Revver’s Financial Woes: Business vs. A Business Model

This week, Greg Sandoval posted a story on CNET about revver.com. The article says that Revver (the online video site) has fallen on hard times and the company, which raised almost $13 million in venture capital, is on the block for “$300,000 to $500,000, as well as the assumption of the company’s debt, which is in the $1 million range.” This should not come as a surprise.

Revver hit the radar map in 2006, the year of user-generated online video mania. Then, as now, YouTube was the dominant player – but Revver had a twist: share advertising revenue with content creators. A simple plan that, if well executed, would win the UGC online video wars by attracting the very best talent with cash. Perfect.

Well, almost perfect. There was one sticky little detail. Revver was not a business — it was a business model.

Let’s review. There are really only three business models. I pay, you pay or someone else pays. Combine them into the most complicated schema you can imagine, but in the end – there are only three directions for cashflows. In this case, “I pay,” means that a video would be fully funded by its creator or publisher. “You pay,” means that the consumer of the video pays per view or per subscription. And, “someone else pays,” means a sponsor or interested third party put up the cash. It’s pretty simple, really.

Revver’s model was based upon advertiser support. That’s “someone else pays” from my list above. Great! Well, no … not that great, because that’s not the whole story.

Revver did not have any defensible technology. They created a very nice video upload site with good navigation and most, if not all, the tools a consumer/user of such a site would expect. For a while, Revver’s video quality was superior to many of their competitors, but – as you can imagine – this kind of superiority did not last. There are simply too many smart people working on the problems related to video quality for any small organization to dominate in that arena.

Revver did not have any particular social network component or relationship that might propel it to stardom. YouTube and MySpace sort of evolved symbiotically. Revver was not so blessed.

What Revver had was a model and a dream. Split revenue with above-average creators and they will keep exclusively uploading the best content to Revver. Sadly, it was doomed from the start. Why? Because if Steven Starr (Revver’s founder) was right, and if splitting advertising revenue with creators was a valid business approach, YouTube could put them out of business without breaking a sweat – and that’s exactly what happened.

The model is a good one. Content creators like to get paid and a split of ad revenue makes sense. (As an aside, I happily post my daily video MediaBytes to revver.com as well as 25 other online video sites, and we even make a little money.) But the technology required to make this happen is child’s play. It was literally harder for the marketing and product development people to socialize the concept throughout the various online video aggregation sites that now offer this model, than it was to program. Ouch.

Each week, about a half-dozen entrepreneurs contact my office with business plans for technology plays that will “change the paradigm of _______.” More often than not, they are related to online video. A herald gleefully conveys the invention of a new distribution methodology or foretells a time when their new approach to online video will change the world.

I’m so optimistic about the future of online video; I listen to all of them. But, always through the filter of: business model or business. The test is easy. 1) is the technology/methodology proprietary? 2) is there a clear, demonstrable revenue stream? 3) will the business come out on the right side of a “build or buy” analysis? As with so many things, the questions are easy – the answers, not so much.

I am truly sorry to see Revver going through this. I like Steven. He’s a very smart guy and he had a great idea. Unfortunately, it wasn’t a business … it was a business model.

Shelly Palmer is Managing Director of Advanced Media Ventures Group LLC and the author of Television Disrupted: The Transition from Network to Networked TV (2006, Focal Press). Shelly is also President of the National Academy of Television Arts & Sciences, NY (the organization that bestows the coveted Emmy® Awards). He is the Vice-Chairman of the National Academy of Media Arts & Sciences an organization dedicated to education and leadership in the areas of technology, media and entertainment. Palmer also oversees the Advanced Media Technology Emmy® Awards which honors outstanding achievements in the science and technology of advanced media. You can read Shelly’s blog here. Shelly can be reached at shelly@palmer.net