HowCast Launches Clever Advertising Model

I will be the first to admit that I am not a big fan of business models that rely on advertising. However, occasionally I run across a clever business model. AlwaysOn has a post on some Ex-Googlers and their new company HowCast.com. Their goal is to create a network of "How-To" videos online. Their content is provided by their own studio as well as other directors and freelancers. They are trying to revolutionize the concept of "How To" videos.

What I love about this business model is that they have created a very easy and desirable way for advertisers to jump on board. They have divided up their videos into tons of categories which makes it easy for advertisers to purchase ads. For example, JetBlue is their first big advertiser that shows up on all videos related to travel.

This model is in contrast to advertising clickthrough model that so many startups rely on yet never really materializes.

In addition to having a great business model, their site actually fills a huge void. Most people "search"for something. How many times have you searched for instructions or tips on how to do something? These guys have taken it a step further by actually providing clever instructional videos. Thus they have created a search destination as well as a "product".

I've never met the founders, but they are obviously very smart guys which I suspect will have lots of success with this model.

Comments

[Joe]

HowCast looks awesome. Great combo model of UGC with professional.

Their ad model is still CPM though. I'm curious as to the difference you see between JetBlue advertising on how-to videos for travel, versus say, a social network for travel enthusiasts? Both sites would seem attractive to endemic advertising.

Is it the technology? (video overlays versus banner ads)

Or the type of user? One probably gets more search engine traffic while the social network gets more repeat-usage visitors? (intent versus interest)

I think I know your answer, and how they can get $20 CPM's, but thanks for provoking thoughts!

[James]

Hi Joe. There is a good argument that it is still CPM and that each category is not different than a vertical social network site. In my view it is both the technology and the type of user. With video the user is engaged with overlays and the user has chosen his destination video. Theoretically, an advertiser in a random industry could choose to advertise on a random video subject but that would probably be the exception rather than the rule. With banner CPM, the user is usually not engaged in dynamic content and I think really ignores banner ads. Additionally, the video overlay ad is very targeted to the user and captures the user's complete attention versus banners. When video overlays become very dynamic you'll start to see the gap widen compared to banners.

I think the best example is to compare web ads to television ads, which essentially is what these guys are doing, except they are running a "How-To" Channel that is essentially searchable into sub-channels.

From a commerce perspective, there is a clear connection of "How-To" videos translating into dollars. In addition to users wanting to know "How-To" do something they will need physical things to do them with. For example, the guy who wants to learn how to build a shelf will need tools, supplies, paint, etc - a perfect video for Home Depot to advertise in. If the technology was very savvy and targeted, perhaps Home Depot could place an ad with a special sale on the item at the local store. This may seem far fetched but if you take a look at the new web-advertising distribution companies, this is not that far off.

An additional source of revenue I could forsee would be for the placement of "brand name spots" within the actual video. I'm not sure those guys will sellout that easily but there are obviously lots of possibilities with their model.

[Joe]

Thanks for the lucid response. I can see how their user and their technology would be more conducive to attract brand advertisers who are used to buying TV spots. And the proof is in the pudding - fetching $20 CPM's says a lot!

[James Tyme]

Howcast is a great concept, but definitely not a new one. They are pretty much a direct copy cat of the much older site: videojug.com and to a lesser extent: expertvillage and 5min who have also been in the how to video space much longer than howcast.

[Tyler]

It's an interesting site but my question is how are they going to compete against text-based How To sites such as About.com and the multitudes of others, that are going to naturally score much much higher on SERPs. Unless Google buys them and integrates the HowCast repertoire into their SERPs in an unnatural way a la YouTube, how are they going to compete?