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Online video player and recommendation network AirMedia has just received a $2 million Series A investment led by Otter Media. The Culver City-based startup is building a paid syndication network for premium video content. The network is similar to Taboola or Outbrain, both native content recommendation networks that suggest additional content that readers might like at the bottom of articles.
Paid content recommendation “has become the best way to buy traffic,” said co-founder and CEO Luke McDonough. “That traffic turns out to be extremely high performance. The click rates tend to be very high and engagement tends to be better.”
“We are now applying that same business model, only to premium content,” said McDonough. “Taboola and Outbrain doesn’t work well for promoting video content.” and, “a lot of publishers don’t like to have low-brow content on their website,” so AirMedia sees the time as ripe for a premium video content recommendation network.
Using an algorithm, AirMedia recommends videos on its network to viewers. Not all videos are suggested by the recommendation engine. The service holds a certain amount of video recommendation slots for paid promotion. Those video slots go to the highest bidders based on pay per click basis.
The sweet spot for AirMedia is video content that is too expensive for syndicating on YouTube, given that platform’s huge advertising take, or not formatted for Netflix, given that site’s focus on longform, evergreen content. Instead it focuses on premium content that has a shorter shelf life like sports, news and lifestyle. Some of AirMedia’s customers include NBC Universal, Cinesports and 120 Sports.
“You have full blacklist, whitelist capability,” said McDonough. “We give them the capability for cutting different deals to different sites. We also give them complete transparency. We are able to report back to them that these are the sites that are embedding their content.”
Such control is important for competitive separation and to help media brands maintain a consistent level of content quality. Premium brands have a harder time doing that amongst the sea of content on YouTube, or without cleaving themselves from a network entirely.
Besides its paid content recommendation network, AirMedia does two other things: it can host videos and run pre-roll advertisements. Right now, video hosting is free and content creators can sell advertising against their own videos, keeping 100 percent of the revenue. With such a strategy McDonough admits they will make a lot less money in the short-term. However, free video hosting and 100 percent of the advertising take could entice content creators away from other video players, especially YouTube.
McDonough is happy to admit that YouTube MCN’s are a key target of the startup. In fact, AirMedia’s lead investor Otter Media owns MCN Fullscreen, and sees the network as a good way of getting away from YouTube dependence.
“Their interest was exactly that: how do we have a way of getting large-scale distribution?” said McDonough.
As AirMedia’s network gets larger it will be a more compelling place to publish. YouTube’s sheer traffic size means content creators have access to large audiences, and benefit from being discovered on the site. McDonough said he knows one of the main fears of YouTube creators is: “’If I get off [YouTube] then my revenue goes to zero.’”
If all goes according to plan, AirMedia would like to be a place for content creators to jump.
In total, AirMedia has raised $2.8 million. This last round was led by Otter Media and included investors Allen Debevoise, Trevor Traina, and Skip Paul. AirMedia plans on using the capital to ramp up hiring of engineers, sales and support staff.
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