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Making In-Stream Advertising a Reality. . .

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In the early days of streaming media, trying to monetize your video was something you really didn't consider. The hardest part was knowing and implementing the technology, and launching your site. Today, however, if you're not making money from your site, you're losing money. Just take a look at sites like CNN, MSNBC, Pseudo.com which have pop up windows with banner ads and in-stream advertising.

One company looking to become a provider of advertising solutions is Hitplay Media (http://www.hitplay.com). According to President and CEO Todd Harris, Hitplay's targeted in-stream video advertising solution (called CUPID) lets companies profit from streaming. Although Hitplay.com looks like a video aggregation site, it is mainly a showcase site for its ad technology. For a demo, users can go to the site, enter demographic information and view some popular videos. But the real prize, says Harris, is implementing their targeted ads on third-party sites.

Harris founded HitPlay last year as an entertainment site, but in June 2000 it remade itself as a provider of in-stream video advertising solutions. Previously, Harris worked NBC and was General Manager of NBC's VideoSeeker Web site.

Q: It seems like you guys started out way back last year, I guess, as an entertainment site. And now you guys are shifting a little bit. Am I correct?

A: No, not entirely. I call it a second phase. We really--we've already started off with the idea of doing a targeted video network, using our video ad insertion technology. And now that it's been rolled out, that's really been getting a lot of buzz lately. We saw in March with Hitplay.com, which was a showcase portal for our technologies and ad insertion and content libraries alike. In June, we rolled out our CUPID targeted technology, which we'll to web sites and corporate clients will be able to, for the first time, make some money off their video assets, which will help them monetize the video stream.

Q: Okay, how can companies monetize their videos?

A: It's a service bureau approach. They're able to tap into our CUPID technology database. CUPID then inserts a short video ad, anywhere from one to ten seconds into the stream (either before or after the video clip) then the web site owner can generate revenues from those video ad insertions working with HitPlay.

Q: And do you handle the ads, like, telling them which ones to use, or insert them automatically?

A: What's innovative about Hitplay is that it's completely dynamic. It is a server-side application that provides targeted ad insertions based on a variety of different profiling techniques, both our own as well as third parties.

Q: I noticed that you have to enter your zip code, age and sex to watch videos. I assume that is part of the demographical information?

A: Yep. We have well over 100,000 profiles. And we use Hitplay.com as a customer acquisition portal. We can profile those users. But as I mentioned, we can also work with third party profiling engines, and we're able to integrate with the likes of Engage to provide even more specific profiles.

Q: I'm not exactly sure where you're standing now. Do you still want to be a portal site, or are you completely focusing on your ads? Is the site just a showcase?

A: Well, as I mentioned, we were never just a portal. Imagine a targeted video network, and Hitplay.com is just a client site. What you're seeing is just the second phase, which we're rolling out the ad insertion technology. And you'll be seeing announcements late this summer about partner web sites that are using our services.

Q: What about the content? Do you sell video clips to customers or simply let them use their own videos?

A: No. We do have--it could be their content, they can license our content libraries--it doesn't really matter. We're making our money as a broadband video ASP by supporting their ad insertion efforts.

Q: So whatever video a customer may have, you guys would be supporting their ads?

A: And we also know that a lot of web sites may not have content libraries and may not know how to build out a broadband video area. So we offer them a full suite of integration services for them. So some of the content library technologies and database features on Hitplay.com can be used by our client web sites.

Q: So is Cupid functional right now? I was trying it out just earlier today. And, you know, I inputted some information, some fake information, I might add.

A: No. It's fully--If you click on it you should see a Lowestfare.com ad, you might see a WebFN ad. That's all dynamic video ad insertion and it's in real time. So CUPID is live today and the operating database are built out. We are signing up customers as we speak. Our initial announcements this June, were centered around the charter video advertisers, like, Lowestfare.com, WebFN, Fredrick's of Hollywood. The next phase will be--you'll see announcements based around our partner web sites that are using Cupid targeted technology.

Q: So it really seems you need good advertisers behind you, or at least a lot of advertisers. I know right now you have a couple. I assume you'll be ramping up more advertisers, too.

A: We're ramping up those efforts. I think on the video advertising front we are way out in front. And you'll see more advertisers being signed up, and you'll be seeing partner web sites and, resellers using our services.

Q: Some companies are already doing this. CNN and MSNBC do this. Pseudo.com does this live [when they were live] they could just break away for commercials. What makes you any better for this? In other words, why go to you when a company can do it in-house?

A: First of all, they're a lot more web sites out there than MSNBC or CNN. Secondly, we have a much more sophisticated targeting system. Our engineers--several of them came out of IBM--developed the WBTV Network, which is an MPEG 2, streaming video network with full ad insertion. So there is a lot of very, very heavy-duty infrastructure we put to work on Hitplay. That way we could support not just one web site, like say CNN, but also hundreds and thousands of web sites, all using our Cupid targeted technology.

So the fact that it is very, very scalable across a network of sites, not just one web site, and we can have some proprietary targeting technology for the actual insertion of dynamic video ads done in real time, and that's the difference. A lot of web sites say they do in-streaming video advertising. It's (a) either not real time, or (b) it's not targeted. And we can accomplish both of those.

Q: Do you work with live video?

A: We are going to be rolling out those capabilities as well.

Q: Does that mean you are competing with Internet ad agencies (like 24/7 or DoubleClick-type companies) who are looking to get into something like or do this with banners, already?

A: We already have a relationship with Engage. And we actually are--you can go to Hitplay.com and see how we integrate the video ads with banner advertising in a very unique way. So not only can you watch a short video ad for Lowestfare.com, but an actual icon, a banner, will drop down on your browser desktop, so you get the best of brand building with direct response. So advertisers love that sort of thing. We are planning to work closely with, companies like Engage. We think this is a rapidly growing area with plenty of room for all parties.

Q: So it seems that you are turning into an ad agency, somewhat.

A: We have the ability to work with advertisers. We also have a great opportunity to cooperate with companies like Engage and DoubleClick. We're providing, I think, a lot of ad agencies are asking for our services and we can actually help craft video advertising ads for client advertisers. The Lowestfare.com ad was something that we produced in-house. But you'll see us working closely with all the major advertiser constituencies as we roll out the service for web sites.

Q: Just to clarify, you can do audio and video, right?

A: Yeah, we could do both of those. We call ourselves a targeted video network. That is what we are focused on. We believe there is a huge market there. And we believe the penetration for 56K modems or MPEG all will be able to play in that space and do quite well with larger and smaller web sites.

Q: When I was playing around the site, I could actually skip through the ad and play the next clip.

A: You could probably use your remote control and probably avoid ads as well. I think in-stream advertising is going to a good way for marketers to reach streaming video audiences. It is certainly more effective than, say, associating video with just a banner advertising. So we are able to do both: add the brand building opportunities through video ads, and then allow, a banner as well.

Q: How much can a company make from this? How much is one of these ads worth to a company?

A: We know--first of all, we know the banner CPMs are dropping fast. And we also know the click throughs on those are ineffective at best. In stream video advertising CPMs right now are relatively high because of the audio and video nature of the ad. But also if you go in context with a piece of video, and also targeted and a large-scale reach across a network, then CPMs will remain quite high. Probably as much as $50 CPMs and higher for the next year. Even as those come down, it's going to be perceived as a far superior method of reaching audiences than with banner advertising.

Q: So what's your revenue model? How do you make money?

A: We make money from a variety of revenue streams. That includes licensing, services and advertising.

Q: Okay. Do you have a revenue share agreement?

A: With the advertisers, no. We basically sell to them on a CPM basis. But to client web sites that actually use Cupid, there is a revenue share and a licensing relationship for the use of Cupid. And if they want other services, we're going to offer our content libraries, our integration services, our technologies and others.

Q: Is part of your strategy to get more fresher content? Is this part of your strategy?

A: Content, is not, we're a content platform, not a content company. We're focused on broadband video enabling solutions, particularly video ad insertion. And Cupid is the cornerstone of the company. You can use our content, we can use the customers' content—it doesn't really matter. We will flow it through Cupid and insert a targeted video ad and deliver that up in a seamless way to the end user.

Q: How long is each commercial?

A: The sweet spot is one to ten seconds.

Q: What can you do in one second?

A: It's an entirely new world for a TV and cable advertisers. It's a nearly $50 billion industry--television advertising. But they have to get their arms around how to do a short form Internet video commercial, which is less than full screen, less than full motion video and under 10 seconds. So that's why we're working with advertisers to help them with those strategies. In a one-second commercial, we would call it a gateway ad. It would be brought to you by Intel boom, it's over. You get an impression. I think the most effective ads are between 5 to 10 seconds.

Q: You said you take just three pieces of demographic information, but is that enough? Do you take any information on what I'm watching? Like if I watched the skydiving video?

A: At this stage you're basically being profiled. We have a profiling database and we also have an algorithm that takes information that users provide. But we also can tie into other third-party profiling databases. So we have our own profiling engine, but we also find other third party profiling engines as needed.

Q: Are you interested in or concerned about privacy issues at all, especially when he's targeted that.

A: Oh yeah. It's the whole--we try to keep up to date. We let users know what we're doing. It's nothing that's not happening on other web sites as well. But we're certainly very sensitive to it.

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