Muzu is a mutiplatform music video service that also acts as an ad network and as a syndicator of music video content. The Dublin-based company has consistently been one of the earliest adopters when it comes to emerging online and connected TV platforms, and the company has successfully scaled across Europe. VAN spoke with Ciaran Bollard, Muzu co-founder and CEO, about Muzu’s business model, how they’re currently monetising their content, and the challenges of starting up in tech-friendly but economically troubled Ireland.
Could you give a little bit of background on Muzu and how the company started out?
We set up the business six years ago, around the time when everyone was focusing on the consumer becoming the producer of video, but we thought there was an opportunity to focus on professional content. We already had some contacts in the music industry and we knew music was one of the most watched pieces of content on the web. However, we looked at what was happening with licensing of content online and we knew it wasn’t working very well and that there was a niche for a company that was a friend of the industry. At this point physical sales were declining and the labels were massively worried, so took a more industry-friendly approach which we think has continued to pay dividends up until this day.
It actually took us about three years to get all of the legal licensing in place with all of the labels and publishers across Europe, and the site launched in August 2009. The business has really catapulted in the last year or so, to the point where we serve a billion streams each month now, which has been huge growth for us.
So there are two parts of the business. There’s Muzu for the consumer, which is the largest legal catalogue of music on the Internet with over licensed 110,000 music videos. Our closest competitor would be Vevo, and they’ve about 45,000 videos. So we’re certainly ahead in terms of our catalogue and we’ve got all four of the major record labels on board. We’re currently offering the full catalogue of content in 16 countries across Europe, and then we sell about half of the catalogue globally.
The other part of the business is providing music content to publishers who had concerns about getting caught up in the licensing issues, so over the last four years we’ve been providing music content to various publishers and we’re up to about a thousand sites now.
I think the fact that we’ve grown independently and organically has also helped. We’ve taken some private funding in – about €12 million – but there’s no major corporate who owns a stake, so we’re completely vendor neutral. We’re currently working with people like 4Music and Mail Online, plus we’ve been working directly in partnership with companies like Microsoft and Samsung to launch apps on their new platforms such as Windows 8, Xbox and Samsung’s Smart TVs. The goal is to own as much of the music real estate on the web, which is obviously powerful from an advertising perspective, but also useful for the consumer in that Muzu becomes a recognisable brand for music across the web.
So when you syndicate content to a publisher, what’s the revenue model?
We share the revenue, which to some extent disrupts the market, as YouTube doesn’t share revenue with publishers who are using their content. So we wanted to provide an incentive for publisher partners to sell the ads as there is a massive shortage of premium pre-roll inventory in Europe, so sites like Mail Online are looking for more and more video inventory. So we have an editorial relationship with them, whereby they embed our videos in the relevant editorial articles and in the new music section of their site. They have the ability to sell the ads if they want to, or we can sell the ads for them. But regardless of who sells the ads, there’s a revenue share arrangement which gives them free access to 110,000 legally licensed videos.
Is it difficult to make money across so many different devices?
Yes, it’s quite challenging, particularly on connected TV, where people are used to seeing ads every fifteen minutes or so, whereas on the web people are used to seeing ads a bit more frequently. You also have to keep up with the various ad formats, and in some cases we’ve created new ad formats of our own.
One we’re particularly excited about is a new format that we’ve created for connected TV and will be working with Viacom and MTV on selling it. For example, the videos that are featured on the Muzu homepage could be syndicated through to the Xbox platform. When a user clicks on the video, normally the video would expand into full screen, but with this format it only goes to half screen and the surrounding area can be used as one giant display ad, a bit like a wallpaper. Beneath the player you’ll then see a counter than counts down from ten to one, and then the video will go to full screen. It’s particularly impressive when you take into account that these ads will be viewed on a TV screen.
While it’s a new format, we did design it with a view to tapping in to existing creatives, but most agencies already have display formats and page takeovers that they can repurpose, so we think it’ll tap into new sources of revenue for us.
In the UK we’ve also had great success with InSkin, which has commanded the same rates as preroll but doesn’t interrupt the viewing experience. In the UK it can be displayed while someone is watching a music video, and it displays the thumbnails for other videos. It’s extremely engaging and very cool creatively, and when you click on it it pauses the music video, and a rich media pops up.
So for example, a trailer for a movie might pop up and with popular campaigns the click-through rates can be extremely high and tend to be up around ten percent, although the average on InSkin tends to be around one and three percent. They’re a great format from a publisher’s perspective because you’re not taking someone off the Muzu site and they can return to their music video when they’re finished watching the ad.
So how are you selling your inventory?
We use a combination of different methods. We maximize the income for the labels and the artists as much as ourselves, and as it’s premium inventory we’re keen to retain that value. We’ve implemented a tiered monetization structure and in the UK we’ve just announced a deal with Unanimis, and Group M are going to be our second buying partner. We’re currently selling 100% of our inventory in all territories.
What about real-time bidding – have you been selling any of your inventory via ad exchanges?
To be honest most of the inventory sold on exchanges tends to be low value and our market is a more premium market, so our rates would be the same if not more than TV. So we don’t need to go into that area at all as we sell everything directly. When your established buyers are screaming at you for more inventory, you don’t need to take a risk by selling via other methods. That might be a problem in another ten years, but not just yet anyway.
Are we seeing a video production gold rush to take advantage of the booming advertising market?
We are, but you need to have the audiences as well, so you need to have the reach and the right demographic reach. YouTube are throwing fortunes at producers at the moment to have more content produced. Things have been a little easier for us. Music is pretty much universal and is obviously very popular with the youth market, which is traditionally a difficult target audience to reach. With someone like Group M, we give them the chance to buy from our network of sites all over the world, so they can target the demographic they’re after.
So what technology do you use for your ad ops?
We use a combination of different systems and it’s quite complex as we’ve a tiered monetisation structure that will call an ad depending on our relationship with the buyer, so a tier one advertiser will get called first etc. We’re using DFP as the over-arching system, and then we’ve multiple different layers within that. So, for example, if a publisher is selling, they might give us their own redirect tag from their ad server, which will then serve into our system.
As a premium publisher with a teen audience, do you have to vet the advertisers you’re working with in order to make sure they’re the right fit for your brand? For example, might you ever have to turn down an advertiser because they aren’t cool enough?
Yes and no. It’s job of the agency to find the right audience for the brand they’re working with and they’re usually quite good at knowing what they’re after, so it’s rarely ever an issue for us.
A common complaint about connected TV is the lack of standards and the number of walled gardens. Do you think enough is being done in terms of making it easy for publishers and broadcasters to move on to connected TV?
At the moment it’s not easy, particularly for smaller companies like ourselves, as everything has to be built separately for each platform. However, there’s a new standard called CE-HTML, which most of the platforms will be compatible with, so there will finally be a common language for TVs. Sony is the only manufacturer we’re not working with as they’ve decided to have a completely closed environment. Having a closed environment isn’t just a problem in terms of app development, but it also means that we can’t use some ad formats etc.
Ireland has been going through a rough time economically over the last few years. What was it like starting out as a company in that environment?
I’m of the view that you just have to get out there and make money. As an entrepreneur, that’s your job and you have to overcome all of those problems. Notwithstanding that, I don’t think Ireland is a bad place to start out, particularly in terms of the grants system. The main problem in Ireland is the VC market, which has completely hemorrhaged, so the VCs – or people who claim to be VCs – often don’t have money most of the time and all of the cash in their funds is committed. So they end up wasting perhaps three months of a company’s time when they’ve no money to give them. And for a startup, three months of cash reserves could be the difference between success and failure for that start-up.
Organisations like Enterprise Ireland (EI) have been great in helping entrepreneurs get started. They cover everything from helping you with your salary at the beginning to mentoring so you can put together a business plan, which is great on a practical level. They recently did a readiness study and found Ireland was very start-up friendly, but there are still some really stupid things like the bankruptcy laws, where if you fail you’re written off as a director for years. However, there has been a resurgence of start-up companies – which I would call garage start-ups – which are learning to be a lot more realistic and frugal in terms of valuations and expenditure.
Then of course you’ve got Twitter, Facebook, Google, Spotify and LinkedIn all basing their headquarters here, which is in some ways is a bit of a brain drain when it comes to start-ups, so it does reduce the number of people in the market who you can hire.