Facebook’s $1 billion acquisition of photo-sharing start-up Instagram has shifted the spotlight to the newest phenomenon in mobile apps: uploading personal videos from smartphones. But the fervor in mobile video-sharing apps could be undermined by what these services still don’t have—revenue and a concrete business model. Some of the start-ups, like Viddy Inc., have started charging for extra features like tools that add filters and effects to the videos, though the effort is nascent.
“The biggest issue in mobile is monetizing,” said Dino Decespedes, vice president of Mobli Media Inc., a mobile video app that has signed up more than the three million users since last September and snagged funding from actors Leonardo DiCaprio and Tobey Maguire. Mobile is “not a sexy place to put ads.”
Mobli is also experimenting with charging for certain features, such as overlaying a video with a Disney World-themed frame. But the company is still figuring out the business model.
That may not be an issue if Mobli can find instant riches instead the way Instagram did when Facebook agreed to acquire it last month. Instagram had no revenue but 35 million users after launching just 18 months earlier.
Such a deal is rare in Silicon Valley, however, and some investors question whether video services can reach the same level of ubiquity as photo-sharing, given people tend to share more photos than videos.
So far, the boom in video-sharing apps is being fueled by fast user growth at start-ups such as Viddy. About 26 million people have downloaded the Los Angeles company’s app since it was launched a year ago, and it is currently adding around a million users a day.
Viddy has recently been in talks about a new financing that would value the young start-up at more than $200 million, according to people familiar with the matter. A Viddy spokesman declined to comment.
Last week the app vied with San Francisco-based Socialcam Inc., which spun out of video website Justin.tv last year, for top app in the free section of Apple’s app store. Socialcam, which has pulled ahead in the rankings, has 36 million users since it went live about 14 months ago.
Socialcam CEO Michael Seibel said his company has been considering various business models. Among them: selling the ability for brands to push a video to the phones of everyone who enters a specific location, like Times Square, or sending everyone at a school a movie trailer around lunch time. Still, “less than 1% of our focus is on the business model,” he said.
Some entrepreneurs and investors backing these apps said the bandwidth-hogging nature of video, high wireless data costs from carriers and different mobile video habits suggest their engagement and growth may not be as viral as Instagram.
Videos take longer to produce and consume than pictures, for instance. It is unclear if the video apps will reach a point where they threaten a major player in the near term, much like Instagram frightened Facebook enough to compel it to make a gigantic offer.
Video “does not have that zero friction adoption” that photos have, said Bruce Dunlevie, a general partner at venture capital firm Benchmark Capital, which backed Instagram. “It is a bigger, more gnarly technical problem.”
Still, Benchmark placed a bet on mobile video by leading an $8 million investment into Klip Inc. in November. Mr. Dunlevie said he thinks the market can be valuable because videos can create more lasting memories.
Wireless carriers are paying attention to video-sharing apps too, as they seek to promote services that encourage users to sign up for pricey data plans for fourth-generation wireless networks.
Verizon Wireless announced a deal with Color Labs Inc. on May 7 to preinstall its free live-video sharing application into some Verizon phones that work on its fourth-generation wireless network. The partnership will give Color the opportunity to connect its app, which streams live video to its app and Facebook, to the computer chips in a phone, which could improve the quality of the videos.
But Color, which raised $41 million as a photography app last year, has struggled and said it only has more than one million users. After an unsuccessful launch last spring, the company changed course in December and instead focused the app on streaming bits of live video over a smartphone that could be shared on Facebook. Color co-founder and CEO Bill Nguyen said the new deal would yield apps that “leapfrog current technologies.”
The mobile video push comes amid renewed interest in online video in Silicon Valley. When Google Inc. GOOG +0.86% paid $1.65 billion to acquire YouTube in 2006, venture capitalists started salivating over online video. But many investors got burned as YouTube copycats quickly went out of business, beset by challenges such as making money from amateur content, policing inappropriate content, copyright issues and the ability of wireless networks to support video.
Earlier this year, Viddy was briefly kicked out of Apple’s app store after people posted adult content. A Viddy spokesman said the ban lasted 48 hours and the company worked with investors to implement “one of the most pro-active and effective content moderations systems of any application in the App store.”
But improvements in camera technology, networks and the proliferation of social media have attracted a new wave of investment and entrepreneurs. Napster co-founders Sean Parker and Shawn Fanning will in the coming weeks launch Airtime, a live-video chatting service, said people familiar with the matter. The site—which raised around $8 million last fall—will have a mobile experience as well, one of these people said.
Also, entrepreneurs said YouTube could be doing more on mobile. “The YouTube experience on the iPhone is pretty dreadful,” said Mobli’s Mr. Decespedes. “They have been slow to change.” Users can’t upload videos directly through the YouTube app but can using iPhone’s videocamera.
A YouTube spokesman said “developers bringing more video applications to the Web is good thing for consumers.” He added that the company partners with many app developers to allow them to upload videos to YouTube Apple, which develops the YouTube iPhone app, didn’t immediately have a comment.
via Wall Street Journal