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Hey everyone, it’s Andrew Warner. I’m the founder of mixergy.com, home of the ambitious upstart, and today I’ve got with me, an entrepreneur who used to be a fighter pilot with the Israeli Army. He went on to create 5min, a site that offers how-to videos, which raised a total of $12.8 million. The company publishes to over 400 partner sites, including wikiHow, answers.com. Including who, who else?
Interviewee: We have Fret Play, SheKnows, Betty Confidentials, Cafe Mom just closed, and we didn’t launch yet, but we’re about to. We have tons of vertical sites, ton of comprehensive sites, wikiHow, which is, like, 30-something million uniques, Answers, WikiAnswers. Many publishers within the niche content space.
Andrew: What is a site like Wikia, which is basically, Wikia is by the founder of Wikipedia and they’re trying to build out the rest of the library, wikis focussed on individual niches. What would they do with, with your software?
Interviewee: So what 5min is really, basically saying, in a nutshell, is that it’s really, really, hard to create scale in one niche content. Know we have this amazing library of over 150,000 videos, from, you know, top-tier comp-, media companies, such as CBS and NBC and Meredith and Scripps and Britannica and Ford Models and Vogue and Hachette and some other, like, really good publishers on one hand. And on the other hand, we think that there are so many niche sites on the web, that the traffic is really getting fragmented between everyone. Now, as a publisher, for you to produce videos to your site, as big as the site is, there’s no how or why behind it. Because you basically need to produce the content in high-quality. Then you need to take the bright guys of the world, pay them the money just to have a video player, and then you need to encode all your videos. Get them live. Get the traffic. Go and sell them. It, it is so complicated for publishers to have videos on their site that we think, in 5min, on 5min, that the best way to approach it is to create this huge managed library and to give it to any publisher out there that wants to have videos on their site on a semantic basis. Meaning that, if you want to compare 5min to anything else in that space, I would say we’re the Google AdSense of video content. Meaning that, as, as a publisher you come to us, you take our player, you customize it, you get one Javascript, like, one piece of really easy code to put on the template of all of your pages. And we read the pages, understand them, and give you the best related videos to the pages. And people are watching the videos on your site, as a publisher. So, if you take Wikia or wikiHow or Answers.com, they have millions of articles on anything you can imagine starting from parenting, health, food, sports, biographies, you know, a huge spectrum of content. And we help them to let their consumers to watch the videos within that specific page’s, within
their user experience, and we share their revenues on the videos that were watched on their sites. So what we’re basically saying is, video, video is too complicated. It’s, it’s not like text. You know, as, if you want to do text, you can hire four, five students and write articles.
Andrew: No, no question, what you’re, yeah, as somebody who creates video on a daily basis, I can see it’s a lot of frickin’ work. People just think you hit the record button and everything goes.
Interviewee: Right.
Andrew: Those who are watching us live know that it took us, maybe, ten minutes just to set up the video cameras here and to make sure the audio works.
Interviewee: Right.
Andrew: And you and I are using Skype, which is a basic program. Imagine if we wanted to go even more high-def or actually add some high-def and add some production values. But, what you do is say, okay, if you’re gonna create all this content, Andrew, and other content creators.
Andrew: You don’t want to just house it on your site. You want to get as broad a distribution as possible, and that’s what you say to us, the pub-, the creators. What you then say to, if I’m understanding you right, to a site like wikihow.com, is you can’t possibly create enough video to satisfy your audience. You want lots of videos. You want to make sure they’re high quality videos and that they fit the context of the pages those videos are on. And so, what 5min will do is take videos from producers like Andrew and run them on sites like wikiHow and make sure that the content is appropriate for the page.
Interviewee: Exactly, and I, I think basically what were saying is, as a producer, let’s say the conversation we’re having right now. Let’s say people are writing about 5min somewhere else, or they’re writing about Mixergy something else, somewhere else. And we’re now going to work with bloggers and etc. So, if someone writes about Mixergy and 5min, if someone writes in his blog, he just read this interview, and the interview was interesting. Automatically, the interview would be embedded within that piece of content elsewhere. So that, we would be able to get this conversation to the right places on the web, wherever they are. Because, eventually, getting traffic into your site, I think, is the hardest thing that people can experience. It’s a lot about SEO, SEM, branding, marketing. Sometimes it’s not even about the quality of the content, it’s just about getting across this [weather] of tons of sites. So, what we’re saying is that, everyone should focus in what they’re good at, and if you’re a publisher, and you know how to bring entrepreneurs to your site then that’s great. I mean, keep on doing that. And if someone else knows how to produce content, then they’ll focus on production, and we do the, the matches because it’s really hard to do everything. And there’s no how or why behind it. Like, if I was wikiHow or Wikia, I wouldn’t go for production.
Andrew: Let’s, let me also, before I ask you the next question, let me just address some of the issues the people in the chatroom are bringing up. The quality of the video connection here today isn’t very strong. I think it’s because of the bandwidth that we’re sharing. So, it’s not because of JustinTV or any other plug-in that we have in here. It’s because of the bandwidth that we have today. But the audio is still coming in and I’ll clean this up for the people who are listening to us afterwards on, who are listening to the recorded version. Talk about the work involved in video, this is, this is part of it, this small piece.
Interviewee: It is.
Andrew: What about the money? Where’s, where’s the money flow?
Interviewee: So, I think that this is the most interesting thing in our model. If you look at niche content, the hardest thing for, for any niche content site is to scale. Because it can have this, you know, amazing user-base of, let’s say 500,000 people that are passionate only about health or anything else. But, eventually, I’m not sure the advertisers would meet you because you’re not big enough. You know, advertisers, the fragmentation of the web is really complicated for the advertising business, and they want to close these big deals. They want to get, you know, a huge amount of people that are passionate about something. And what 5min is doing, I think we’re creating the next generation of cable networks or the online interpretation of cable networks. Because we’re basically going to the advertisers, and we’re telling them, you see this, like let’s say we have a 120 food sites. And we have a very close relationship with Scripps that gives us a lot of content but also sells all of our food channel across the board. And then, the advertisers can have a scalable buy that is also engaged with great content and the, the money that we’re getting from the deal is being split between the publisher, the content creator, and 5min.
Andrew: Okay.
Interviewee: So, if you’re just, if you’re just one part of the ingredients, if you had your own site, and you produced your own content, and you sold your own inventory, your gross would have equaled your net. Which is great, but it’s so hard to do it on a scalable basis. And we’re sold out for the last year, and no matter how much we grow, and we have 30 million uniques globally right now that are watching our videos. We’re still sold out, because I think we’re the only one that are getting the advertiser today, a niche, digital video buy with scale on this great piece of content. Which is basically a buy that is a replication of the cable buy that they’re doing on The Food Network, or on The Discovery Channel, or on TV buys that are very niched. So that’s why…
Andrew: So, what’s happening is, again to just make sure that I’m understanding, I’m a publisher, wiki, I’m a creator of content, wikiHow is a publisher that takes my content, you’re the intermediary that makes sure that my, that my videos and their, their pages line up. You’re also selling ads for me, or making sure that, I guess you are kind of selling ads, right?
Andrew: I guess you are kind of selling ads, right, even though, in this case, you brought up Scrips as doing the actual selling.
Interviewee: Yeah, we do sell the ads on most of the verticals.
Andrew: What’s the percentage breakdown? How much do you keep, how much does the video creator keep, and how much does the publisher keep?
Interviewee: It’s a great question. I think it differs. Basically it differs between … like if you’re a big publisher it would change because you have 20 million uniques [?] and that’s a huge asset. You’ll put some time and money into the integration and you’ll get more than if you’re a small publisher and vice versa. On content, we look at the quality of the content. We don’t look at the name behind it. So if you’ve created 300 walk-throughs on, let’s say, World of Warcrafts and they’re amazing videos will give you another portion. I can say that the average is 33% to each one, to each side, but it changes. It differs between the sides and the content creators.
Andrew: OK. Alright. I want to go back and talk about your history before you started this company and then we’ll pick up where we left off here and get deeper into 5min [?]. But before we do either of those, let me take couple of questions from the audience who are watching us. Adam K. is saying, ‘Demand Media: are they a competitor or are they a potential partner for you?’ Demand Media, of course, is like a manufacturing company for content, video, text, everything.
Interviewee: It’s a good question and my answer would be both. I mean, on one hand I think 5min and Demand Media right now are the only two web properties that have a scalable niche library. They have this amazing production line that produces content with cheap costs and we have a very good way to license content, which in my opinion is way better than what they’re creating. But the business model is a bit different. Right now I think we’re competing. Demand Media is not distributing videos to the web. They work within their owned and operated sites and YouTube. We offer our videos to any blogger, any site, anyone that thinks they can make good use of them. And I think that’s the main difference. But the basic thing is that, yes, there is a competition but there is also a way to work together in the future so I think the answer would be both.
Andrew: OK. Kirsten Winkler is asking she’s asking if Gary Vanerchuck’s [sp] theory is applicable here … the idea that the content aggregators in the future are either going to be at least as profitable or at least as valuable as the content creators, if not more so. Is that what you’re banking on?
Interviewee: I think that … you’ve got to remember one thing … I think that’s a good question. I think that the aggregators would be much stronger than the producers and not as good as them. In a lot of ways what I’ve seen in the market … and I know I’m saying something that is a bit provocative but it’s good for our job … content is getting commoditized. I mean, entertainment is entertainment. If you create Lost or Seinfeld or a good show then you would never be commoditized. But you need to spend a lot of money in order to create it. But if you look at recipes, for example, when 5min goes out to look for recipes, do you know how many producers are out there that are producing recipes? The problem with recipes is not getting the video property, it’s getting the audience. So I think the winner would be the one that has this huge amount of people that are passionate about food, not the one that creates the recipe because creating recipes is a commoditized business. You can do it with $1000 bucks. There are plenty of people in the U.S. who are creating good content there. And the main thing is how many views you have. And, in my opinion, YouTube today can decide how many views each one of their creators would have. It’s their sole decision. And in a lot of ways, 5min performs as well. Now Gary is our best partner. He gets a lot of views for us. The question is who controls the audience? Is it Gary Vanerchuck or is it 5min or is it YouTube or is it a wine site that has a million passionate audiences and can switch the video on any given day? So I think that the question is who owns the audience, not who owns the content because production becomes a commodity.
Andrew: I see. So is there a way for a content creator to own the audience … to own his own audience?
Interviewee: There is, but it’s difficult and expensive. You need to have your own site.
Andrew: And you will not be as big and as powerful as the aggregators, right? So, Gary Baynerchuk [sp], even if he’s the best in his space, which he is, can never be as big as 5min. Can never be as profitable as 5min.
Interviewee: No, I’m not saying that. And I love Gary and I don’t want to go into this dogfight on the web. What I’m saying is, that Gary reaches his audience through syndication deals. He syndicates videos to Vimeo, to YouTube, maybe he also works with MSN, with Yahoo!, with 5min. His way to get to these audiences is through syndication. Because if Gary, and Gary is one of the most talented producers on the web. If his strategy would be, I have a site. The only way to see the videos is by going to my site. I’m not syndicating them. I’m a brand and I’m a destination. And, if you want to see me you’ve gotta go to whatever domain I have. Then his business would be much smaller. Meaning that, content producers have to join hands with syndicators because the web is so fragmented. If you look at TV, if you got your show on the food networks, you’re there, you’re done. Because the food networks brings the audience. If the food networks don’t like you anymore, they can go to another guy and produce another show. They own the audience. They are the distribution. On the web, no one owns the audience. The audience is so fragmented. So, syndication is a strategy for content producers and that’s why we have over 800 partners that are producing content. I don’t see myself as a competitor to Gary. I can’t have a business without Gary and Gary can’t have a business without companies like 5min. We’ve got to work together, here. I think that’s the point.
Andrew: And AdamB, who’s watching us, picked up on something you said earlier, and that I saw in my research, that you say quite a bit. That you’re trying to create a new cable concept, here. What does it mean? Are you trying to create a series of channels? Is that what you mean?
Interviewee: Yeah, but the question is, what is a channel? And, I think that’s the big differentiation. If you look at all the big cable or niche content companies on TV and, if you look at their web strategy, they’re trying to replicate what they’ve built on TV into the web, without any consideration of the fragmentation. So, if I have this amazing TV channel, now I’m opening theamazingtvchannel.com. But, now I need to find SEO, SEM, smart people that know how to bring the traffic. Suddenly, I don’t own it. And, the niche magazine business, by the way, works the same. If you look at the niche magazine guys, they came to the web, they opened their destinations, and their destinations are not as big as they thought they would be. So, we ask ourself, what’s the next model of cable networks? How is it going to look like on the web? If you’re Home Depot or Lowe’s, and you’re looking for a buy on Home and Garden, are we expecting them to go to these 150 sites that takes a chunk of the traffic? What 5min creates, basically, is a Home and Garden channel that is being streamed or broadcasted in ever site that deals with Home and Garden. And we have more than 75 partners, just on Home and Gardening. And, this is the Home and Garden channel. So, yeah, we’re creating vertical channels on the web. I think that’s the next evolution of the cable network model. And, we’re giving advertisers a scalable buy, but not as an ad network, and I think that’s a very important distinction. We’re not an add network, we’re a content network. Meaning that they choose the content they are attached to and they’re not just putting their money and get an ad somewhere.
Andrew: Right, and that answers the question that we got here from AndrewSG [sp], who’s saying, ‘How do you protect your advertisers from showing their ads next to unsavory content?’ And the answer is, you’re curating the content, you’re not allowing just anybody to be in the system, and so, that’s one of the reason that partners and advertisers want to work with you.
Interviewee: Yeah, we’re a purified library. You can upload a video to 5min but, 85% we would reject it. But, by the way, if it would be great we would like, ‘Can you create more?’ Meaning that, yeah, we think that the biggest problem of YouTubes, and all the other me-toos of YouTube, is the [unintelligible], the chaotic library. YouTube has great content that lies next to awful content. Their biggest problem is they don’t know how to do the distinction between the two.
Interviewee: And we think that the only way to go right now, and syndicate content, is to have some kind of authority so that the publishers would know that we work only with the best content creators, on each niche. An open platform would get you tons of traffic, but I don’t know if you would know what to with that traffic, afterwards.
Andrew: Alright, AdamB, I like your question but I think I need a lot more clarity on it. So, while you’re clarifying that question, and other people are thinking up their own questions, let’s go back and talk about the entrepreneur behind the business. I love entrepreneurs, and entrepreneurship, and I want to find out who you were before you launched the business to understand why you did it? So, I said earlier, that you were a fighter pilot in the Israeli air force. Now that has nothing to do with entrepreneurship but, figure that’s something interesting from the past that I could start off with. So, let’s start off with that. What influence does that have on you going into the tech industry?
Interviewee: You know there’s a book that went to the market, not a long time ago, about Israeli entrepreneurs and why are there so many? There’s too many of us, basically, out there in the market. I think that when you’re 18 and they send you out somewhere without your parents and you’re being driven to make decisions from a very young age. You need to take decisions since you’re 18 and I think it brings some flavor into who we are. We’re just used to take decisions. We’re used to get more creative. We’re used to take decisions under pressure and I think that the army, in that sense, is a very good hot house, I think, for entrepreneurs. Because you go out when you’re 25 and, unfortunately sometimes, you’re much older than that in your experience. So, I think that what the army really gave me is independency and confidence to make decisions before everything becomes theoretical.
Andrew: Sthumps [sp], who’s watching us, is saying, ‘It seems that North American mentality is to protect their children from tough decisions.’ And, you’re bringing up an example of how going to the army, of encouraging people to get involved in the army, to enroll, gives them responsibility. But, give me an example. Let me really understand, from your experience, how you were, as someone in his early 20s or late teens, because you were in the military you were able to make decisions early on?
Interviewee: Can you say it again?
Andrew: Yeah. I wonder if we’re having some audio trouble? I’m asking for an example of how you in the military were able to make decisions or take responsibility.
Interviewee: So, I finished the Air Force Academy when I was 20 and I started flying on jets. I flew F4s, which is kind of an old plane, today. They send you out there, if it’s training, if it’s real combat, which we don’t experience much, fortunately. And, you’re expected to take decisions and the culture is that you’re getting debriefed on your decisions. But, the whole culture is that you’re taking them. And, I can tell you, you decide to move forward or to go backward. If it’s too dangerous, or not. You do a lot of recalculations [?], which is something we do in start-ups all the time. Is it too risky? Can I take the risk? Is there an [unintelligible] for that risk? And, I think that we just make a lot of mistakes. And when you make a lot of mistakes, you realize that that’s the only way to move forward. If you don’t make mistakes, you don’t move forward.
Andrew: Like what? How did you make a mistake in the air force?
Interviewee: How do I make a mistake in the air force?
Andrew: Do you have an example? I’m looking for a story because I tend to remember things if they’re attached to stories. And, we also tend to understand the person better when we hear one of his stories.
Interviewee: That’s a good question. I don’t know much can I tell. Let’s say you go out to this mission and there’s a lot of clouds. And the mission is super important and you need to decide if you want to attack or you don’t want to attack. And there’s clouds, and there’s risks, and there’s civilians, a lot of things that has nothing to do with start-ups. You’re expected to take the decision because you’re there. No one is there. If you want the comparison, it’s like, you have investors but, eventually, when a big company comes and says, ‘Alright, this is how we want to do the deal.’ You know your business the best and if you’re on an airplane, out there, you look out and you have the full picture. No one else does. And sometimes you can say, ‘Alright, I’m not doing it because it’s too cloudy.’
Interviewee: … the risk is too high, I understand that the mission is very important but the risk is too high and I’m not taking the responsibility and you know that, you, when you go back you just need to explain why you did it, and either people would like it or not but the responsibility is on you and I think these kinds of dilemmas are, you know, just helping you to take better decisions as you get older in a lot of ways and, and, you know for me it’s like it’s really my past, I’m not there even emotionally, but I’m sure that if I was 18 and I was just thrown into this weird extreme experience it, it gives you some tools in the start-up world, no doubt about it.
Andrew: And you said something earlier about how there are a lot of start-ups, a lot of entrepeneurs, coming out of Israel. Jackie Mason even before the Internet had this joke that he said: “a Gentile walks into a restaurant tries the food, it’s great food, and he goes, ‘this is delicious, it’s wonderful,’ or a Jew walks into the restaurant, tries the food, goes, ‘this is making the guy a bundle. Look at how little money he’s spending on the, on the ingredients.'” And it was true even before the Internet, the entrepeuri…entrepeneurial spirit in the Middle East, and especially in Israel, was just raving. I think that they needed the Internet in order to have an outlet, in order to be able to go and get started. Is that your experience? Did you see that even before …?
Interviewee: Yes and no. I think … I think that Israeli … Israelis are entrepreneurs. They’re entrepreneurs not only on the Web. They’re entrepreneurs because Israel is a small country, with a small market, with nothing. There’s no oil, there’s no, there’s no good stuff that you can just make money off, so it’s all about, and you’re being educated by that, by the way, you’re, you’re being educated that you need to go and study and do things by yourself, there’s no other option. So Israeli entrepreneurs, we know how to improvise very well, I think. We don’t see a wall where a lot of people do see them. But there’s also disadvantages, because, you know, I think that American entrepreneurs are much more structured, they know how to build bigger companies, Israelis don’t know how to build big companies. We usually sell them quite early, because there’s, I think that in the beginning, when a start-up just goes out there, you need to react, to switch a business model, to change, to do some tasks, this is where Israelis are really good, you know, like they’re, they fall, they get back, they fall, they get back, they find their way, but at one point, when you need to get a structure, to build a company, to manufacture, to get revenues, I think Americans are much better than us. So it’s a give-and-take, I think.
Andrew: All right, let’s move on. After, after the Air Force, you were a journalist, I read. What got you to be a journalist?
Interviewee: I wanted to be a journalist since I was a child, I always wanted to be a journalist, and when I became one, I didn’t want to be a journalist any more. I worked in …
Andrew: Why?
Interviewee: First of all, I think that what happens from a bigger perspective is the distribution of newspapers is getting smaller. As a reaction of that, I think that reporters are getting paid like them, not getting paid well. They’re getting really pressured to create a huge amount of stories. The advertising business and the content business are getting into a mixture. If you come to neutral journalism from ideology, you experience stuff you never thought of, you know, like, you want to do some, you want to write something about a company that puts a lot of ads to the newspaper, and you find yourself in a very weird spot, and I just felt that the traditional media is, I don’t know if, I didn’t see it dying financially, I saw them slowing down financially because of the, but I thought that in terms of, you know, good spirit, good entrepreneurial stuff, trying to break the bad guys, I thought that the journalism, the print media, is, is not doing it any more, and it, that it becomes much more advertorial oriented, yellow, much more entertaining, and I just …
Andrew: Were you personally …
Interviewee: … it was a big conflict …
Andrew: Were you pushed to write things that you weren’t into, were you pushed to write things that were more advertorial?
Interviewee: … everyone was …
Andrew: Do you have an example of that?
Interviewee: Everyone does, I don’t know of one journalist that doesn’t do that, I mean, I can tell you that I did a big piece, a big story, about a company that was doing some laser cosmetic surgeries, and I found that, I found out that these guys are butchers, like, really butchers, and I did this very long story, and they, these companies had a lot of dollars …
Interviewee: ‘his company spent a lot of dollars advertising in the newspaper and I was pressured not to take the story. And, by the way, I think it’s common knowledge. Every journalist I know in the States and in Israel and any other country … journalism becomes a different business, I think, than what it was.
Andrew: Alright. So you realized that it wasn’t what you hoped it would be. It wasn’t what you were planning on going in to. And so you left journalism and, from what I understand, you went to Angola.
Interviewee: Yeah.
Andrew: Is that the next step?
Interviewee: I wanted money to have a company. We knew that we wanted to launch a company. But that’s the most entrepreneurial experience I ever had in my life.
Andrew: Going to Angola?
Interviewee: Yes.
Andrew: What was that? Why did you go to Angola?
Interviewee: It’s an Israeli civil company. We had UAVs, which are like unmanned air vehicles with cameras within the small airplanes and we were giving civilians to all the American oil companies that are drilling oil in West Africa, which is Angola mainly … Angola and Nigeria. And we were just taking off at like 5:00 p.m. and just watching all the drills, a lot of green activities against leaks and thefts and things like that. But the main thing in Africa is that there are no rules. There are no checklists. Every day is a new day. And in that respect I think it was the most interesting entrepreneurial experience I ever had in my life.
Andrew: So you were flying … from what I read … you were flying unmanned planes over government buildings on behalf of the government or on behalf of the oil companies.
Interviewee: Not government. It’s over oil drilling off shore infrastructure.
Andrew: OK.
Interviewee: Americans.
Andrew: For American companies.
Interviewee: Chevron, Shell, all the oil corporations.
Andrew: OK. So you’re saying that it’s like the Wild West there … even more than the Internet … where anything goes?
Interviewee: Oh yeah.
Andrew: So what did you see?
Interviewee: What did I see?
Andrew: Yeah.
Interviewee: It depends on how you look at it. It’s a crazy place in a good way. I mean, the people there are amazing. They’re warm, they’re open, they’re transparent. No political correctness whatsoever. On the other hand, they’re very poor and a lot of money is being made next to them which brings a lot of conflict and tension. And in one way you have a lot of empathy for them, although you’re working within a project that can help them much more. But the whole experience of just making it happen in a place where there’s no infrastructure, when you need to import and export everything just to make things happen, is an amazing experience. And it was wild.
Andrew: Give me a wild story. What happened? Did you see something while you were flying one of these unmanned planes?
Interviewee: I didn’t fly them because they’re unmanned.
Andrew: I meant that you’re flying them using remote controls, no?
Interviewee: Yes.
Andrew: You’re not flying inside them but you’re flying over these oil wells and you’re seeing people do what?
Interviewee: Drilling oil, basically. But you know, there’s a lot of thefts, a lot of boats that are coming to do thefts. The interesting thing is that you can really spot huge oil leaks and you can spot them even if it’s at nighttime and you can spot them and then you can give a call to the oil companies. We once stopped a huge oil leak because we just accidentally … because there were only two planes … we just spotted it at the minute it happened. That was a good feeling. You give a call and then someone shut down the specific place where the oil is being drilled. The experience was not really the professional activity. The experience was to live in a place where there are Americans, French, Israelis, locals, government, corruption, tons of interests from [inaudible 34:37], and just, you know, making it happen throughout the way and not being hated by anyone. I think that was the challenge.
Andrew: Alright. Was there enough money in there that you could save some aside and go start a business?
Interviewee: Yeah. That was the purpose was to get enough money to go and to be able to not have us sit around’
Interviewee: Not to have a seed round in the first 5 to 6 months.
Andrew: OK, so did you know, at the time, what your business was going to be or were you just looking to save some money and figure it out?
Interviewee: No, I didn’t, I didn’t.
Andrew: OK, when did you figure out what the next business was or what your business would be? Which ended up being 5min.
Interviewee: We’re ‘ founders ‘ the company.
Andrew: I’m sorry, can you say that again the connection ‘ I’m sorry Ron, the connection dropped. Can you say that again, when you figured it out?
Interviewee: We are 3 founders, in the company. And, one of the other founders [unintelligible], was working in the advertising business. And, it was in mid-2006. And the big video portal UGC companies were starting to try and sell their inventory to advertisers. And he saw it. He was presented with the content and it was the first green attempt to monetize UGC content. And, he was shocked. From the disproportion of the traffic, on one hand, and the really unsafe, sometimes very stupid content, on the other hand. And from the kind of naive perception that everything would get sold. And he represented the advertisers and he was like, ‘I’m not going to put any money there.’ This is risky. And, we started to debate about, ‘Alright, so where would you?’ And, we thought that niche content, like how to informational, is amazing. So, we went to the web to look for 5min. And, we couldn’t find it. And, it was the aha-moment of, ‘Alright, let’s combine better content, a bit less sexy, but a bit more valuable. And, let’s get going.’ And, actually after YouTube was acquired, there was a period where anyone, including our grandmothers, could have raised money for online video. And we were there, already, with a working platform and I think YouTube acquisition helped us to get along.
Andrew: You say anyone can raise money but, from what I read ‘
Interviewee: Could.
Andrew: Sorry?
Interviewee: Anyone could. Today it’s difficult.
Andrew: At the time. From what I read, the Globe Magazine, the Israeli magazine, I think it was the Globe said that you guys, the three of you partners, gave up about half of your company for only $300,000 in angel investing. And, TechCrunch said that was an example of how not to raise angel funding. What’s the truth there?
Interviewee: Listen, I don’t want to open it because I don’t want to have fights with anyone. This is the most stupid article that was ever published about 5min, ever. Again, I don’t want to go there because I think everyone that is involved knows, very well, that this article needs to go. And, I still interview people that are Googling us and are asking me that question. We’re not celebrities. I don’t think it’s that important. But, I can tell you that it’s BS, completely.
Andrew: Ok. Alright. So, there’s no truth to it. That cap table that they showed, the percentage listing how much of the business you had, that was all BS. It wasn’t true?
Interviewee: Do you want me to elaborate?
Andrew: Please.
Interviewee: Because if it’s interesting, I can tell you what happened.
Andrew: I would love it.
Interviewee: In Israel, an Israeli company ‘ even if it’s private ‘
Andrew: I’m sorry, we lost the connection and now you’re back. So, you were saying you want to elaborate. Go ahead, in fact, I’m gonna let you talk and elaborate while I have a sip of matte, here. Go ahead. It’s all yours, the floor.
Interviewee: Enjoy. I’ll do it really fast. Anyway, the difference between an Israeli company and an American company is that, even if you’re private in Israel, if you go to the register of the companies and look for the cap table, you’ll get it. The cap tables are open. So, if you want to check any Israeli company, you can go and take it. The reporter that did the work on us, from Globes, was not really good in analyzing the cap table he got. When it was published, it wasn’t published on the web. So, I called the newspaper and we decided that it’s not going to go to the web and if something is not indexed, it never happened. So, they can take the newspaper and wrap the fish for the next day. Unfortunately, one of TechCrunches reporters read it, copied it into TechCrunch, without giving me a call, without asking me for a comment, without even verifying the facts.
Interviewee: Just took what he read on Globes as God givens word, copied it to TechCrunch, and the rest is history. I think that’s maybe the difference between newspapers and blogs. Still, when I was in newspaper, you don’t publish anything before you get a comment, before you ‘ You don’t do it. But, eventually it happened. It’s indexed. I don’t have time to deal with it. You know?
Andrew: Fair enough.
Interviewee: That’s what happened.
Andrew: I can’t imagine that you’d still be in the company if that story was true because, soon afterwards, you guys raised 5 million dollars from Spark Capital. Soon after that, most recently, you raised 7.5 million from Globespan and Spark, which means that with the total of 12.8 million dollars that you guys have raised, if I’m doing the math right on everything that I read, after that angel round you’d have been crammed down to zero and there’s no reason for you to stay around with the business.
Interviewee: We would have owned the company.
Andrew: No, if the angel round percentage was right, after those next two rounds, you would have been down to zero and it wouldn’t have been your business anymore. So, you wouldn’t have stuck around.
Interviewee: Oh, yeah. Below zero.
Andrew: Yeah.
Interviewee: Yeah, yeah, yeah.
Andrew: What is your current percentage of the business?
Interviewee: Are you serious? Are you asking about percentage?
Andrew: Mm-hm.
Interviewee: We have a decent amount for the three of us. I won’t elaborate on how much.
Andrew: OK. Did you see how I asked, though, with a straight face? I wanted to smile, I wanted to say, ‘Hey, look, I can’t believe I’m about to ask him that.’ But, I read Chrisdrit [sp] here, in the comments, ask that so I figured let’s read what he says. OK. Alright. So, let’s see. Has the company shifted it’s business model? It looks like you guys were starting out by just trying to produce content only on your website and then, later on, it was always about syndication.
Interviewee: We never produced. I think production is ‘
Andrew: I’m sorry, I don’t mean produce. Did you only try to publish, on your website, videos? Or was the intention always to syndicate it out?
Interviewee: The intention was always to syndicate, but we needed to have an identity in order to license good content. We needed to play the traditional. We couldn’t really syndicate content until we had something like 20,000 videos. So, first we tried to build a brand. We spent a lot of money on SEO and viral marketing. Getting the content out there. We developed the semantic engine, on the back end, while we aggregated the content. And the minute we felt we have enough content for a few verticals, that was the time to go out and offer publishers to get videos on their site.
Andrew: OK. Let’s talk about what it takes since you’ve seen so many videos and you’re seeing the traffic numbers and the revenue numbers on videos. Let’s talk about what it takes to make a good video online. So, I guess there are lots of definitions of a good video. Let’s start off with the profitable video. Who’s out there who’s making profitable videos? Who’s just cranking them out beyond Demand Media. Who are you working with, who’s doing it profitably?
Interviewee: I don’t know if Demand Media are making profitable videos. I don’t know. I think it’s hard. It’s hard to get an [unintelligible] ‘ Look we have more than 800 publishers that work with us. We work with the top media companies that I elaborated when we started talking. We have most of the web production companies, Nexview Networks, FYI, MonkeySee, On Networks, Gary Vaynerchuk [sp], Growing Wisdom, all the web producers work with us. Not all, but I would say, a big portion of them. And we also work with DVD vendors that already produce their content, offline, and they’re selling it in Amazon. And, you know, the Yoga routines and things you can really buy. And, we convinced them that this business is gonna ‘ It is. It’s being affected by the web. And, we’re basically repurposing the content. We edit the content. We edited I think, in the last year, more than 5,000 DVDs. Just to give you a scope of the amount of content that exists already. So, I have 800 partners. I guess some of them syndicate content to other vendors. I would say that the two main ingredients, in my opinion, is A, the quality and how much you can be entertaining, but still valuable. And, the second thing, which I think not a lot of producers take into consideration is, find a place where there’s not enough content. Like don’t make another How to Make Sushi. Don’t make the most amazing How to Make Sushi video. Find the niche, where there’s a real demand for the content and no one else still produce that and own the space. And, I think that what we’re seeing lately, in the web production business, is that everyone are going to the most 20% trafficked pages or topics.
Interviewee: . . . or topics and are trying to compete with one each other in creating the same content. Whereas, there’s so much content that was, that was never produced, you know, on, on really like niches, like Blackberry applications. I’ve never seen a library that has, you know, 700 videos on how to install any application, how to work with your Blackberry and that’s just one example. I think the producer . . .
Andrew: I see. So,everyone’s making Sushi videos and recipe videos, but they’re missing out on niches like how to install every Blackberry app out there.
Interviewee: Yeah.
Andrew: And what can somebody, let’s say somebody’s listening to us right now. We’ll take Andrew W, Andrew S.G. who’s listening to us and typing away here in the chat room. Thank you, Andrew. If he wants to get into this business and create a bunch of videos about how to install Blackberry applications. And do one for every single app that he can find out there. Production not very tough? He’ll just need a camera, right? Maybe even something, some way to, to pipe the video directly from the Blackberry to the, to the computer. So we’ll assume production cause nothing or cost nothing. What kind of profit can he get from it? What kind of revenues can he get?
Interviewee: All right. So, first I would say the production, matter, matters, I mean, you, you need the video, if you want your videos to be streamed on size that we send them to, then the content should be okay. Like the production volume should, should be good.
Andrew: Okay.
Interviewee: I mean, it shouldn’t be, the sound shouldn’t be ****. So, you, you’ve got to spend some money on production. I wouldn’t dismiss that.
Andrew: Okay.
Interviewee: But on top of that I think we can, we can guide them. I think the men media are doing the same. We have a network of hundreds of publishers. Our videos are syndicated to more than 1700 million pages. And we know exactly on what pages we don’t have an answer because we read more pages than we’re . . . If we read a page and we don’t have a video, we don’t show up.
Andrew: So, you know what kind of videos need to be created?
Interviewee: Exactly. Yes.
Andrew: Okay. Let’s talk about the revenue. What kind of revenue can somebody get from creating these videos?
Interviewee: I can say it can go from a few . . . it depends on the, on the niche. Like travel, I think, can be amazing, but it’s hard to produce. So, but it would vary between a few hundreds to tens of thousands or more.
Andrew: That’s a big gap there. What about Blackberry? Can you give us any numbers on that. Just to, just to give us an example that we can all work with? What kind of CPM’s can, can somebody generate for a Blackberry video?
Interviewee: The CPM’s can be really high. I mean, you can get into the 25 and then it’s being divided instead between everyone.
Andrew: Okay, so we get 25 CPM divided by, by three people, right?
Interviewee: More or less.
Andrew: Assuming we don’t get to the third. That’s about 8 bucks maybe a little be less since he’s a new producer.
Interviewee: And then the question is how do you find the fine line between a content that was never produced, or there’s not enough of it and there’s, and a decent amount of traffic on the other hand.
Andrew: I see.
Interview: I mean, because If, if you’re going to Mongolia to shoot some videos of how to travel in Mongolia, I can assure you knowing, knowing and produce them. So it would have a huge volume for the long tail. But there would, wouldn’t be enough traffic. You wouldn’t get in enough CPM’s in order to get an economy with things. So, you need to find the fine line. And when we speak with our partners, our **** partner. We always have this discussion of let’s go to this thing. I asked them at the **** this and that. But, I think the interesting thing on the internet is that 96% of the pages on the web are textual. And there’s barely, you don’t see a lot of videos yet when, when you surf around. So there’s a room for so much more production. It just need to have a reasonable how or why behind it, you know, to actually go and produce it.
Andrew: So, you doing kind of what the men [sp] media does. Which is evaluate what the CPM is on a content, what the demand is for that content and then you’re going to your producers and you’re saying this is what you guys can expect to earn from it. What do you say? Do you want to get into business of creating it.
Interviewee: Yeah. Basically, yes. The demands are, are, have these**** things that are based on SCO assumptions. They can, they guess the demand. We do the, the opposite model where we already are ingesting so many sites and we know what the demand is, actually is.
Andrew: And who do you go to with that? What kind of producers?
Interview: So we . . . All, all, all across the board. The web production, the top media companies, the DVD producers. I mean there’s producers wants to make money. There’s a lot of producers that just want to know, hey, where should I focus. And . . .
Andrew: And you’re not assigning the jobs, right? You’re not saying to one producer, you’re not saying . . .
Interviewee: No.
Andrew: . . . this is what we have out there, who wants to do it. You’re just saying, go free for all.
Interviewee: Yeah. But, I can tell you and this is where, I think, where we’re differentiated from demand that sometimes we just find the content.
Andrew: They’re chopping up the long interview into small pieces, just a couple of minutes so that it’s a question and an answer, not even a question I think they will even, they won’t even have the question on camera, right? It’s just Richard Branson[sp] giving you a couple of minutes to explain this one issue.
Interviewee: Exactly.
Andrew: OK.
Interviewee: And I love them, I think they really create value for the users.
Andrew: Let me write a note to remember to edit ou the bigthink.com url here. No need to give them publicity. No, kidding, I’ll leave it in. Let’s take a couple of questions from the audience and then I’ll go and edit this interview down. Let’s see what do we have here… Do you have a self-serve ad platform for advertisers Chris[sp] Wants to know.
Interviewee: I wish, the biggest problem is… Yeah that’s a very good question I think it will happen, eventually. But on display there’s so much remnant inventory so there’s no need, everyone has the creative .. people really need a platform to do their self served. I think that on video there’s not enough ad inventory for these platforms, there’s not enough pre-rolls. We need the market to get bigger, and it is, I mean online video is one of the hot spaces on the web, but I think it’s still premature to put the effort there cause there’s not enough market space for that right now.
Andrew: ok, Andrew S. G. says that it seems that all the content, all the video that you needs is pretty much out there. He can search for just about anything and find video anyhow at the top one or two searches, what do you think of that? Is it all out there already?
Interviewee: I think he’s right, and that’s why I, we’re trying to work with anyone that is winning the SEO, I mean if you’re winning the SEO and you don’t have a video on your site, we’ll give you a call. And I think that’s how the media consumption is being changed, there isn’t a video for everything, but there’s a video for a lot of FAQs, and then the question is how do you get the audience, which is exactly what we talked about, SEO is a big part of it. And today I think that, you know Ehow Wikihow, Wikia, Answers.com, About.com, these guys are winning the SEO. For most of the questions, and we want to help them to get videos, Ehow don’t need our help, they have their own media, they can handle themselves great, but we work with almost all them others and that’s the thing today by the way, you don’t go for a brand, the brand is Google. You go to Google, you ask a question, and if you produce this amazing video in ten thousand bucks, and it’s not on Google’s front page, you have a problem.
Andrew: I see so what you do is to find the publishers, to find the websites that you put the videos on is, you might do a search on Google for a few keywords to see who keeps coming up at the top, if they don’t have any videos already on their site you’ll say look, run our videos, the CPMs is so much higher on videos than text you can give us a small section of your site and test it out.
Interviewee: This is how it started, today fortunately we get a lot of publishers to call us, but yes this is how we started and on top of that it’s a no cost deal for the publisher. If you go to Bridecov[sp], you pay them to get the CMS, than you need to license content and you need to get the deals, you need to get the content, 5min gives you the content, the technology, the ads, not only for free, we give you a check, and that’s our value prop and this is how we started, yes, so who wins the SEO, we gave them a call we say, we’re not competitors, we’re friends. Here’s the content. Do you want the content? And it just makes sense for everyone.
Andrew: Raheem[sp] earlier asked who does your SEO? For 5min.com?
Interviewee: We do our own SEO.
Andrew: Ok
Interviewee: I think by the way, anyone that deals with niche content, needs to do its own SEO. Don’t get consultants and learn it yourself, it’s not rocket science.
Andrew: Really? You didn’t hire someone with experience in SEO? You just had them figure it out?
Interviewee: We did, but we didn’t hire him to consult us, we hired him to teach us.
Andrew: I see. Adam B.’s question from earlier I don’t think he clarified it but let me reshape it. Celebrity, he’s saying, how important is celebrity in videos?
Interviewee: So, let me ask you, I’ll reverse the question. If you wanna know right now, who’s Churchill, or how to connect your Blackberry to your laptop, or how to make a Tequila Sunrise. In my opinion, you know what you want, you don’t need a celebrity. If you want just to spend time online, celebrity help. Celebrities help.
