Entrepreneurial

Ex-Googlers seek traffic for how-to video startup

July 1, 2009

The Web is full of user-generated video, but for Sanjay Raman’s tastes most of it is too bland and poorly produced to actually watch.

That’s why Raman launched Howcast (http://www.howcast.com) – a high-quality, how-to video-sharing website – last year with former Google colleagues Jason Liebman and Dan Blackman.

While at Google the three Howcast co-founders noticed how popular do-it-yourself content was, but how little of it was in video format.

“How-to content is something that is really popular in terms of user search queries,” said Raman, who left his job as product manager for Google Apps to launch their startup nearly 18 months ago. “As video was really exploding online we saw the opportunity to marry those two concepts together.”

Unlike other DIY sites that predominate search engines, such as About, eHow, Expert Village, Videojug and 5min, Howcast utilizes a more entertaining and humorous approach. Some of its most-popular videos are less practical and more tongue-in-cheek in nature, such as “How to find out a girl’s name after you’ve slept with her” and “How to grow grass in someone’s keyboard.

“We try to take the format of a how-to and make it more exciting and engaging than it would normally be,” said Raman.

In order to boost its video content, Howcast pays filmmakers, mostly students, between $50-100 to produce videos for them.

Despite the economic downturn, Howcast has raised $10 million in funding, with $8 million coming from New York venture capital firm Tudor Investment.

THE PITCH

Howcast’s revenue model is solely ad driven, so continuing to drive people to its videos is Raman’s top priority and biggest challenge.

Most of its revenues are currently coming in through its distribution deals, where Howcast gets a cut of the revenues generated by playbacks of its videos on partner sites like YouTube.

In order to generate more revenue, it needs to keep producing more videos. Raman said it usually takes a day or two to churn out a new video, like last week’s “How to come back from a political scandal” in response to South Carolina Governor Mark Sanford’s announcement he had an extramarital affair.

“Coming from Google where you automatically have millions of eyeballs on your product to where you start something from scratch has been extremely challenging,” said Raman, whose ultimate goal is to have Howcast become synonymous with everything how-to related. (check out Raman’s entrepreneur journal, exclusively on Reuters.com)

TAKING IT TO THE EXPERTS

Paul Kedrosky, who writes the popular business blog Infectious Greed and a former partner in the California-based venture capital firm Ventures West, said sites like Howcast traditionally don’t bring in gangbuster traffic numbers and feels it will have a tough time realizing any kind of sustainable large-scale ad revenue.

“Unless you can get it to Google-class numbers, then an advertising model, predicated on video content, is really tough,” said Kedrosky, adding Tudor’s investment of $8 million was likely based on an evaluation that Howcast would potentially hold an exit value of $400-500 million. “It’s possible, but it’s fairly heroic.”

Zachary Shullman, managing partner of Cayuga Venture Fund in Ithaca, NY, thinks Howcast should charge users a nominal annual subscription fee to watch its videos.

“Say they want 10 million users? If they charged everyone $1 they would cover their operating costs,” said Shullman, who has concerns about an ad-based revenue model at a time when advertising dollars are drying up. “People are buying very stupid iPhone applications for $1, so why not charge $1 or $2 to subscribe for a year to a how-to video site?”

Zubin Mowlavi, the founder of new media marketing company Lucid Fusion, is very impressed by Howcast and the viral nature of the video content. Mowlavi also said Howcast’s digital platform is superior to most of the how-to video sites he has come across.

“It’s a very casual, friendly style that they have to their videos and if you like it, you’ll continue watching them,” said Mowlavi, whose company has produced cutting-edge marketing campaigns for the likes of Sage, Kenwood, Redbull, Sirius and Sony Pictures Classics. “There are other video sites out there, but they don’t have the same sense of consistency.”

What do you think of Howcast? Will it be able to generate the Web traffic to become profitable? Leave your response in the comments below.

Comments
2 comments so far | RSS Comments RSS

I think a lot of ex-google employees started their own projects but I don’t know if any succeeded so far. I think this one will fail too.

 

Assuming to begin with that the hunger for how-to videos is sufficient to be monetizable, I think its safe to say that the market will have to weed out a few of the players here. Thus success over the other video sites that can do the same thing seems to rest with their differentiation. It seems like this differentiation is the quality of videos and entertainment value of the videos–so they have to be able to establish some sort of loyalty from the most creative and talented video producers. Given the immense competition in this area, it seems like this is an exceptionally difficult goal. Furthermore, this seems like a differentiation that is more aligned with some sort of entertainment video site–say one focused exclusively on comedy or drama–than one that ostensibly has a practical “how-to” purpose. Perhaps a focus on making it easy to learn and teach through the site would be more strategically aligned than making the videos funny and in claymation.

 

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