ROI of Video Commerce Platforms, Part I

This is not another article about the ROI of online video in e-commerce.  Thank Goodness.  There are plenty of articles on that topic already.  The ROI of video in e-commerce has now been proven by so many companies and in so many case studies that I’m starting to find it a bit of a “snoozer” topic.  Hopefully you agree.

As a sophisticated interactive marketer or digital merchant, you no longer need to justify the business case for video.  You already know it works.  You need to maximize results.  In this 3 part article, I’m going to show you how to assemble an ROI analysis to justify investing in technology that maximizes the results of e-commerce video.

I’m going to introduce you to the concept of the Video Commerce Platform.

The Evolution of Online Video Publishing Tools

In the late 1990’s, as the mass consumer adoption of the Internet was taking shape, e-commerce sites ran into a common challenge: figuring out how to deliver a consistently smooth shopping experience to their customers.  Images delivered from a server located in Silicon Valley might load in a split second for a web surfer in San Francisco, but a person in Frankfurt accessing the same content from that same server would experience significant delays.

Content Delivery Networks (CDNs)

Enter the modern-day Content Delivery Network (CDN).  A CDN, at a very basic level, prevents the Frankfurt/San Francisco problem by storing several copies of a content asset on servers local to the end user.  The web surfer requesting an image in Frankfurt would have that asset delivered from a server in Frankfurt.  A web surfer in San Francisco would get the image from a server in San Francisco.  The performance benefits of this “edge caching” became obvious to e-commerce sites.  Demand for CDN services boomed.  Companies like Akamai and Internap launched, followed by the likes of Limelight Networks, Edgecast, and, Amazon’s Cloudfront service.

 

Example of Content Delivery Setup. If you're an interactive marketer or businessperson, this could be pretty boring stuff.

In the early 2000’s, as more consumers gained access to broadband Internet, the consumption of online video began to soar.  With YouTube’s launch, consumers began to expect to see online video everywhere.  Since video is so bandwidth-hungry, the demand for CDN services increased.  For e-commerce sites, CDNs became a “must have” infrastructure component to ensure quality of service.

The basis for competition in the CDN market is fairly straightforward.  At risk of oversimplifying the matter and upsetting some of my CDN bretheren who read this blog, I’ll risk some cred and posit that all CDNs are basically trying to help their customers solve the same problem.  Their services throw 1’s and 0’s around the Internet better/faster/cheaper/more reliably than the next CDN.  That’s the basis for competition in the CDN market: Better, Faster, Cheaper, More Reliable.

Most businesspeople’s eyes begin to roll back into their heads when CDNs are brought up.  That’s because CDNs are considered infrastructure – the purview of IT.  As long as an e-commerce site’s CDN “worked” well enough, businesspeople might not even know it was there.  CDNs, to most businesspeople, are in the same class of service as electricity, running water, or an Internet connection.  Infrastructure.  Boring.  Yawn.

Online Video Platforms (OVPs)

In the mid 2000’s, as online video consumption was accelerating, some entrepreneurs saw an opportunity.  CDN’s were duking it out with one another, selling their services to a sophisticated technical audience.  CEOs and early innovators clearly saw the rising consumer expectation for online video and wanted to be part of the wave.  Caught in the middle were non-technical businesspeople that needed an easy way to manage and publish video content online.  Although CDNs provided solid infrastructure, they were entirely too technical and arcane to meet the rapidly changing needs of video publishers – especially in the media industry.  The Online Video Platform (OVP) was born.  Early innovators like Brightcove shifted into a B2B strategy.  Ooyala, Kaltura, and others followed suit by entering the space.

Online Video Platforms simplify the process of managing and publishing video content.

The basis for competition in the OVP space is more up in the air today compared to the CDN space, but not by much (in my opinion, at least).  Most OVPs have settled on a value proposition highlighting ease-of-use and sophisticated video management capabilities.  Custom video player support and extensible APIs are also entry-level requirements.  Since most OVPs cater to media companies, integration with ad networks is also a required staple since these media companies monetize video by selling ads against their content.  But ultimately, I’ll posit again (with risk to cred) that OVPs primarily help their customers solve the problem of managing and publishing video content.  Every OVP sales rep on Planet Earth has a Powerpoint deck with at least one slide in it that explains why their solution is the ideal one to help clients solve the business challenge of managing and publishing video content.

Video Commerce Platforms (VCPs)

Businesspeople understand the concepts of “ease of use” and “simple video publishing” and “integrates well into my workflow” when it comes to evaluating software platforms.  That’s a key reason OVPs were able to take off in the first place.  CDNs were so focused on solving the “throw around the 0’s and 1’s better/faster/cheaper than the other guy” problem, selling to the CTO, that they were totally sideswiped when OVPs entered the market and changed the basis of competition as businesspeople began to enter the decision-making process.  Classic market disruption.

But ultimately, it’s not enough for video technology to just simplify how to manage and publish content.  Plus, there are close to 100 OVPs today that can solve this problem in one form or another.  Businesspeople have choice.  And, they demand results.  Enter the Video Commerce Platform.

A Video Commerce Platform is a set of integrated tools that enable businesses to maximize the value of video.  Ease of management and publishing are just the “base layers” underpinning the tool ecosystem, which unto itself forms a higher-order platform.  Think of the Video Commerce Platform as an integrated Swiss Army Knife of online video results generation.

Whereas Online Video Platforms require clients to create many of the applications that ultimately drive the value of video (for example, by building on top of an OVP’s API), or shuttle as much of the application layer as possible off via a partner ecosystem consisting of other online video technology providers, VCPs are designed with the underlying premise that business users neither have the development resources to maximize the value of video, the proclivity to learn how to use multiple applications from different video vendors to meet their unique business requirements, or the budget or time necessary to handle the complexity that such a distributed approach requires.

If an Online Video Platform and a Video Commerce Platform were both players in the mobile device ecosystem, and you wanted to get the maximum benefit of an Online Video Platform, you’d need to carry around a PDA, wear a watch, 2 cell phones, an mp3 player, a GPS device in your front pocket, digital camera in your back one, strap a camcorder to your head, hold a wireless router under your armpit, and buy a barcode scanner to tote around.  Or, you could decide to get a Video Commerce Platform, in which case you’d buy an iPhone instead.

In the next post, I’ll share how a Video Commerce Platform adds value through this application layer and outline the components of an ROI analysis for video commerce platforms.  Until then,

Happy Selling!

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