Instant infomercials: Making millions from YouTube ads
Web media startup TurnHere churns out 1,000 corporate videos every month. That might just be the future of Web advertising.
EMERYVILLE, CALIF. (Fortune Small Business) -- Antoine's Restaurant in New Orleans had never been the subject of a TV commercial, let alone an Internet ad. The 168-year-old business, where third-generation waiters serve gumbo and other Creole delicacies to third-generation customers, had only ever advertised in print and on radio. So last June, the owners decided to drag the restaurant into the 21st century with an ad on YellowPages.com, complete with a promotional video.
That was good news for Brad Inman, owner and founder of the online video production company TurnHere. Based in Emeryville, Calif., TurnHere is fast becoming the first choice for local businesses around the country that want to show off their wares in a quick online movie, but have no idea how to make it look professional. Analysts say spending in this niche is set to explode. By producing videos as fast as it can, TurnHere is already cashing in.
"Our market is the 70 million Web pages out there," says Inman, 56. "They can all use video."
TurnHere isn't shy about telling clients exactly what should be in their videos, either - as Antoine's found out. "I thought I knew what I wanted," says Wendy Chatelain, the family-owned restaurant's head of sales and marketing. She lined up one of her waiters to record a sound bite and listed the signature dishes she wanted to show off. But TurnHere's producer-cameraman made the waiter into the star and narrator of the video and filmed the restaurant's flaming Baked Alaska, which wasn't on Chatelain's list. "It was great," she says of the end result.
Best of all, TurnHere shot, edited and uploaded the one-minute ad for a mere $1,000, and the spot attracted 300 new customers to the restaurant in its first month online.
Inman has reason to believe he's onto something big. Small businesses spent $10.9 million on Internet video ads in 2007 and will spend as much as $1.5 billion in 2012, according to the Kelsey Group, an advertising research firm. A survey forAT&T (T, Fortune 500) found that half of its small business customers plan to purchase online video ads in the next couple of years. Inman says he produced a whopping 1,000 videos each month in 2008, compared with 2,800 videos in all of 2007. He won't reveal revenues, but says the company just became profitable.
Although Inman, the founder of two real estate Web sites, had limited professional video experience before he launched TurnHere in 2006, the rise of Google's (GOOG, Fortune 500) YouTube helped him see which way the wind was blowing.
"I was lucky to catch two trends: the success of click-and-play video [on sites like YouTube] and the dramatic drop in Web video production costs," he says. "Cameras have become very cheap."
TurnHere's labor is pretty cheap too. The company employs 50 full-time staff and an army of 6,000 freelancers. Each freelancer is a one-person crew who, after coaching the client, shoots, directs and edits the video, usually all in one day. Inman's profit margins are juicy: Freelance pay starts at around $250 for a basic project, depending on experience, while clients pay an average of $1,000 for each video.
TurnHere's model may seem quick and dirty, but the company still strives to make each video feel relaxed and documentary-like. "The old, branded Mad Men style of TV commercial is over," Inman says. "We want real people telling real stories, authentic and full of information. The Web demands believability."
Two-thirds of Inman's business is still local advertising - uploaded to listing services and search sites like YellowPages.com, Superpages.com, Citysearch.com and Kudzu.com. But increasingly TurnHere is doing high-concept ads for big companies such as InterContinental Hotels (IHG), Williams Sonoma and Pottery Barn - available both on the clients' Web sites and YouTube. Recently the company shot a series of 100 videos for publishing giant Simon & Schuster, in which authors such as Stephen King and Mary Higgins Clark were interviewed about their latest books.
Since TurnHere launched, dozens of companies have turned up to serve the same niche, including Denver Multimedia, SpotMixer, Spotzer, EZshow and Mixpo. And the large Los Angeles ad agency Spotrunner, which has traditionally focused on helping clients buy and place television ads, is entering the online video ad market. The company, flush with $50 million in venture capital, recently purchased a production company with a network of 1,200 video professionals, along with online local advertising company Weblistic.
Inman, who raised $7.5 million in VC funding earlier this year, says he's not threatened by his competitors: "I said to Spotrunner, 'Let's figure out how big this market is before we start fighting about how to divide it up.'"
In any potential shakeout of the online video market, TurnHere's strong brand and efficient production will likely help it survive. But the danger Spotrunner represents is that online video ads will simply become part of the marketing mix. Companies large enough to offer TV, radio and Internet spots as a package deal could get the lion's share of the business.
"TurnHere has an excellent product," says Greg Sterling, an Internet analyst at Sterling Market Research. "They're like the iPod in a sea of MP3 players. I see them evolving into an ad distribution network - which somebody's going to want to buy."