Market Overview

Can Streaming Video Take a Bite Out of Traditional Media Advertising?

If Netflix (NASDAQ: NFLX) and Hulu are the future of streaming video, TouchStorm could be the future of brand promotions.

TouchStorm, which describes itself as a digital video solutions company that's “powered by an editorial network,” distributes online video that is “sold like advertising” but runs like content.

“We curate a lot of video and we produce videos for brands that do not currently have any editorial videos of their own,” Alison Provost, CEO of TouchStorm, told Benzinga this month. “And we do it in a way that helps them get their expertise out to people who need it.”

Provost said that people don't always think of brands as being experts, “but when you get right down to it, who knows baking better than Betty Crocker?”

“So who better than Betty Crocker to guide consumers on baking children's birthday cakes – which has been one of the most-searched topics on the Internet for the past few years,” she said. “And that's another aspect that sets us apart – that we take a search-based approach to our online video strategies rather than the share-based approaches brands use in their advertising. We identify the topics that consumers are actively searching for – how to bake a princess cake or how to take a picture of my children – and then help brands like Betty Crocker or Sony share their expertise in an engaging, informative how-to format.”

Provost said that TouchStorm then optimizes those videos to “ensure the highest search ranking among today's leading search engines, including Google (NASDAQ: GOOG), Yahoo (NASDAQ: YHOO) and YouTube.”

“We also syndicate them through the TouchStorm Editorial Network of top-tier publishers around the Web to ensure the brands are getting TV-like reach along with the highest levels of consumer engagement,” she added.

Big Brands

TouchStorm's clients include Autodesk (NASDAQ: ADSK), Kraft Foods (NYSE: KFT), Procter & Gamble (NYSE: PG), Sony (NYSE: SNE), and Travelocity.

“We launched in 2008 after a round of conversations with some of the country's top chief marketing officers,” said Provost. “We'd talked to them back in 2005 and 2006 about the coming online video revolution. Broadband penetration and the rise of video-sharing sites like YouTube were just the beginning, and we wanted to know what they hoped would happen as the future unfolded. They said three things:

“First, they hoped that it would not just be television content ported over onto the Internet. The Internet is such a high engagement medium, and TV is a one-way medium. They hoped for better engagement from audiences.

“Second, they hoped that it would not just be a long-tail scenario. TV has scale to it, but to date, the Internet struggled in delivering a reliable source of scale where advertising and content were concerned. Sure, videos went viral, but they needed reliable scale.

“Finally, they hoped that they would be able to convert views into action. This goes back to the interactivity of the Web. Its two-way nature offered marketers the potential to give audiences more information, sell their products or drive other high-value actions.

“So they wanted reach, engagement, and conversation. And that's what we built TouchStorm to deliver – online video that gives TV-like reach, Internet-like engagement and converts an audience to an action.”

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Earned Media vs. Paid Advertising

On TouchStorm's site, it says that the company distributes video “Online. As earned media not paid advertising. So, the videos show up center of the page, not over in the margins with the advertising. The videos run everywhere.”

This made me wonder: what's the difference between “earned media” and “paid advertising”? Why does AOL (NYSE: AOL), for example, distribute TouchStorm videos?

“Publishers want great content,” Provost replied. “And more and more they want great video content. We have great video content. It's as simple as that.

“All of our content – whether curated or produced in-house – is pre-wired to perform well in search. So, audiences find it where they are looking for it – on page one of Google search results.”

Provost said that for a publisher such as AOL, “or any publisher looking for high-quality video content that will draw a steady flow of visitors,” this is a no-brainer.

“They don't have the headache of production, they get TV-quality videos, they get more traffic because of the search optimizations and they get instant high CPM ad inventory for their site,” Provost explained. “It is a great deal for our publishing partners – there's no faster, easier way for them to get a huge inventory of high-quality video on topics their readers are actively searching for now and in the future.”

Center-Screen Editorial Content?

TouchStorm describes its videos as “center-screen editorial content.”

“You won't find them among the ads in the margins,” the company wrote on another page of its site. “We deliver helpful informational content that answers the Internet's most frequent searches. Now, your brand can be the voice behind the know-how.”

This sounds interesting…but what does it all mean?

“Imagine a webpage that has video content in the middle of the page and banner ads all around it,” Provost explained. “When people are searching for content, they are not Googling for those ads around the margins of the page, they are searching for that video in the center.

“As we mentioned before, we know that brands have a ton of expertise, but they are not used to sharing it with an audience. They are used to just running ads that tout features and benefits copy. What we do is help them get their expert video content in the center of the page where people are searching for it.

“The video content we create is underwritten by either brands, subscribers, advertisers, or, sometimes in the case of movies, investors and the content we distributed is providing answers to the questions consumers are searching the Web for answers to – what to make for dinner or how to get Taylor Swift curls or how to housebreak a new puppy.”

Premium Videos

Provost said that publishers are particularly fond of TouchStorm's Howdini platform “because it gives them an instant inventory of premium video that they can monetize on their sites.”

“They know that all of our video is optimized to perform well in search, which will increase their site traffic,” said Provost. “And great video translates into higher CPMs on their ads. It means more people on their sites. And, ultimately, it means more revenue for them. It is a great proposition for publishers of all shapes and sizes.

“Many of these publishers already have videos and we run in rotation with their content. For example, Hulu runs our content and it also runs pre-roll. So does AOL. So does YouTube because we are a YouTube partner.”

The Next Step

Looking ahead, Provost said that TouchStorm is focused on three things:

  • Going Global
  • Increasing Curation
  • Expanding Howdini

“We have plans to expand Howdini into other global markets by adding video in several new languages,” said Provost. “In Q4 2011 we'll be making our videos available in French, German, Portuguese, Spanish and Japanese and adding Mandarin Chinese and Russian in early 2012. We're also taking steps to make our content even more accessible to more publishers. There's a lot of exciting developments we're looking forward to.”

Follow me @LouisBedigian


ACTION ITEMS:

Bullish:

Traders who expect TouchStorm to continue growing should consider that:

  • Video has become a key strategy for many online properties, particularly AOL. TouchStorm has helped AOL fill that void, which could be essential to the company's long-term growth.
  • As a YouTube partner, both Google and TouchStorm can mutually benefit from their success together.
Bearish:

Traders who are fearful of how TouchStorm might impact existing media and advertising companies should consider the following:

  • TouchStorm could lessen the need for some of the more traditional ad agency services, such as those offered by Omnicom Group (NYSE: OMC) and WPP (NASDAQ: WPPGY).
  • The value of Interpublic Group of Companies (NYSE: IPG) and MDC Partners (NASDAQ: MDCA) could also be reduced by TouchStorm's video offerings.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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