Startup Produces 2006th clip in 2006: the Year of Online Video

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Privately-held start-up manages to carve out a niche amongst media giants and technology pioneers in the rapidly growing online video space on the Internet.

If 2005 went down in history books as the year of social networking with MySpace leading the way, 2006 is shaping up to be the year of online video.

After the dot com bubble burst in 2000 and took down with it the dreams of many in the online video space, the surge in online advertising, decline of bandwidth costs and rise of broadband users is creating an opportunity for online video to shine in 2006.

“The overnight success of video sharing service YouTube has definitely put the spotlight on the online video space,” states's Founder and Executive Producer Ashkan Karbasfrooshan.

But with success comes excess, or does it?

According to Thomson Financial, 27 online video companies secured $126.7 million in financing in 2003, 23 firms secured $121 million in 2004, and 37 companies secured $160.7 million in 2005. In April 2006 alone, three companies snagged $30 million. Today, there are 175 video sharing sites online, many wonder if an impending shakedown is around the corner.

YouTube serves 100 million videos a day. But, of course, it owns none of the content. Instead of competing with the file-sharing sites, has carved out a niche as a leading producer of video content. So instead, it has been courted by YouTube, Google Video, Yahoo Video and the like who envy the site’s library of 2000-plus short videos, custom-made for the Web, ranging from comedy skits to informational, do-it-yourself, how to clips.

In theory, YouTube could embed ads into videos and generate millions a year. But since most of the content is questionable in copyright and quality, advertisers have balked. To make matters worst: a Business 2.0 article pegged YouTube’s spending on bandwidth and hardware alone at $5 million per year. The current craze over Web 2.0 companies is warranted, Karbasfrooshan argues, but reminds “don’t forget the premium that advertisers -- and investors -- place on content,” something that file sharing sites lack.

“Regardless, despite the murky income statement, YouTube knows that it’s the most sought after asset in the space. While the video sharing and hosting sites have garnered much of the press, companies producing custom, proprietary video have remained largely off the radar of the press, though certainly not of old media firms who envy the quick production cycles and relative low costs of web production houses like There has been a large discrepancy in terms of press coverage between services that offer the technology with those that produce the content,” argues Karbasfrooshan.

A lot of the companies in the video sharing space will have to fine-tune their business models to survive. Tom McInerney, CEO of Guba states in the Business 2.0 article: "There'll be a lot of casualties in the next year." Adds August Capital's David Hornik, who backed VideoEgg: "It's not possible that this many video-sharing sites can exist and make money."

Part of the problem is that traditional companies have resisted the urge to shift their video online, because the revenue is simply not there. A traditional video producer can generate millions of dollars on TV with their content, but online, advertisers are intrigued by the media but still hesitant to shift more dollars to video.

“There’s not real financial incentive for the so-called old media firms to migrate content online,” according to's founder. Believers are not too worried even if the perception is that too much money is chasing too few quality companies. “We need to put these numbers into perspective,” in 2005, the entire U.S. venture capital industry invested $20 billion in 3,000 new companies, “so only 5 percent of that was invested in online video sites.”

One thing is for sure, concludes Karbasfrooshan: "traditional companies remain the best positioned to benefit from the surge in online video, and once the incentive for them to do so is there, they will come knocking." But until then, he does admit that a wonderful opportunity has presented itself for aspiring filmmakers and producers to turn to the Web and avoid the Hollywood and Silicon Valley trap.

About was founded and launched in January 2006 and has gone on to boast one of the largest video archives on the Web, with over 2,000 short videos, ranging from entertainment and comedy skits, to informational, do-it-yourself video clips. Its library places near the top of online video-producing sites and is one of the five largest in terms of traffic. The site is a part of the privately held Mojo Supreme network, a company with interest in video publishing, vertical search, classifieds, and much more.


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Ashkan Karbasfrooshan
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