their wares). “There are some people who want our shows on their platform and seem to think I owe them a favor,” he says. But for startups that Black embraces, he’s the master of the testimonial: “TubeMogul, who I just absolutely adore, that’s a great example of a great product and great people behind it. If I had to upload episodes of Abigail to 15 places at a time, I would never leave the house. But because of their fantastic product, it’s a click of a button.”

But how many people actually have this problem? Is the market large enough to support the myriad companies building businesses around serving it? Entrepreneurs increasingly seem to think so, and venture capitalists are starting to back them.

Earlier this year, Emeryville, Calif.-based TubeMogul raised $1.5 million from Knight’s Bridge Capital Partners, and it’s currently trying to raise more funding. New York City-based blip.tv, a video portal that hosts independent episodic shows and actively works to foster a community among its creators, raised money from Ambient Sound Investments and Lauder Partners last year and is also looking to raise more.

More recently, a crop of new, emerging competitors has been receiving small chunks of funding as well. Episodic, which promises to be similar to blip, but with richer web-based tools, raised $1.5 million from Granite Ventures. Another, 750industries, barely has a web site up for its video marketing service but was able to raise $1 million from Maples Investments and Baseline Ventures.

Also notable is Trendessence, a bootstrapped startup founded and staffed by current and former Stanford students that’s currently in stealth mode. The young company, which has built a platform for online video producers and advertisers to find each other, has scored meetings with top advertisers including Procter & Gamble, Unilever, Kraft and Motorola by promising it can hook them up with the brave new world of online video producers. Other new and newish players include Viddler (hosting), Zadby (product placement marketplace), Castfire (hosting) and Video Breakouts (analytics).

There are already signs that the space may not yet be big enough to support its supporters. Dynamic ad insertion startup Kiptronic, for instance, has already changed its focus away from small publishers to major media companies. But as traditional content consumption moves online and online video finds its way onto other platforms, the difference between indie and establishment will be less important. Notably, however, nearly every startup mentioned in this article offered up Hayden Black as an example of its target market. Could it be that Black isn’t just an example of the market, but is actually a big percentage of it?

U.S. online video startups raised $461 in venture capital in 2007 — up from $267 million in 2006 — yet many of their half-baked business plans are already going stale. It’s possible that publisher tools are the next generation of the online video business — but they could also be a sign that we’re officially in a bubble.

Ask Black if people like him make up a large enough (and lasting enough) market for these startups, and you’ll get a more hopeful, if biased, take: “This is the emerging of an entirely new industry that’s going to be absolutely huge,” he says. “It certainly, within our lifetime, will become the way of distribution. I think it’s perfect timing.”

Ladies and gentlemen, there you have it, from Mr. Testimonial himself.

This post also ran on BusinessWeek.com