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The Revolution of Video Advertising

A startup cashes in on the popularity of online video through ads.

Who: Jayant Kadambi, 40, and Ayyappan Sankaran, 40

What: YuMe Networks, an advertising network that distributes, tracks and customizes ads within video content downloaded to a user's PC, mobile device or TV

Where: Redwood City, California

Until now, the world of online video has been chaos for advertisers. As the popularity of user-generated video and premium content has exploded, marketers have been left scrambling to find ways to reach a new generation of consumers.

It sounds easy enough, but this new frontier has lacked a reliable way for advertisers to track or measure how many people view their ad, or even guarantee their ad reaches the right audience. And with advertisers reluctant to buy ad space, content owners have been forced to either offer their content for free or charge viewers a per-download fee.

The result is a lack of quality, easily accessible online video content. According to Jayant Kadambi and Ayyappan Sankaran, that's exactly what drove them to start YuMe Networks, the first dedicated advertising network created and optimized specifically for broadband video.

"We quickly figured out that content owners aren't licensing good content to people because there was no way to make money on it," says Kadambi.

After nearly three years of building their network from the ground up, Kadambi and Sankaran officially launched YuMe in March 2007. For the first time, advertisers can place targeted messaging in online video content, just as they're able to do with text and banner ad placement on websites.

Since its launch, YuMe has been a virtual dream come true for video webcast advertisers who previously had little control of who their ads reached. YuMe does the work for them by scouring online video content and categorizing it into customizable channels like auto, finance, entertainment and family-friendly. Advertisers can then select the customized video channels that most closely match the brands, products and messaging they're trying to deliver.

In addition to reaching the right audiences, advertisers can track how many people view their ad, as well as measure its success. "We let them automate the process of figuring out if the ad placement worked better at the beginning of the video or at the end, if it's running too frequently or not frequently enough," says Kadambi. "We want all those levels of optimization available so advertisers and content publishers can grow together into something big." And that, Kadambi adds, results in an enhanced user experience.

As with any attempt to map uncharted territory, Kadambi and Sankaran have encountered a few snags along the way as they figure out the best way to monetize their service. "We're finding that people who have the content and want to distribute it want control over the ad sales, and people who are actually distributing the content, like YouTube and other distribution agents, also think they have control or a share of the pie," says Kadambi. For now, though, everyone seems to be working together.

"We're in a very good spot simply for the fact that the video space needs a strong, valid ad network," says Kadambi, who predicts they'll be doing millions of streams of video advertising a day within six months. He projects 2007 revenues of at least $5 million and 2008 revenues of more than $10 million. "People, obviously, are very receptive to it."

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