In 1979 when the Buggles released their hit song “Video Killed the Radio Star” in the UK, their subject was a radio star whose career was cut short by the rise of television. Updating the metaphor, one might now ask what effect the Internet will have on television.

The short answer is that while it is unlikely that the Internet will kill television, the rise of Web 2.0 and “social media” are creating ever more challenges to conventional television businesses. And it is not yet clear which strategies will provide the best response.

It is easy to conflate the array of video-based websites into a kind of amorphous YouSpace or MyTube, full of multitasking media-savvy teenagers sharing music and video (often not theirs to share) with thousands of online ‘friends.’

It is important to understand the different kinds of companies in this emerging space, the alternative business models and the specific challenges they pose to traditional media organizations.

First there are social networking sites that include video players (such as MySpace and Bebo) and then there are video sites that include social network elements (such as YouTube and Veoh).

Within both types of site, there is a wide range of content - both in terms of quality and legality.

Can it be ‘monetized’?

News Corporation Chairman and CEO Rupert Murdoch sees a huge difference between MySpace and YouTube in terms of the business model. While he finds Google-owned YouTube “hypnotic,” he questions whether it could ever generate serious advertising revenue.

“How do you monetize it?” Murdoch asked the McGraw-Hill 2007 Media Summit in February. “If you interrupt the flow of videos with commercials, [YouTube viewers] are going to go with [MySpace] or somewhere else.”

Of course, Murdoch would prefer they come to MySpace, which he bought for $580 million in July 2005. That’s why he has teamed up with NBC Universal to create what can be seen as The Empire Strikes Back sequel to upstart YouTube.

The two old-media giants will distribute top TV shows such as 24 and The Office over MySpace, AOL, Yahoo and MSN which between them reach about 96 percent of the US Internet audience.

The content, displayed in an embedded media player on these websites and on a separate video site that the two companies are about to launch, will be advertising-supported and free to users. So far, just TV on the Net. But it gets ‘social’ with facilities for members to edit content and post their own videos.

Other big media groups may join the venture (known internally as Caterpillar) and both News Corporation and NBC Universal insist that it is much more than a defensive move against YouTube.

Wired: Not impressed

Wired magazine, the Geek bible, was less than impressed: “They’ve got to build a new site, develop an easily brandable embedded video player . . . fill it with content, and launch it – all within a few months. Does anyone think that a rushed, top-down, corporate-driven project like this will pose a serious threat to YouTube?”

Big media hasn’t always come off best against the new media upstarts. For example, NBC and Bertelsmann’s anti-Napster music site Getmusic.com failed to win an audience. But there are other ways to fight back, as shown by Viacom’s $1 billion copyright infringement lawsuit against YouTube.

But Colin Donald, director of Futurescape, the UK consultancy, argues that the damage to Viacom and other mainstream media business from the likes of YouTube has been exaggerated: “People are not going to YouTube to watch the professional stuff, which is a lot less viewed than is often thought.”

According to online research company Hitwise, in the two weeks after YouTube was forced to remove 100,000 Viacom video clips on February 2, visits to YouTube in the US increased by 14 percent. Hitwise reports that YouTube’s US traffic “surged above the combined traffic to all of the television network websites. This is a landmark event in the changing face of web traffic and entertainment consumption.”

Just as it launched its suit against YouTube, Viacom signed up to Joost, created by Janus Friis and Niklas Zennstrom, the duo behind both Skype, the voice-over-IP service; and Kazaa, the file-sharing network. This is another vehicle for the mainstream companies to play in the video social media arena. Other Joost partners include National Geographic, Warner Music Group, CBS and Endemol.

Joost qualifies as social media because it offers chat and messaging features to create a community feel around the content.

Hybrid social networks

Another emerging model is the hybrid social-network service (SNS) that combines online and broadcast television. In the UK, Trouble Homegrown is a video SNS linked to Trouble, the cable and satellite channel where users create profiles and upload video clips from cameras and mobile phones.

A more sophisticated hybrid is Current TV, set up by former US Vice President Al Gore, which has launched on cable in the US and on BSkyB in the UK. Targeted at young adults, its users create their own videos and upload them to the website where other members vote on which ones should be shown on the TV channel. Producers of those selected are paid up to $1,000 for each video.

Current TV also allows users to generate advertising content with the ability to create 30-second television spots for sponsors, including L’Oreal, Mountain Dew, Pop Secret, Sony, Sony Ericsson, T-Mobile, and Toyota Corolla.

Advertisers as well as content owners face significant challenges from social media, not least because the online audience is often hostile to advertising.
Futurescape’s Donald suggests that brand owners and advertising agencies have to learn how to “make the leap from broadcasting commercials to entering a conversation, from TV ads to YouTube anarchy.”

Going “viral”

Going “viral” is one solution. This refers to creating an ad that becomes a talking point and quickly spreads through the online community. The classic example on YouTube is the 75-second Dove Evolution short film designed to promote Dove beauty products. It had more than 2.4 million views in five months, generated a large reaction through blogs and ended up being featured in mainstream media.

But as a Futurescape report concludes: “The reality is that YouTube is full of well-crafted, professionally produced commercials that no one pays much attention to. For every ad that does manage to go viral […] there are hundreds or thousands that are uploaded to oblivion.”

The challenge for traditional content companies and advertisers as they enter social media is to avoid ending up in oblivion – and to do this they need to create fruitful conversations with the people formerly known as “the audience.”