Who Will Be the Godfather of Web Video?

By: Carlye AdlerThu Aug 7, 2008 at 7:30 PM

Well-funded, big-studio-backed comedy-video Web sites have taken more hits than they've made. Does anyone have a plan that's not a joke?

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The Comedy Don: "Super Deluxe had great goals," says comic Eugene Mirman, "but the goals were never realized." | photo by Matt Hoyle

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It was slated to be a "brave new world of comedy." In January 2007, Turner Broadcasting System frothily launched Super Deluxe, a short-form video site with original content by the "funniest peeps in the comedy biz" (read: up-and-comers) such as Eugene Mirman and Brad Neely. Content wouldn't be limited to the Web; Super Deluxe would serve as a cheap testing ground for potential television and film projects, and videos could be distributed to content-hungry cell phones. Turner was bullish, mobilizing a staff of 35 and giving the venture 42 free ad spots a week during Adult Swim programming on Cartoon Network in an effort to lure advertiser-cherished 18- to 34-year-old males.

Then -- bada bing! -- 14 months after Super Deluxe had launched, Turner announced the site would sleep with the fishes. At its peak, it corralled only 400,000 monthly viewers and didn't win substantial ad revenue (a paltry $19,000 in the first quarter of this year). With a fat staff and a fatter roster of outsourced talent, the site was bleeding money. Turner fired the entire staff save one employee, and very little, if any, of Super Deluxe's content is expected to move over to AdultSwim.com when Turner formally takes the site down later this year. So the whole enterprise (and the $15 million or so spent building it) will completely evaporate into cyberspace. "They only had enough money to make deals with everyone for one-and-a-half years," says Eugene Mirman, who now skewers Tom Cruise and the presidential race, among other topics, for 236.com, a Huffington Post -- IAC joint venture.

Super Deluxe is only the latest casualty in a string of high-profile comedy-video blowups. In fact, Turner's humbling experience represents parent company Time Warner's third failed foray into Internet comedy. This Just In, a joint venture between AOL and HBO, closed in August 2007 (six months after it launched), and Time Inc. pulled the plug on Office Pirates in September 2006 (six months after it debuted).

Time Warner isn't the only media company serving rotten tomatoes online. NBC Universal's DotComedy -- a jumble of stand-up and content from SNL and Late Night With Conan O'Brien -- was shuttered after less than a year. Sony's offering, Crackle, has gone through several iterations since the corporation purchased Web-video startup Grouper for $65 million in 2006, and despite additional multimillion-dollar investments, the site has yet to generate sticky traffic or turn a profit.

Even Funny or Die, cofounded in 2007 by Hollywood's hottest property, Will Ferrell, and supported by a generous investment from Sequoia Capital, hasn't been able to keep an audience. Its first video, "The Landlord," which starred Ferrell and a 2-year-old girl as a swearing and beer-seeking landlord, was a runaway hit -- collecting a wildly impressive 57.8 million views thus far -- but the site has never seen numbers like that again. Despite the draw of Ferrell friends Judd Apatow, Eva Longoria, and Bill Murray, all of whom have contributed videos, the site pulls just 1.5 million unique viewers monthly, and the average visitor comes only 1.8 times, according to Quantcast. "It's a slow build," admits CEO Dick Glover.

What gives? Surely there's an appetite for short-form comedy video -- on YouTube, four of the top five subscribed-to channels are individuals posting funny clips -- so if any Joe can create a consistent audience, why can't the pros? It turns out it's not the comedy that's falling flat. Mostly, it's the business model that's the joke.

Singing the Advertising Blues

Although online video has grown in terms of content production and viewership, significant revenue and especially profitability -- even for YouTube with its massive audience of 69 million viewers -- has been largely elusive. The prevailing model is ad supported, but that market isn't necessarily ripe. Although video advertising is increasing, it totaled only $775 million this past year, a "tiny amount" of the overall $21.1 billion spent on online advertising, says Kris Oser, communications director at eMarketer. Worse, most marketers aren't particularly enthralled by what these sites are peddling. "Advertisers, besides the edgy ones -- Mountain Dew, Powerade, and Sprite -- aren't interested in being affiliated with questionable content," says Matt Stodder, VP of sales strategy and operations at online-ad-sales rep Gorilla Nation Media.