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Wednesday, November 29, 2006

Business: User Generated Videos on Mobile Phones

Since the approach Verizon is taking is not very appealing, let's see if there is an opportunity for User Generated Videos on mobile phones.

First questions is how are User Generated Videos making money on the Internet? Well, they are not! Although ads placed before Internet videos (mainly music and tv shows) have very high click-through rate and are one of the fastest growing ad-revenue categories, the user-generated videos are not making much money. Google bought YouTube for its potential (integration/buldling/advertising) and as defensive move against a competitor buying YouTube. There is definitely demand for user-generated videos since more than 100m are watched everyday on youtube.com. The challenge is how to monetize this demand. I think, in the short term, Apple will do better than the wireless companies by providing user-generated videos on iTunes. It has been very successful at selling Video iPods and selling music videos/tv shows. So why not user-generated videos? It can provide them for free to increase the "stickiness" of iTunes/iPod just as it provides podcasts for free.

If you look at the history, first came the Internet, then the browser, then the broadband, and then the videos. I would say the commercialization of the Internet occurred after the browser came. Today, the broadband penetration is approaching 50% after more than 10 years of the browser adoption. Now, videos are popular on the Internet. Let's see the state of the wireless world. It is debatable if the wireless phones have a browser since you can only visit the sites your wireless carrier allows you to visit. Broadband (3G) in the wireless world is still in the very early stages. Most of the 3G roll outs in the US started last year and no carrier has a nationwide broadband network. I think wireless world would follow the wireline world. There has to be higher wireless broadband adoption before videos. This raises another question: why would anybody pay for wireless broadband if there is no compelling reason? The wireless carriers need to develop a good reason for trying 3G. I think adoption of videos on mobile phones is still 3-5 years away. And, the adoption of popular videos, which customers already know about, would occur before user-generated videos. By the way, not many people are using the "limited Internet" available on mobile phones.

Do you want to watch user-generated videos on your mobile phone? If yes, are you willing to pay for it?