Insider Chatter by Donna Bogatin

Who is calling the NBC Universal - News Corp. online video joint venture in the works “Clown Co”? Kevin McGurn, the man leading the JV sales charge, is NOT clowning around.

From the Advertising Research Foundation’s Audience Measurement 2.0 big-ticket conference two weeks ago, to last night’s free NY Video 2.0 meetup, McGurn has been making the business case in New York City on how NewCo is being developed to be big co.

The timing is fortuitous: Uptake in online video streaming is one one of the shifts in Web behavior that is spurring Neilsen/NetRatings to measure “engagement” at sites, not merely page views.

At Audience Measurement 2.0, McGurn characterized advertiser reception to the NBC Universal - News Corp. NewCo online video offerings slated for the Fall season “extremely favorable,” as I present in my first-hand report: NBC: Millions in Upfront Video Ad Sales

At the NY Video 2.0 meetup last evening, McGurn underscored the JV is well on its way to creating an optimal online video platform to meet the needs of all constituencies: content producers, advertisers, distributors and viewers.

During a discussion aimed at figuring out “What’s next for online advertising,” Dan Rayburn of Streaming Media posed simple, but direct questions, such as: Is anyone making money in online video, covering their costs? and Are video sites just popping up, hoping to figure out what users want?

McGurn on the NBC Universal case:

NBC as a content producer is making money: NBC.com, iTunes, NBBC…

NewCo is conducting ongoing, extensive market research, focus groups, studies, analysis…to determine what works and what doesn’t from all perspectives: video content, ad formats, page layouts, user interface…

I asked McGurn if such extensive preliminary research was done to support the launch of NBBC and, if so, what is the rationale for folding NBBC into NewCo.

McGurn told me NBBC was designed as a “proving ground” and proved successful and profitable. Why is it being absorbed by NewCo then? NBBC did not offer a “video destination” and optimal deployment of NBC assets necessitates a focused deployment of resources for the NewCo, McGurn said.

McGurn did not weigh in though on the rumored billion dollar valuation of NewCo. In Video Valuations: YouTube Billions Rule! I analyze how NewCo just may have a billion dollar shot!

ALSO: Facebook Platform Misses 1.2 billion Internet Users and Valleywag: Lots of Ham, Where’s the Beef?

CONTACT DONNA BOGATIN

Is the (promised) soon to be launched News Corp./NBC Universal online premium video joint venture a good buy at $1 billion is (one of) the blogosphere’s questions du jour.

Dow Jone’s Kara Swisher weighs in, succintly: “NO,” billion dollar case closed. Swisher did not promise a rationale for her “conclusion”; Her “story” is headlined “In a Word.”

Is it really video valuation case closed though? I heard the NBC ad sales point man for the News Corp./NBC Universal JV give his (inherently rosy) take yesterday on prospects for the soon to be launched “high quality” video intitiative.

READ my first-hand report: NBC: Millions in Upfront Video Ad Sales

Regardless, online video beauty is in the eye of the holder. YouTube was a $1.65 billion in GOOG beautiful thing, for search-driven Google. Google itself implicitly acknowledged the “price” was substanially all goodwill during its Wall Street conference call:

QUESTION: Any idea on what you used to value this acquisition? Were you looking at cash flow returns or any kind of help you can give us on that?

GOOGLE, David Drummond, SVP Corporate Development on the “structure” of the deal: We model this on a more or less synergistic kind of a model. You can imagine that it might be difficult to sort of do this on a standalone basis. We feel that we arrived at a purchase price that’s very fair and reflects the great value that’s been created at YouTube.

We structured this as a stock transaction in order to make it tax free for the YouTube shareholders, which we think is a good transaction for them and for us, in the sense that it in some ways made it cheaper for us. There is some very slight dilution, but we think this was a good structure.

Good for Google, direct “cost,” wise yes, BUT not from the perspective of potenitally massive indirect “costs” it assumed when acquiring the DMCA fueled no need to pay for the content of others buisiness model.

Google is currently exposed to billions of dollars worth of copyright infringement lawsuits, literally.

Viacom’s $1 billion copyright slap at Google may end up being mere peanuts.The copyright infringement class action currenlly being prosecuted against YouTube by Proskaeur Rose is opened-ended with no theoretical bounds on the financial liabilites Google may incur.

READ my exclusive interview with Proskaeur Rose: YouTube Copyright Infringement Claims ‘tip of the iceberg’

In the event of such a Google meltdown, a News Corp./NBC Universal copyright friendly online video venture could be worth not just one, but several billions.

CONTACT DONNA BOGATIN

News Corp. is on a video roll. MySpace TV is set to debut tomorrow and its premium video joint venture with NBC Universal is making a multi-million dollar upfront ad sales splash, according to the man integral to the JV sales charge: Kevin McGurn.

McGurn addressed “disruption” in the online video space this morning at the Advertising Research Foundation’s Audience Measurement 2.0 conference underway in New York City.

The NBC-Fox JV sold $2 million in advertising to ten charter advertisers, including General Motors and Cisco, within four hours upon the announcement of the venture in March, McGurn proudly underscored. What‘s more, online video ad sales for the JV in the current upfront market is “extremely favorable,” and the yet to be named and launched high-end video property is already “highly valued” and doing millions of dollars in business, he indicated.

McGurn believes it is incumbent upon networks to “focus on the content” because “the audiences will come along with it.” McGurn believes the NBC-Fox joint video entertainment venture is poised for success as “demand for high-end video inventory exceeds supply.” Professionally produced, episodic long form content is the focus of the NBC-Fox joint venture, McGurn said.

The NBC-Fox joint video venture is to formally launch its video destination site and distribution network in late summer in advance of the fall season. Extensive research is currently being conducted in order to gauge “users’ threshold for pain in advertising as a tradeoff for free content,” McGurn indicated.

All manner of video ads are being explored: “Takeovers, bottom-thirds, video during pre-roll for good exposure and then receding into some form of persistent background messaging…” In “experimenting,” advertising effectiveness and user acceptance are evaluated.

Thousands of hours of full-length TV programming, clips and movies, representing premium content from close to twenty networks and major television and film studios will be featured by the joint venture, according to News Corp. and NBC Universal. Distribution portal partners include AOL, Yahoo, MSN and MySpace.

CONTACT DONNA BOGATIN

Influence is not as influential as influencers believe it to be, was the novel, but somewhat convoluted sounding, counter theory of influence presented by Columbia University Professor of Sociology Duncan Watts at the Audience Measurement 2.0 conference presented by the Advertising Research Foundation in New York City today.

Watts and Peter Sheridan Dodds have researched “Influentials, Networks and Public Opinion Formation,” and present their findings in the Journal of Consumer Research:

A central idea in marketing and diffusion research is that influentials—a minority of individuals who influence an exceptional number of their peers—are important to the formation of public opinion. Here we examine this idea, which we call the “influentials hypothesis,” using a series of computer simulations of interpersonal influence processes. Under most conditions that we consider, we find that large cascades of influence are driven not by influentials but by a critical mass of easily influenced individuals. Although our results do not exclude the possibility that influentials can be important, they suggest that the influentials hypothesis requires more careful specification and testing than it has received.

A central question for Watts is “How does influence between individuals aggregate over many people to produce “collective” behavior? In simpler terms, “Who says what to whom and to what effect?”

Watts seeks to dispel conventional wisdom that “a minority of exceptional people,” opinion leaders, are responsible for influencing everyone else.

The “traditional” influentials hypothesis is appealing, Watts said, because it offers an easily understandable formula: Influence the influencers and everyone else will follow. The real world is not so clear cut, Watts nevertheless cautioned. After all, how many Oprah Winfreys really are there, Watts underscored.

Watts is a proponent of a “network view of influence propagation.” From a simple logistical perspective, the reach of individuals is generally limited. Watts believes influencers are only “modestly effective.”

For Watts, “network structure” is a determining factor for whether or not influence can spread widely. Given an appropriate network environment, “anyone can start something,” Watts said. When influence “cascades” are possible, influentials may trigger larger cascades, but only to a modest degree.

The bottom influence line, according to Watts:

Influence is propagated not by a few “special” individuals who influence everyone else, but by many easily influenced individuals influencing other, easily influenced individuals.

The cascade creates the influentials, not the other way around.

In other words, anyone can be an “accidental influential” at any point in time because who is influential is largely an accident, Watts said.

The takeaways for marketers are:

1) Because the network is not a property of any individual, seeding average groups may be more effective than attempting to “influence” exceptional individuals, and

2) Focus on reaching easily influenced individuals, not influentials.

CONTACT DONNA BOGATIN