Ooyala CEO Jay Fulcher on the future, Brightcove and a shake out in the OVP space

By Jim O’Neill

Created 04/20/2010 – 10:26

Ooyala CEO Jay Fulcher is a happy man. And why not? His company has just reported record revenue growth for the first quarter [1], with 300 percent growth year-over-year. It’s expanding into Europe, Latin America, South America, Australia and Japan (where it’s just launched a Japanese-language platform). And, it’s created a dust up with its chief rival-Brightcove, which accused Ooyala of spreading misinformation about the security of Brightcove’s platform to its customers. Fulcher, with a grin, waves his hand and dismisses Brightcove’s annoyance as, essentially, “a lot of drama.”

Ooyala is riding high, he told FierceOnlineVideo at the NAB show in Las Vegas. By May 1, he says, Ooyala should top 500 customers, not bad for a start-up that just began selling a commercially viable product 16 months ago. Among the new clients:  The United Football League, Yelp, Caracol Broadcast Channel, Hearst, LiveStrong Foundation, Telegraph Media Group, Esurance, Rowdy.com, Business Insider, GigaOm, StrikeForce, Deca TV and General Mills. Ooyala also has aggressively jumped into the TV Everywhere landscape, scoring a big win there with a major broadcaster.

Those are milestones, Fulcher says, on which the company isn’t planning to dwell. With more than five dozen online video platforms fighting tooth and nail for each customer in the crowded marketplace, looking at where you’ve been isn’t much of a plan, Fulcher says; it’s all about where you’re going. For much of the segment, Fulcher says, the next year will be pivotal. He’s predicting at least half the companies will shut their doors as VC tightens, a function of a maturing industry and the rise of several leaders, Ooyala being one of them.

What’s the market for OVPs looking like in the next nine months?

There are still some companies out there that are over funded, but don’t have the long-term future they once did. Many of them, frankly, are coming to us as potential aggregators, and we may or may not be interested in some of those players.

We’re not sure that we perceive ourselves as a buyer that’s mostly interested in either technology or customers or revenue and we still think time’s on our side because a lot of these businesses are ones that probably aren’t long term all that viable and so we think the price point can be very advantageous to our shareholders.

How’s Ooyala situated?

The last six months has been a really, really intense time of growth and expansion for us. We’re excited about that; we’re doing that not only through our own organic efforts in terms of employees and in terms of broader organizational dimension, but also in terms of our partners. We have 500 customers, and those customers are now serving video in more than 110 countries around the world; we’ve gotten some scale here relatively quickly. The way in which we built both the architecture of the product is allowing us to be very capital efficient, which is a bit of a differentiator from some of the guys we compete with.

And, we’re excited about the Microsoft work we’re doing with Silverlight, and they really seem to be leaning into our relationship. Some of that, I think, is a bit more evidence that, maybe, we’re no longer perceived as “that upstart,” that we once were.

I think we’re well on our way now to being a company that’s going to have the size and scale that’s going to be necessary to be a leader in the space.

What kind of role will Ooyala play in TV Everywhere?

We see TV Everywhere as being more of the uber-concept of what TV Everywhere might be, not necessarily as what Comcast might see it as. To us, it’s really about how do you go from on air to online and on demand. That transition is really the thing that we want to be able to fuel for our customers. That’s a pretty transformational thing for those clients because the revenue model and the underlying business models are really different from what they are comfortable with.

Will consumers be willing to pay for content they can already get free online? Or are telcos and cable companies likely to become “semi-dumb pipes” that transport content with less control over it?

We totally agree with that and that premise has actually fueled the approach that we’ve taken. We’ve built an experimentation framework that allows us to help broadcasters experiment with what’s the right revenue model going to be for a particular piece of content; whether it should be pay-per-view, or subscription, or video on demand, or have a completely authenticated pay wall. It’s going to take, we think, an iterative, on-going process of experimentation to figure out what kind of content is best monetized what way.

If you want a richer experience then, there are other ways to kind of monetize it?

Right. This notion of kind of an iterative, experimental, process we think is the right sort of thing. And we’ve started charting that out to not only the broadcasters we have today, but to the ones that we’re engaged with. One of the things that we’re excited about is that we’re taking to basically every major broadcaster in the world. It’s not like those guys don’t have a video player on their site, they do, but they don’t have the deep analytics we do, they don’t have the monetization tools we do, they–in many ways–don’t have the syndication capabilities that we built into our platform, and that’s really gotten them focused on Ooyala.

Speaking on analytics, how do, say, Akami’s analytics play into Ooyala’s? How do they compliment yours?

Akamai does a good job of providing somewhat generic web-based analytics to customers, but we go to the next level to actionable information that a customer can use to make a decision. It’s nice to know how effective the pipe is working, that’s interesting, but it isn’t necessarily something a customer can do anything with. And, we don’t think it’s differentiable, because, quite frankly, anyone can-and many of us already do-use it in one form or another.

What we try to do is be complimentary with what any of the CDNs–not just Akamai–serve up by helping the customer understand how their video is being consumed, or some of the dynamics around the nuances of that consumption that they can do something about, like pricing.

In the instance of taking a bit of a more progressive example of a pay wall, for example, we did a pretty big project for a broadcaster where we were putting up an authenticated pay wall around a family of shows. That will help them figure out what to price that content for, how many times to show it for that price, over the course of how many days, what other kind of information might they want to gather around gender and then advertise specifically toward individual viewers. Those are they type of things we think are deeper and more interesting and more meaningful about our approach.

More personalizing of video?

Exactly. We think it’s the highest order of the value proposition. For the content publishers, personalization is all around making sure that they are taking that content and doing the best job with the individual to make sure that the engagement of that content is maximized, because that typically means that they are going to make the most money as a result of that. But personalization to the consumer is all about “I want to see what I want to see, when I want to see it, and I want to see it on the device that I want to see it on, my iPhone, my iPad, my laptop, in the living room. So again, it’s that entire ubiquitous experience that is what we’re trying to provide.

How do you develop customer loyalty in a market that traditionally doesn’t have a lot of it? Where big customers routinely jump from OVP to OVP?

That’s certainly been true up until now… not only are there companies flipping in and out, different attempts to work with different companies, but in some cases, too, my God, how many OVPs can claim the same companies as a customer?

I know that when some of the visible Brightcove defections came out–especially like the Telegraph–I know Jeremy was out in the market talking about how they took EA from us. That’s actually not true. Brightcove has gotten into the habit of giving their product away for free. EA has both products running side by side, in the same way that a company like EA may have Cisco and Juniper running side by side, or IBM and HP running side by side. I’m not happy about it necessarily, but I also know that sometimes free can be a powerful weapon, typically for a very short amount of time and it’s not necessarily very sustainable.

In the last three or four months, we have dozens of examples where we won customers and won business versus free; customers see that you get what you pay for. In this space, customers are concerned about innovation and rapport and about who they’re working with and how reliable the company is. We haven’t had a lot of customer defections, despite attempts by other companies to take them. 

I wouldn’t say that we’re not under attack–I think we are. And I’ve told the company it’s really a good thing; it’s a sign that we are now considered the leader in this segment. We’re certainly the leader from an innovation and technology perspective and I think that–at the end of the day–it’s going to be hard for someone to compete with us just on price.

I’m not willing to lose money to win a customer. It’s not good for the category. When this concept of free comes up-I have a favorite line, and I can’t claim it’s original, but, it’s, ‘Well, there’s free beer and there’s free puppies. Free beer-that’s a good thing. Free puppies, maybe not so good.” I think savvy customers see through that.

There are 60-plus OVPs. How many don’t survive until the end of the year?

Half. The VCs are starting to see it’s game, set, match for at least who the top two or three players are. When that starts to coalesce, the money to go attack those companies-it doesn’t completely go away-but it’s radically different. I think half are out of business and maybe that’s probably too conservative.

Who’s the biggest casualty?

Big is relative, because big isn’t all that big.

Who’s the one you’d like most to go out?

You can fill in the blank. I shouldn’t really name somebody that I’d like to go out of business. I will tell you–and this is a very genuine thing–I’m rooting for Brightcove to do well, because this space needs a couple of healthy companies. So, I’d like to see them not raise more money, be more capital efficient, be more innovating. It’d be better for customers, better for Brightcove, and I think it would be better for Ooyala. Now, I’m not running that company, so I don’t have to worry about it.

I think that with some of the other payers, I think that the Delve Networks of the world, I think the Kalturas, some of those kind of businesses, I think they have a tough row to hoe ahead of them. It’s a tough row to hoe. They all have their individually issues in place which make their situations not easy. But it’s not easy for any of us, so…

Do you think CDNs are likely to-because their market is so competitive-add on services, services that might include an OVP?

CDNs definitely have to continue to think about how to continue to be strategic to their customers to the degree they can be and for sure there has been a lot of margin pressure on those guys over the last four or five years. Some have handled it a little better than others. I know that they’re all trying to figure out how best to offer other services, other capabilities to sort of defy gravity a little bit in terms of the margins. Whether or not it’s a natural fit for them to be in the OVP space, I’m not convinced it’s as natural for them as it is for a number of other companies who have a vested agenda in this space. So that’s going to be another factor in how this space coalesces over the next few years.

Google buying Episodic… surprised?

Not really at all. I think that Google has had an interest in turning YouTube from a destination site to a syndication hub. Over time they want more professional content onto YouTube. Today, they’re not in a position to do that; post the Episodic acquisition they’re still not in a position to do that, but it’s a first step.

Google is constantly trying to figure out buy, build or partner. They’re a little unusual because they’re not so interested in customer or revenue, they’re more interested in technology and engineers and innovation.

Episodic just happens to be a little bit of a half step on their way. The revenues are relatively minor, the amount of customers is very minor, and officially, Ooyala really likes the Episodic guys. We know them, and spent some time with them.

Was their sort of a collective groan when you heard it was Episodic and not Ooyala that Google had tapped?

A collective groan, I think, is overstating it. The quick sound bite in that is that we think time is on our side. Our business is getting more valuable every week, every month, every quarter. And, over time there are not just one, but several quality companies of that size who have an interest in this space. So, at the end of the day, there’s lots of options for us.

The best option is the one we’re focused on; we think we’ve got a more and more valuable independent company that we think we can continue to grow and develop. We’re going to continue to have a really good relationship with Google, in the same way that we do with Adobe and Microsoft and Cisco and any number of other companies.

Speaking of YouTube, what’s next for it?

The YouTube that Card Hurley founded is giving way to the YouTube I think that is the second generation within Google, and they’re starting to be focused on other things. They’re starting to experiment with, “So, how do we start to put some of that skill set and experience and background into the company and be able to get there.”

Take it from something entertaining to something functional?

Yeah, like I said, the destination site-there’s nothing wrong with that, when you have 40 percent of the video market-but eventually when I think they would like to hook their already world-class monetization engine to the professional content so that they could monetize it more easily.

So when Google lights up all of its dark fiber, what happens in the industry?

I’m probably not smart enough to give you all the implications of that.

It’s dominoes isn’t it?

Yeah, it is. It is. In some ways I think, and I think that Eric and others have made it clear that they’re going to set the pace for how a lot of companies, including some of their competitors, have to think about what’s going on in the market. I think that makes the market better, it makes the ability to deliver what customers want a  lot better and, so I’ll be curious to see how it comes out.

What’s with Ooyala and Brightcove? They were really angry at how the recent security brouhaha went over.

They were. And I think the one thing that’s unfortunate is that their marketing spin cycle tended to sort of convey this somehow that we were reckless or irresponsible in what we did. To set the record straight: We did not go broadly to their customer base. We went to some customers who were looking to flip Brightcove out for Ooyala, we went to some customers who had Ooyala and Brightcove side by side running in their shop, and we went to at least one customer who was a current Brightcove customer who was engaged with us and was starting to ask some questions about security specifically. And, I’m talking about a handful of clients, not their client base, as sort of was alleged. I don’t think that not only is that not irresponsible, I think that’s very responsible for us to point some of that out.

We also knew, absolutely, that that would immediately go directly to Brightcove and that they would need to react and they should. So we don’t really make any apologies for the process. In hindsight I think that just in terms of all the drama-which I think in some ways was cultivated-we definitely could have, maybe just gone to them simultaneous to make sure they were aware. And I think that in the future, that’s what we’ll do, just so there’s no question about what our intent is.

We do think there are some major points of differentiation between our approach and theirs. In general, what this really exposes is that we’ve made a lot of progress as a company over the past year, I don’t think anyone is confused about at whose expense we’ve made that progress, and I think they’re smarting from it.

What are Ooyala’s goals for the remainder of the year?

We’re going to grow the company substantially year-over-year. We are more of less on schedule on the stated plan that we built back in the winter of 2009. We start to get into some big milestones, 500 and beyond customers and the expansion of where those customers are physically located. This year we’re excited about that we are in a financially very self-sufficient position. We raised some money late last year, we’ve been really capital efficient and have been very careful in how we utilize our resources. It’ll be interesting to see just how quickly we arrive at a point of profitability… which really gives us ample opportunity to decide if we are going to raise more money, maybe not. That’s really our goal this year, to be in a position to have those choices.

We’re kind of delighted with where we are right now, with our traction and our momentum. Along the way, there are going to be some guys who take some shots at you but usually, that’s probably a pretty good sign.