Software

There's Gold in Mining Streaming Video


Among Christopher Widauer’s duties as technical director of the Vienna State Opera is to make sure spectators in his 2,100 seats can clearly see the stage as well as translations of the libretto. He had to consider a much bigger audience when his bosses said they wanted to earn additional revenue with Web and mobile HD simulcasts—without the delays and hiccups that often interrupt online videos. “We have customers who are extremely demanding,” Widauer says. “They don’t want buffering. They want to watch an opera as if they’re sitting in the room.”

The opera house is one of more than 600 clients that have relied on software maker Ooyala to help them set up and manage streaming video services. As broadcasters and other companies seek more revenue from programming on mobile devices as well as PCs and smart TVs, they often struggle to adapt their software to run smoothly on all the devices, and to target ads to users based on which device they have. Mountain View (Calif.)-based Ooyala (pronounced ooh-YAH-lah, from the Telugu word for cradle) is one of a handful of companies that provide such back-end services, selling subscription-based software that helps automate online video programming and ad delivery. Ooyala clients include ESPN, Comedy Central (VIA), Univision, Fox Sports, the Washington Post, American Express (AXP), and Dell (DELL). (Bloomberg LP, the parent of Bloomberg Businessweek, has also used its products.)

Ooyala software tracks which video and ads people watch, letting clients target follow-on content and ads based on viewer behavior. Unlike its rivals, such as video cloud company Brightcove (BCOV) and Comcast (CMCSA) subsidiary ThePlatform, Ooyala provides real-time analysis of viewing habits so that every screen is customized based on existing personal data, says Chief Executive Officer Jay Fulcher. “We’ve been collecting data for five years,” he says.

“Ooyala has better analytics around those video decisions, both in terms of monetization and advertising, than Brightcove,” says ABI Research analyst Sam Rosen. Brightcove didn’t respond to a request for comment; the 10-year-old company notched an estimated $109 million in revenue for 2013, data compiled by Bloomberg show. Ooyala has received roughly $120 million in venture capital since its 2007 founding, including a recent $43 million round led by Australian telecom Telstra (TLS:AU), and won’t disclose revenue. Market researcher IDC estimates that the $200 million subscription-software industry will be a $1 billion market by 2016.

Founders Belsasar and Bismarck Lepe and Sean Knapp stumbled into video streaming and analytics. After leaving Google (GOOG) before its initial public offering, they started Ooyala to develop interactive ads that companies could build directly into programming. The idea was to allow viewers to click on and buy a Dolce & Gabbana bag while streaming an episode of Sex and the City. Knapp says they gave up after concluding that “after 40 years of research into this area, we weren’t going to solve it in six months.” Still, the startup helped lay the groundwork for the company’s data analysis. Early on, they pitched their software as a cheap alternative to client-built systems that could cost as much as $100 million. The Ooyala suite costs about one-fifth that price per year, the company says—less for packages that lack the analytics.

For Ooyala and its rivals, the challenge is to help broadcasters and other companies squeeze more money out of their programming online by using data to better target ads to consumers, says IDC researcher Melissa Webster. “They need to know how the video is being consumed—are people engaged or dropping out, and are they watching the ads we’re showing,” Webster says. Ooyala declined to say when it will turn a profit, but Fulcher says the Telstra funding “allows us to keep the pedal down.” Despite the field’s growth, he says, “The gun has gone off in this race.”

The bottom line: Ooyala is using data analysis to try to carve off a bigger piece of the growing market for streaming video services

Cliff_edwards
Edwards is a reporter for Bloomberg News and Bloomberg Businessweek in San Francisco.

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