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5min’s Ran Harnevo on His $65 Million AOL Sale

if (window.location.pathname.match(“tag”)){} else {document.write(“<\/script><\/a><\/noscript><\/span>”);} Video content firm 5min Media was recently acquired by AOL for a reputed $65 million. We sat down with CEO Ran Harnevo to talk about internet video, content and how to get the big guys to notice new start-ups.

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5min Media may not be a household name, but the firm’s sale generated big numbers: AOL paid a reputed $65 million for them in September 2010. Why the high price? 5min is one of the web’s leading video content syndication companies. Their primary site, 5min.com, is a self-described “one-stop shop for instructional videos and DIY projects” that has inked content agreements with everyone from Kellogg’s Cereal to top-tier television networks.

Fast Company recently sat down with CEO Ran Harnevo at a New York coffee shop to talk about video content, the future of the internet, the sale to AOL, and the company’s upcoming project, 5minmedia.com.

FAST COMPANY: Can you give an explanation of what
5min is and how long it has been around?

RAN HARNEVO: There is a need to add video to a lot of content on the
web and 5min’s angle is to put the right video on the right page. So
basically, we have two providers we deal with. Content producers have
a very big problem getting video to their audiences. We help them
bring video to where the audience is. Producing content is one thing;
getting an audience is the second thing.

Usually, the DNA of companies is
not the right one to attain audiences in scale. In that respect, we
help content producers to get a positive return on investment. They
enter ongoing ventures with us and basically we help them by pushing
the content to the right places on the web. From a publisher
perspective, the thing is that most publishers don’t have the dollars
to produce a lot of video; but if they do, it’s video content that
appears only on their destination, which is not profitable. So what
we offer publishers is to get a huge amount of videos–we have a
library of 200,000 videos to date from the best producers out there,
with scripts and more. We put the content in one place, with one user
experience and content matched in scale to the articles. We use a
semantic engine we call VideoSeed and pay them (content producers),
because they bring the audience. What we tell them is we’ll bring
them the content and that it’ll be monetized; you have to spread it
in order to have a better user experience for your audience. They
don’t have to worry about licensing, recording, a lot of costs and
processes that you have to go through in order to have a video
strategy.

How does 5min find their content
partners?

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I’m happy to say that now it’s
50-50 between them finding us and us finding them. Basically, we look
at the demand. The demand side is very important–what people want
to watch is key. It’s very close to the Demand Media or Associated
Content model, only done in video. We look at what people want to see
and we dive into the supply side. We basically allow the guys who
have content to supply their content to the demand side. The process
is very simple. If you understand that there is a huge need for
recipe videos, you are going to call scripts and say “We have this
amazing audience of scale that is looking for recipes. Do you want to
help them?” So the trade-off is very intuitive to content
producers; we see a huge scale in the content partners we get. We
tell people that if they put their videos on YouTube, they have to
put their videos on 5min. Of course, that is if we like the
videos. We create a curated experience.

If you have a premium plate, especially
in niche products but also in entertainment, then you need to put the
video on portals but to also make it accessible to publishers as
well. It’s a very simple trade-off and there’s a huge incentive for
content producers to participate.

What do you think the future of
internet video is?

It will all be television, if you
want me to summarize it. I think that the future of internet video is
very close to the future of the internet as an entertainment platform
on the big screen. Right now videos are consumed on the web. They are
also starting to be consumed on smaller, “smart” devices such as
iPhones, and iPads. But eventually, if you look at Google TV, Apple
TV and all these guys, the content is going to be central. People
will consume the content across platforms, and that is an indication
of what is to come. If you position all the platforms together, they
basically bypass cable as a business model. I have no doubt that the
future of online video is to compete head-to-head with television and
that television dollars will start shifting onto the web in scale.
You can’t really stop it. For me the question is who will win it and
who will be adaptive enough to understand what is happening. You saw
it happen in music and now it will happen to video.

How long do you think the process
of adaptation will take?

There are a lot of components.
First of all, the television manufacturers. Will they adapt to new
technologies? The Sony-Google TV deal is an important deal, even if
it’s just an example. From now on, customers are buying televisions
with access to the web. Look at the new media companies. The big ones
will be the last ones to adapt because they want to protect their
business models. On the content side, you’ll have companies such as
AOL and web-based companies that will produce better content. On the
technology side, more and more companies such as Apple are trying to
disrupt the traditional model. Going back to the content side, you
will see many more innovative producers that will be able to do more
with dollars on the production side. There will be a tipping point
where everything will combine and we will see a drop in cable
subscriptions. At that point, a new business model will emerge. Will
this be in 2014? 2016? I don’t know–I think the question is
“when,” not “if.”

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5min was founded overseas, in
Israel. What was the biggest challenge in adapting to American
business culture?

First of all, “When in Rome.”
You must adapt. When you come to the United States, you must listen
for the first six months. You must educate yourself and understand
the nuances of the market. Understand the cultural things you must
adapt to. I think that what we basically did was to look for industry
leaders to hire and we basically told them “we know how to
improvise,” “we know how to move fast” and that is what we are
good at–please teach us about what we’re not good at. The
business mentality and the direction of business in the United States
is different and networking–networking is key–one of the
things that was very helpful for us was that we insisted on getting
American funding instead of Israeli funding. I look at it as “smart
money” because it is not only about funding–it helps with
networks, connections. The United States market and smart investors
helped us tremendously in the first six months. We basically got a
foothold in the American market, the chance to operate in two worlds
and the opportunity to take what works best from each one. I think we
did a good job in adapting, which is something that foreigners have
to do if they want to get into American markets.

How long did the acquisition
process at AOL take?

Very fast – it was really fast.
I’d say it took less than two months.

What was the experience like?

One of the things, about the
acquisition, that was most important to me was that it all made
sense. They allow good things to happen. It’s good to be acquired by
a company that shares the same vision–that is, premium content in
scale. AOL is turning out to be a major content provider with two
emphases–quality and scale. I think that we found a business
model that knows how to resonate and it’s one that AOL dearly
believes in. AOL had, in particular, a strategy before they met us
and when we met them, we felt we were meeting a company with a
clearly defined strategy. There was not a lot of debate between us.
It was clear we had similar views and mutual needs. We have a huge
content network they could use access to, we speak the same language,
we share the same values and I think that’s why it was such a short
process.

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Now that 5min has been acquired,
what is the relationship with AOL like?

We’re basically keeping 5min as a
brand. I think it’s a good brand that a lot of publishers know and
trust. We want to keep the brand and we want to keep on working with
publishers and content creators. I think AOL helps most of all with
third party aggregation. That’s one angle. The other angle is that we
are helping AOL define a larger video strategy that 5min will be a
part of; we can take our content and create a much stronger video
experience on lots of other sites. It’ll take AOL video’s operations
and greatly increase the scale. I think 5min will be a meaningful
ingredient in AOL’s video strategy but it won’t be the only one; we
will be a key part of the strategy.

What is your advice for other
startups that are hoping to be acquired?

Not to hope to get acquired. I
think that’s a cliche, everyone says that, but cliches don’t come
out of nowhere. Cliches become cliches because they are told too many
times. It’s the right cliché; you need to work as if you want to
conquer the world and to create a business that makes sense from a
revenue perspective and a scale perspective–those are the two
main things. If they contradict each other in the early days, choose
scale over revenue. Scale is all that matters; look at Zuckerberg, look at Twitter–it’s all scale, scale, scale. Then
the rest will follow. Make business deals with the biggest companies.
Show them first commercially that what you are saying is right. We
had a commercial deal way before we got acquired and the goal was
just to make money. If anything happens, look at the offer and decide
if you want to do it or not.   

[Editor’s note: This interview was edited for length and clarity. Image via Fivemin]