The list of Internet companies withering in the post-Sept. 11 economic slump is long, but The FeedRoom Inc. has apparently tapped into an appetite for online video news that has only increased — and it might just make money at it.
The New York-based online media company is within one quarter of reaching profitability with a product that makes the PC an outlet for TV programming, according to founder and CEO Jon Klein.
Now that it's secured a $5.4 million round of funding and hit a monthly revenue-growth pace of 25 percent over the past year, FeedRoom's challenge is to come up with a better way to measure the corporate online audience, and to convince advertisers that it's a market that needs to be tapped.
FeedRoom, which debuted in August 2000, gathers and presents TV news video online, aiming for the millions of office workers and college students who have no access to the tube during the day. It maintains local FeedRoom sites for TV stations owned by NBC, Tribune Broadcasting Co., Journal Broadcast Group Inc. and Granite Broadcasting Corp. Meanwhile, AT&T Broadband cable-modem customers can access a FeedRoom video-news page from their AT&T WorldNet portal.
The company recently expanded to provide internal corporate communications and marketing sites for Cisco Systems Inc., Ford Motor Co. and Miramax Films, among others. Those corporate pacts include a deal FeedRoom landed earlier this month with Microsoft Corp. to create the video showcase for Windows Media Player 9.
Volume up, a lot
If anything, the events of last Sept. 11 showed that corporate workers sitting at broadband-enabled PCs want to see the latest world events in video form, Klein said.
FeedRoom's video volume has increased from 1 million streams per month in 2001 to 15 million at present. According to recent The Arbitron Cos./Edison Media Research figures, a total of 38 million North American users now tap streaming media at least once per month.
"I think that unfortunate event did have the effect of illustrating for mass numbers of consumers that you could watch video on a computer, and it would more than do the job of television, because you could watch ultra-clear video images that could also afford the interactivity of the Web," said Klein, a former CBS News executive vice president.
The idea that the PC can stand in for a TV screen does run counter to long-held Web content philosophies. But Klein argues that the PC is the TV substitute for 29 million workplace users and 14 million college students.
"As a TV executive, I used to worry that we were saying goodbye to our viewers every morning when they left for work and we just had to hope they would come back to us at the end of the day," he said. "Well, you don't have to worry any more.
"The NBC TV stations are driving viewers from their morning programs like the Today
show to their local FeedRooms in 14 local markets across the country, where they can continue to watch coverage."
But is that profitable? FeedRoom.com has generated steady revenue from online advertising and fees for the sites it manages, and it recently secured another $5.4 million in funding, said Klein. And automated software has allowed the company to pare its work force from 96 people to 43 in the past year, even as it increased the number of sites it operates to 79 from 28.
But online advertising is still the risky question mark. A year ago, FeedRoom decided to cut its reliance on Internet advertising, and ads now constitute about 50 percent of the company's revenue. The other half comes from the licenses and fees levied to create and maintain customer Web sites.
But unlike others, Klein has not written online advertising's eulogy. He believes that ad buyers will come back to the medium.
"What we see in the advertising business is interesting, because the media buyers have gone from an attitude of, 'Prove to me why I would ever do this,' to one of 'OK, clearly I get pretty powerful branding from streaming video. Now just give me the data so that I can make intelligent buys,'" he said.
To that end, FeedRoom and partner Nielsen/NetRatings will soon study how to measure the streaming-media audience according to a TV-like gross ratings-point system, rather than the Internet's gauge of unique users and total streams delivered. By bringing online ad ratings in line with TV and radio, Klein hopes television advertisers will see the Web's promotional value.
"That has been our Holy Grail for two years, to get away from the online budgets, which are only going to amount to $3 billion, and start tapping into the television budgets, which are $40, $50, $60, $70 billion," Klein said. "And once you can do that, you are off to the races."
The company has also branched out into the subscription-video business, and one of its first clients is Playboy Enterprises Inc. The result: the Playboy TV Club, a site where viewers can watch outtakes from shows on cable's Playboy TV channel for $24.95 per year.
Klein said FeedRoom is working on deals with MSOs to provide localized content pages for cable systems. "In the next few I think we'll have some interesting deals," he said.
"The issue is right now that the cable industry itself is in such an uproar that they've got to figure out when to pull the trigger," Klein added. "We've got deals in place. They are ready to go."
Given the expanding broadband universe at home and in the office, Klein said FeedRoom will should to supply an audience increasingly hungry for Internet video.
"The fact is, as Nielsen [NetRatings] pointed out in January, the majority of time spent online is now is spent at a broadband-connection speed," he said. "That's not going backwards. That trend is going exactly where we want, and we are riding that wave."